<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
PARK-OHIO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
OHIO 5072 34-6520107
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) INDUSTRIAL CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
23000 EUCLID AVENUE
CLEVELAND, OHIO 44117
(216) 692-7200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RONALD J. COZEAN, ESQ.
GENERAL COUNSEL AND SECRETARY
PARK-OHIO INDUSTRIES, INC.
23000 EUCLID AVENUE
CLEVELAND, OHIO 44117
(216) 692-7200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
DAVID P. PORTER, ESQ.
JONES, DAY, REAVIS & POGUE
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
(216) 586-3939
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement has become effective.
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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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 1/4% Senior Subordinated
Notes due 2007.............. $200,000,000 100% $200,000,000 $55,600.00
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(1) Estimated Solely for the purpose of calculating the registration fee
pursuant to Rule 457.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
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 SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
PROSPECTUS
PARK OHIO LOGO
$200,000,000
PARK-OHIO INDUSTRIES, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT WERE ORIGINALLY ISSUED ON JUNE 2, 1999 OR NOVEMBER 25, 1997
FOR NEW 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999
- Interest on the notes accrues at an annual rate of 9 1/4% and will
be paid twice a year, beginning December 1, 1999.
- The terms of the notes are the same as the terms of the outstanding
notes that we issued in a private offering on June 2, 1999, except
that the new notes will not be subject to the transfer restrictions
imposed by federal securities laws.
- The notes will rank below all of our senior debt. Therefore, if we
default, your right to payment under the notes will be junior to any
of our senior debt.
- We will exchange all outstanding notes that are validly tendered and
are not withdrawn before this exchange offer expires.
- You may withdraw your tender of notes at any time before
, 1999, the expiration date of this exchange offer.
- Your exchange of an outstanding note for a new note will not
constitute a taxable exchange for U.S. federal income tax purposes.
- You may tender your notes only in denominations of $1,000 and in
multiples of $1,000.
- The exchange offer is subject only to the condition that it does not
violate applicable law or any applicable interpretation of the staff
of the Securities and Exchange Commission.
- We will not receive any proceeds from this exchange offer.
THIS EXCHANGE OFFER APPLIES TO ALL OF OUR OUTSTANDING 9 1/4% SENIOR
SUBORDINATED NOTES DUE 2007, INCLUDING THE $150,000,000 OF NOTES ORIGINALLY
ISSUED ON NOVEMBER 25, 1997 AND THE $50,000,000 OF NOTES ORIGINALLY ISSUED ON
JUNE 2, 1999.
------------------------
Please carefully consider the "Risk Factors" beginning on page 9 of this
prospectus.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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FORWARD-LOOKING STATEMENTS.................................. iv
WHERE YOU CAN FIND MORE INFORMATION......................... iv
PROSPECTUS SUMMARY.......................................... 1
Park-Ohio.............................................. 1
Recent Developments.................................... 1
The Exchange Offer..................................... 2
The Notes.............................................. 5
Ratio of Earnings to Fixed Charges..................... 6
Risk Factors........................................... 6
Federal Income Tax Consequences........................ 6
Summary Historical and Pro Forma Consolidated Financial
Data.................................................. 7
RISK FACTORS................................................ 9
Risks Associated With the Notes........................ 9
Risks Specific to Park-Ohio and Our Business........... 11
Risks Associated with Not Participating in the Exchange
Offer................................................. 14
USE OF PROCEEDS............................................. 15
CAPITALIZATION.............................................. 15
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 16
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA...... 18
THE EXCHANGE OFFER.......................................... 24
Purpose and Effect of the Exchange Offer............... 24
Resale of the New Notes................................ 24
Special Rules for Broker-Dealers....................... 25
Terms of the Exchange Offer............................ 25
Expiration Date; Extensions; Amendments................ 25
Conditions............................................. 26
Procedures for Tendering............................... 27
Book-Entry Transfer.................................... 28
Guaranteed Delivery Procedures......................... 29
Withdrawal of Tenders.................................. 29
Termination of Rights Accorded by the Registration
Rights Agreement...................................... 30
Exchange Agent......................................... 30
Fees and Expenses...................................... 30
Consequences of Failure of Exchange.................... 31
Accounting Treatment................................... 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 32
Overview............................................... 32
Results of Operations.................................. 33
Three Months 1999 versus Three Months 1998............. 33
1998 versus 1997....................................... 33
1997 versus 1996....................................... 34
Liquidity and Sources of Capital....................... 35
Impact of Inflation.................................... 36
Year 2000 Conversion................................... 36
Environmental.......................................... 37
</TABLE>
i
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<TABLE>
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Seasonality; Variability of Operating Results.......... 37
Quantitative and Qualitative Disclosure About Market
Risk.................................................. 37
Forward-Looking Statements............................. 37
DESCRIPTION OF OTHER INDEBTEDNESS........................... 39
Revolving Credit Facility.............................. 39
Industrial Revenue Bonds............................... 39
State Loans............................................ 40
Other Indebtedness..................................... 40
Series B Notes......................................... 40
BUSINESS.................................................... 41
Our Operations......................................... 43
Integrated Logistics Solutions......................... 43
Manufactured Products.................................. 44
Aluminum Products...................................... 45
Sales and Marketing.................................... 46
Raw Materials and Suppliers............................ 46
Backlog................................................ 46
Environmental Regulations.............................. 46
Employees.............................................. 47
Information About Industry Segments.................... 47
Properties............................................. 47
Legal Proceedings...................................... 47
MANAGEMENT.................................................. 48
Directors and Officers of Park-Ohio.................... 48
Compensation of the Board of Directors................. 49
EXECUTIVE COMPENSATION...................................... 50
Summary of Compensation................................ 50
Stock Based Compensation, Including Options............ 50
PRINCIPAL SHAREHOLDERS...................................... 52
RELATED PARTY TRANSACTIONS.................................. 53
DESCRIPTION OF THE NOTES.................................... 54
General................................................ 54
Maturity, Interest and Principal....................... 54
Optional Redemption.................................... 54
Subordination.......................................... 55
Covenants.............................................. 57
Limitation on Additional Indebtedness.................. 57
Limitation on Other Senior Subordinated Indebtedness... 57
Limitation on Restricted Payments...................... 57
Limitation on Liens.................................... 59
Limitation on Transactions with Affiliates............. 59
Limitation on Certain Asset Sales...................... 59
Limitation on Preferred Stock of Subsidiaries.......... 61
Limitation on Capital Stock of Subsidiaries............ 61
Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries................................ 61
Limitation on Sale and Lease-Back Transactions......... 62
Payments for Consent................................... 62
Change of Control Offer................................ 62
</TABLE>
ii
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Merger, Consolidation or Sale of Assets................ 64
Events of Default...................................... 65
Defeasance and Covenant Defeasance..................... 66
Modification of Indenture.............................. 67
Reports to Holders..................................... 68
Compliance Certificate................................. 68
The Trustee............................................ 68
Transfer and Exchange.................................. 68
Definitions............................................ 68
Book-Entry; Delivery and Form.......................... 82
FEDERAL INCOME TAX CONSEQUENCES............................. 86
U.S. Holders........................................... 86
Non-U.S. Holders....................................... 88
Information Reporting and Backup Withholding........... 89
PLAN OF DISTRIBUTION........................................ 89
LEGAL MATTERS............................................... 90
EXPERTS..................................................... 90
</TABLE>
iii
<PAGE> 6
FORWARD-LOOKING STATEMENTS
WE MAKE "FORWARD-LOOKING STATEMENTS" THROUGHOUT THIS PROSPECTUS. WHENEVER
YOU READ A STATEMENT THAT IS NOT SIMPLY A STATEMENT OF HISTORICAL FACT SUCH AS
WHEN WE DESCRIBE WHAT WE "BELIEVE," "EXPECT" OR "ANTICIPATE" WILL OCCUR, AND
OTHER SIMILAR STATEMENTS, YOU MUST REMEMBER THAT OUR EXPECTATIONS MAY NOT BE
CORRECT, EVEN THOUGH WE BELIEVE THEY ARE REASONABLE. WE DO NOT GUARANTEE THAT
THE TRANSACTIONS AND EVENTS DESCRIBED IN THIS PROSPECTUS WILL HAPPEN AS
DESCRIBED, OR THAT THEY WILL HAPPEN AT ALL. YOU SHOULD READ THIS PROSPECTUS
COMPLETELY AND WITH THE UNDERSTANDING THAT ACTUAL FUTURE RESULTS MAY BE
SIGNIFICANTLY DIFFERENT FROM WHAT WE EXPECT. WE WILL NOT UPDATE THESE
FORWARD-LOOKING STATEMENTS, EVEN THOUGH OUR SITUATION MAY CHANGE IN THE FUTURE.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934. In accordance with those
requirements, we file reports and other information with the SEC. All reports
and other information filed under the Exchange Act may be inspected at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices, located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of those
documents may be obtained from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. You may obtain
information about the operation of the public reference facilities by calling
1-800-SEC-0330. The SEC maintains a web site at http://www.sec.gov that contains
reports and other information regarding registrants, like us, that file
documents electronically with the SEC.
We have agreed that, whether or not we are required to do so by the rules
and regulations of the SEC, for so long as any of the notes remain outstanding,
we will furnish to the holders of the notes and file with the SEC, unless the
SEC will not accept such a filing:
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 we were
required to file those 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 by our certified
independent accountants.
All reports that would be required to be filed with the SEC on Form
8-K if we were required to file those reports.
In addition, for so long as any of the notes remain outstanding, we have
agreed to make available to any prospective purchaser of the notes or beneficial
owner of the notes in connection with any sale thereof the information required
by Rule 144A(d)(4) under the Securities Act.
iv
<PAGE> 7
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information you
should consider before deciding to participate in the exchange offer. We urge
you to read this entire prospectus carefully, including the section titled "Risk
Factors." Unless otherwise indicated, all references in this prospectus to "we,"
"us," "our" and similar terms, as well as references to "Park-Ohio," refer to
Park-Ohio Industries, Inc. and its subsidiaries. Park-Ohio is a wholly owned
subsidiary of Park-Ohio Holdings Corp.
PARK-OHIO
Park-Ohio is an industrial logistics and diversified manufacturing business
which conducts its operations through three business segments:
- Integrated Logistics Solutions, a leading national supplier of over
150,000 standard and specialty fasteners and other industrial products;
- Aluminum Products, which specializes in casting and machining aluminum
components primarily for the automotive industry; and
- Manufactured Products, which operates a diverse group of niche
manufacturing businesses including large forgings such as locomotive
crankshafts and camshafts, rubber products such as valve seals and
capital equipment such as induction heating systems.
Between 1992 and the year ended December 31, 1998, we have grown
significantly, both internally and through acquisitions. Over this period, we
have increased:
- Net sales from $67.2 million to $551.8 million; and
- EBITDA (as defined) from ($4.5) million to $53.1 million.
We generated net sales of $347.7 million, $441.1 million, $551.8 million
and $171.4 million and EBITDA of $28.1 million, $38.3 million, $53.1 million and
$18.0 million for the years ended December 31, 1996, 1997 and 1998, and the
three months ended March 31, 1999, respectively.
RECENT DEVELOPMENTS
We completed the following acquisitions in 1998 and 1999:
INTEGRATED LOGISTICS SOLUTIONS
Columbia Nut & Bolt Corp. and Industrial Fasteners Corp. In July 1999, we
acquired all of the outstanding stock of Columbia and Industrial Fasteners,
distributors of fasteners and other industrial products. Industrial Fasteners
manufactures fasteners, primarily screws, rivets and pins. The acquisition of
these companies provides us with a base on the east coast from which we can
expand. Columbia and Industrial Fasteners had combined 1998 net sales of
approximately $35.0 million. As these acquisitions did not take place until
July, 1999 and are not material to Park-Ohio, their results have not been
included in the pro forma financial statements.
GIS Industries, Inc. On October 8, 1998, we acquired all of the outstanding
stock of GIS Industries, a distributor of fasteners and other industrial
products and a manufacturer of metal products and fasteners. GIS Industries,
which is referred to in this prospectus as Gateway, has customers primarily
located in Ohio, Pennsylvania, New York and Kentucky. The acquisition of Gateway
provides us with a major presence in Pennsylvania, as well as an experienced
management team. Gateway generated $41.4 million in net sales in 1998.
Direct Fasteners Limited. On April 13, 1998, we acquired all of the
outstanding stock of Direct Fasteners, a distributor of fasteners located in
Ontario, Canada. Direct's customers are located primarily in the provinces of
Ontario and Quebec. The acquisition of Direct Fasteners provides us with a base
in Canada from which we can expand. Direct Fasteners generated $6.8 million in
net sales in 1998.
1
<PAGE> 8
ALUMINUM PRODUCTS
The Metalloy Corporation. On January 4, 1999, we acquired all of the
outstanding stock of Metalloy, a full service aluminum casting and machining
company. Metalloy's customers are primarily domestic producers of automobiles
and trucks. Metalloy specializes in die, sand and permanent mold machined
castings and has operations in Indiana, Michigan and Mississippi. Metalloy
generated $94.8 million in net sales in 1998.
MANUFACTURED PRODUCTS
PMC Industries Inc. On February 17, 1999, we acquired all of the Ohio-based
assets of PMC. PMC is the only domestic manufacturer of tube threading machines
and related parts for the oil drilling industry. PMC generated $10.4 million in
net sales in 1998.
St. Louis Screw and Bolt Company. On January 29, 1999, we acquired
substantially all of the assets of St. Louis Screw and Bolt, a manufacturer of
bolts for the construction industries. St. Louis Screw and Bolt complements our
existing structural hardware business and expands our product offerings. St.
Louis Screw and Bolt generated $6.8 million in net sales in 1998.
We borrowed approximately $99.3 million in cash under our revolving credit
facility to complete these seven acquisitions.
THE EXCHANGE OFFER
THE EXCHANGE OFFER We are offering to exchange $200.0 million
principal amount of new 9 1/4% Senior
Subordinated Notes due 2007, Series D, which
have been registered under the federal
securities laws for:
- $50.0 million principal amount of our
outstanding unregistered 9 1/4% Senior
Subordinated Notes due 2007, Series C, that
were issued in June 1999 in a private
offering; and
- $150.0 million principal amount of our 9 1/4%
Senior Subordinated Notes due 2007, Series B.
All of the Series A notes, originally issued
in November 1997, were exchanged for Series B
notes that were registered with the
Securities and Exchange Commission in
December 1997.
We sometimes refer to the Series C notes and
the Series B notes collectively as the
"outstanding notes." You have the right to
exchange your outstanding notes for new notes
with substantially identical terms.
In order for your outstanding notes to be
exchanged, you must properly tender them prior
to the expiration of the exchange offer. All
validly tendered outstanding notes will be
exchanged. We will issue new notes promptly
after the exchange offer expires.
THIS EXCHANGE OFFER WILL
EXTINGUISH REGISTRATION RIGHTS We sold the Series C notes in a private
offering to CIBC World Markets Corp., ING
Baring Furman Selz LLC and Value Investing
Partners, Inc., the initial purchasers. At that
time, we signed a registration rights agreement
with those initial purchasers which requires us
to conduct this exchange offer for both the
Series C notes and Series B notes.
This exchange offer is intended to satisfy the
rights provided by the registration rights
agreement. After the exchange offer is
complete, you will no longer be entitled to
registration rights with respect to
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<PAGE> 9
outstanding notes you were entitled to exchange
but did not exchange.
WHAT HAPPENS IF YOU FAIL TO
EXCHANGE YOUR OUTSTANDING
NOTES? If you hold Series C notes and do not exchange
your outstanding notes for new notes in the
exchange offer, you will continue to be subject
to the restrictions on transfer provided in
those notes and in the indenture governing
those notes. In general, you may not offer or
sell your Series C notes unless they are
registered under the federal securities laws or
are sold in a transaction exempt from or not
subject to the registration requirements of the
federal securities laws and applicable state
securities laws.
If you hold Series B notes, and do not exchange
your notes for new notes in this exchange
offer, you will not become subject to transfer
restrictions and your notes will remain freely
tradeable. However, the principal amount of
remaining Series B notes will decrease as those
notes are exchanged in the exchange offer. This
decrease will reduce the liquidity of any
trading market that may exist for the Series B
notes.
EXPIRATION DATE The exchange offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless we decide to extend the expiration date.
See "The Exchange Offer -- Expiration Date;
Extensions; Amendments."
CONDITIONS TO THE EXCHANGE
OFFER The exchange offer is subject to conditions
that we may waive. The exchange offer is not
conditioned on any minimum amount of
outstanding notes being tendered for exchange.
Please read "The Exchange Offer -- Conditions"
for a complete description of the conditions to
the exchange offer.
We reserve the right, subject to applicable
law, at any time and from time to time:
- to delay the acceptance of any outstanding
notes;
- to terminate the exchange offer if any of the
specified conditions have not been satisfied;
- to extend the expiration date of the exchange
offer and retain all tendered outstanding
notes subject to the right of tendering
holders to withdraw their tender of
outstanding notes; and
- to waive any condition or otherwise amend the
terms of the exchange offer in any respect.
HOW TO TENDER YOUR OUTSTANDING
NOTES If you wish to tender your outstanding notes
for exchange, you must:
- complete and sign the enclosed Letter of
Transmittal by following the related
instructions, and
- send the Letter of Transmittal, as directed
in the instructions, together with any other
required documents, to the exchange agent,
either
(1) with the outstanding notes to be
tendered; or
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(2) in compliance with the specified
procedures for guaranteed delivery of
outstanding notes.
Brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer.
Please do not send your letter of transmittal
or certificates representing your outstanding
notes to Park-Ohio. Those documents should only
be sent to the exchange agent. Questions
regarding how to tender and requests for
information should also be directed to the
exchange agent. See "The Exchange
Offer -- Exchange Agent."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNER If your outstanding notes are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee, we urge you to
contact that person promptly if you wish to
tender your outstanding notes in the exchange
offer. See "The Exchange Offer -- Procedures
for Tendering."
WITHDRAWAL RIGHTS You may withdraw the tender of your outstanding
notes any time prior to the expiration date of
the exchange offer by delivering a written
notice of withdrawal to the exchange agent. You
must follow the withdrawal procedures described
under the heading "The Exchange
Offer -- Withdrawal of Tenders."
RESALES OF NEW NOTES We believe that you will be able to offer for
resale, resell or otherwise transfer new notes
issued in the exchange offer without compliance
with the registration and prospectus delivery
provisions of the federal securities laws, as
long as:
- you are acquiring the new notes in the
ordinary course of business;
- you are not participating, and have no
arrangement or understanding with any person
to participate, in the distribution of the
new notes; and
- you are not an affiliate of Park-Ohio. An
affiliate of Park-Ohio is a person that
"controls, is controlled by, or is under
common control with" Park-Ohio.
Our belief is based on interpretations by the
staff of the Securities and Exchange Commission
set forth in no-action letters issued to third
parties not related to us. The SEC's staff has
not considered this exchange offer in the
context of a no-action letter. We cannot assure
you that the SEC's staff would make a similar
determination with respect to this exchange
offer.
If our belief is not accurate and you transfer
a new note without delivering a prospectus
meeting the requirements of the federal
securities laws or without an exemption from
these laws, you may incur liability under the
federal securities laws. We do not, and will
not, assume or indemnify you against this
liability.
Each broker-dealer that receives new notes for
its own account in exchange for outstanding
notes which were acquired by that broker-
dealer as a result of market-making or other
trading activities must agree to deliver a
prospectus meeting the requirements of the
federal
4
<PAGE> 11
securities laws in connection with any resale
of the notes. See "The Exchange Offer -- Resale
of the New Notes."
EXCHANGE AGENT................ Norwest Bank, National Association is the
exchange agent for the exchange offer. The
address, telephone and facsimile numbers of the
exchange agent are listed under the heading
"The Exchange Offer -- Exchange Agent."
See "The Exchange Offer" for more detailed information concerning the
exchange offer.
THE NOTES
SECURITIES OFFERED............ $200,000,000 principal amount of 9 1/4% Senior
Subordinated Notes, Series D, which we refer to
as the "notes," the "new notes" or the "Series
D Notes".
MATURITY DATE................. December 1, 2007.
INTEREST RATE................. 9 1/4% per year (calculated using a 360-day
year).
INTEREST PAYMENT DATES........ Each June 1 and December 1, beginning on
December 1, 1999.
RANKING....................... The notes will not be secured by any
collateral.
The notes will rank below all of our senior
debt. Therefore, if we default, you will not be
entitled to payment under the notes until the
holders of our senior debt collect all of the
money we owe them at that time. The notes will
effectively rank below all liabilities
(including trade payables) of our subsidiaries.
The notes will rank equal to our other senior
subordinated debt.
As of March 31, 1999, we estimate that we would
have had $271.3 million of debt after issuing
the notes, of which approximately $71.3 million
would have been senior debt.
OPTIONAL REDEMPTION........... Except in connection with qualifying equity
offerings by us, we cannot choose to redeem the
notes before December 1, 2002. At any time from
that date (which may be more than once), we can
choose to redeem some or all of the notes at
specified prices, plus interest.
Redemption in connection with qualifying equity
offerings: at any time (which may be more than
once) before December 1, 2000, we can choose to
buy back up to 35% of the outstanding notes
with money that we raise in one or more
qualifying equity offerings, as long as:
- we pay 109.25% of the face amount of the
notes, plus interest;
- we buy the notes back within 60 days of
completing the equity offering; and
- at least 65% of all the notes issued under
the indentures remain outstanding afterwards.
CHANGE OF CONTROL OFFER....... If we experience a change in control, we must
give holders of the notes the opportunity to
sell us their notes at 101% of their face
amount, plus interest. We might not be able to
pay those holders the required price for notes
they present to us at the time of a change of
control, because:
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<PAGE> 12
- we might not have enough funds at that time;
or
- the terms of our senior debt may prohibit us
from paying.
ASSET SALE PROCEEDS........... We may have to use the cash proceeds from
selling assets to offer to buy back notes at
their face amount, plus accrued interest.
CERTAIN INDENTURE
PROVISIONS.................... The indentures governing the notes will limit
what we, and most or all of our subsidiaries,
may do, including our ability to:
- incur more debt;
- pay dividends and make distributions;
- issue stock of subsidiaries;
- make investments;
- repurchase stock;
- create liens;
- enter into transactions with affiliates;
- enter into sale lease-back transactions;
- create dividend or other payment restrictions
with respect to subsidiaries;
- merge or consolidate; and
- transfer or sell assets.
These covenants are subject to a number of
important exceptions.
RATIO OF EARNINGS TO FIXED CHARGES
The following are the ratio of earnings to fixed charges for each of the
years in the five-year period ended December 31, 1998 and for the three months
ended March 31, 1998 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1998 1999 1994 1995 1996 1997 1998
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Ratio of earnings to fixed charges............. 2.0x 2.2x 3.8x 2.8x 2.7x 2.7x 2.1x
</TABLE>
RISK FACTORS
You should carefully consider each of the risk factors and all of the other
information set forth in this prospectus before deciding to participate in the
exchange offer.
FEDERAL INCOME TAX CONSEQUENCES
Your exchange of an outstanding note for a new note will not constitute a
taxable exchange for U.S. federal income tax purposes. See the section titled
"Federal Income Tax Consequences" in this prospectus for more information.
------------------------
Our principal executive office is located at 23000 Euclid Avenue,
Cleveland, Ohio 44117, and our telephone number is (216) 692-7200.
6
<PAGE> 13
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The summary historical consolidated financial data set forth below for the
three years ended December 31, 1998 have been derived from our consolidated
financial statements. Our consolidated financial statements for the three years
ended December 31, 1998 have been audited by Ernst & Young LLP, independent
auditors. The summary historical consolidated financial data for the three-month
periods ended March 31, 1998 and 1999 have been derived from our unaudited
consolidated financial statements, which include all adjustments (consisting of
normal recurring accruals) that we consider necessary for a fair presentation of
our financial position and results of operations for these periods. You should
read the following data in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," our consolidated
financial statements and notes thereto, and other financial information included
elsewhere in this prospectus. The data for the periods presented are not
necessarily comparable because of acquisitions made throughout such periods. The
unaudited pro forma consolidated financial information for the year ended
December 31, 1998 and the three-month period ended March 31, 1999 has been
derived from the unaudited pro forma consolidated financial data included
elsewhere in this prospectus. The results of operations for the three months
ended March 31, 1999 are not necessarily indicative of results that may be
expected for any other interim period or for the year ending December 31, 1999.
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------------------
---------------------------------------------------------- YEAR THREE
YEAR ENDED THREE MONTHS ENDED ENDED MONTHS
DECEMBER 31, MARCH 31, DECEMBER ENDED
------------------------------ ------------------------- 31, MARCH 31,
1996 1997 1998 1998 1999 1998(B) 1999
-------- -------- -------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Net sales.................. $347,679 $441,110 $551,793 $136,503 $171,403 $697,872 $171,403
Cost of products sold...... 289,400 368,734 455,167 113,171 140,436 573,735 140,436
-------- -------- -------- -------- -------- -------- --------
Gross profit............. 58,279 72,376 96,626 23,332 30,967 124,137 30,967
Selling, general and
administrative
expenses................. 38,131 44,396 56,318 14,137 17,952 74,314 17,952
Operating income(a)........ 17,496 27,980 40,308 9,195 13,015 49,823 13,015
Interest expense........... 6,947 9,101 17,488 4,152 5,378 23,370(c) 5,842(c)
OTHER FINANCIAL DATA:
Net cash flows provided
(used) by operating
activities............... $ 7,726 $(10,039) $ 4,132 $(11,938) $ 10,926
Net cash flows provided
(used) by investing
activities............... 31,611 (77,217) (62,957) (6,355) (35,896)
Net cash flows provided
(used) by financing
activities............... (37,340) 84,411 61,331 17,262 25,132
EBITDA(d).................. 28,146 38,345 53,061 12,926 17,999 $ 68,763 $ 17,999
Depreciation and
amortization............. 7,998 10,365 12,753 3,731 4,984 18,940 4,984
Capital expenditures....... 15,590 15,947 22,681 6,254 6,304 26,195 6,304
Ratio of earnings to fixed
charges(e)............... 2.7x 2.7x 2.1x 2.0x 2.2x 2.0x 2.1x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------
HISTORICAL
--------------------
(UNAUDITED)
<S> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 4,482
Working capital, as adjusted (f)............................ 159,877
Total assets................................................ 565,281
Total debt.................................................. 270,316
Shareholder's equity........................................ 145,439
</TABLE>
(See footnotes on following page)
7
<PAGE> 14
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(a) Operating income is defined as net sales less cost of products sold,
selling, general and administrative expenses and a restructuring charge. In
1996, we incurred a restructuring charge of $2.7 million relating to the
consolidation of three of our consumer products manufacturing facilities
into one and the discontinuance of certain of our product lines.
(b) Reflects the operating results of our recent acquisitions from the periods
prior to their respective closing dates and certain cost savings that we
believe would have been realized and certain estimated incremental expenses
relating to selling, general and administrative expenses and amortization of
intangible assets that would have been incurred had we consummated our
recent acquisitions as of January 1, 1998.
(c) Reflects an interest rate of 9.25% on the notes.
(d) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. Non-recurring items include a restructuring charge of $2.7 million in
the fourth quarter of 1996 relating to the consolidation of three of our
consumer products manufacturing facilities into one and the discontinuance
of certain product lines. EBITDA is not a measure of performance under GAAP.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity, we understand that EBITDA is customarily used as
an indication of a company's ability to incur and service debt. You should
read the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" sections included elsewhere in this prospectus for a
discussion of other measures of liquidity and operations that are covered by
our consolidated financial statements. EBITDA as defined by us may not be
comparable to other similarly titled measures of other companies.
(e) Earnings are defined as earnings from continuing operations before income
taxes and fixed charges. Fixed charges are defined as interest expense and a
portion of rental expense representing the interest factor, which we
estimate to be one-third of rental expense, and amortization of deferred
financing costs and premium on the notes.
(f) Working capital, as adjusted, is defined as total current assets excluding
cash and cash equivalents less total current liabilities excluding current
portion of long-term debt.
8
<PAGE> 15
RISK FACTORS
You should carefully consider each of the following factors and all of the
other information set forth in this prospectus before deciding to participate in
the exchange offer.
RISKS ASSOCIATED WITH THE NOTES
WE HAVE SUBSTANTIAL DEBT THAT COULD PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THESE NOTES.
We have a substantial amount of outstanding debt. At March 31, 1999, we
would have had $271.3 million of debt after issuing the Series C notes,
representing approximately 65% of our total capitalization. Our substantial debt
may have important consequences to you. For example it could:
- limit our ability to obtain additional financing for acquisitions,
working capital, capital expenditures or other purposes;
- require us to dedicate a substantial portion of our cash flow to pay our
interest expense and debt amortization, which will reduce the funds that
would otherwise be available to us for our operations and future business
opportunities;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industries in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt;
- increase our vulnerability to general adverse economic and industry
conditions; and
- make it more difficult for us to satisfy our obligations with respect to
the notes.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend in part upon the future financial and operating
performance of our subsidiaries and upon our ability to renew or refinance
borrowings or to raise additional equity capital. Prevailing economic conditions
and financial, business and other factors, many of which are beyond our control,
will affect our ability to make these payments. While we believe that cash flow
from operations will provide an adequate source of long-term liquidity, a
significant drop in operating cash flow resulting from economic conditions,
competition or other uncertainties beyond our control would increase the need
for alternative sources of liquidity. If we are unable to generate sufficient
cash flow to meet our debt service obligations, we will have to pursue one or
more alternatives, such as:
- reducing or delaying capital expenditures;
- refinancing debt;
- selling assets; or
- raising equity capital.
We cannot assure you that any of those alternatives could be accomplished
on satisfactory terms, if at all, or that those actions would yield sufficient
funds to retire the notes and the debt senior to the notes.
ADDITIONAL BORROWINGS ARE AVAILABLE -- THE RISKS DESCRIBED ABOVE COULD INCREASE
IF WE BORROW MORE MONEY THROUGH OUR REVOLVING CREDIT FACILITY.
Despite our high level of debt, our revolving credit facility and the
indentures governing the Series B notes and the Series C notes permit us to
borrow additional money. Any additional debt could rank senior in right of
payment to the notes. If we borrow more money, as we intend to do in order to
make acquisitions, the related risks described above could be significantly
increased.
THE NOTES WILL BE CONTRACTUALLY SUBORDINATED IN RIGHT OF PAYMENT TO ALL OF OUR
SENIOR DEBT.
The notes will be unsecured and rank behind all of our existing and future
senior debt, including our obligations under our revolving credit facility. Our
debt under the revolving credit facility will also become due
9
<PAGE> 16
prior to the time the principal obligations under the notes become due. As a
result of the subordination provisions of the notes, in the event of a
liquidation or insolvency, our assets will be available to pay obligations on
the notes only after all of our senior debt has been paid in full. After our
senior debt has been paid in full there may not be sufficient assets remaining
to pay amounts due on any or all of the notes then outstanding. If we incur any
additional senior subordinated debt, the holders of that debt would be entitled
to share ratably with the holders of the notes in any proceeds distributed in
connection with any insolvency, liquidation, reorganization, dissolution or
other winding-up. This right may have the effect of reducing the amount of
proceeds paid to holders of the notes.
In addition, no payments may be made with respect to the principal of or
premium, if any, or interest on the notes if a payment default exists with
respect to our senior debt and, under certain circumstances, no payments may be
made with respect to the principal of, or interest on, the notes for a certain
period if a non-payment default exists with respect to the senior debt. See
"Description of the Notes -- Subordination."
SUBSTANTIAL RESTRICTIONS AND COVENANTS -- RESTRICTIONS AND COVENANTS IN OUR DEBT
AGREEMENTS LIMIT OUR ABILITY TO TAKE CERTAIN ACTIONS. WE HAVE LIMITED
FLEXIBILITY TO DO SOME CORPORATE FUNCTIONS.
Our debt agreements, which consist of the indentures covering the Series B
notes and the Series C notes and our revolving credit facility, contain a number
of significant covenants that, among other things, limit our ability to:
- incur additional debt or liens;
- pay dividends or make certain other restricted payments;
- make investments including the repurchase or redemption of either capital
stock or our notes;
- consummate asset sales;
- enter into transactions with affiliates;
- issue capital stock of a subsidiary or create dividend or other payment
restrictions with respect to subsidiaries;
- consolidate or merge with any person or transfer or sell all or
substantially all of our assets;
- make capital investments; and
- alter the business we conduct.
In addition, our revolving credit facility requires us to comply with
specific financial ratios and tests, under which we are required to achieve
specific financial and operating results. Our ability to comply with these
provisions may be affected by events beyond our control. A breach of any of
these covenants would result in a default under the revolving credit facility.
In the event of any default, depending on the actions taken by the lenders under
the revolving credit facility, we could be prohibited from making any payments
on the notes. In addition, our lenders could elect to declare all amounts
borrowed under the revolving credit facility, together with accrued interest
thereon, to be due and payable, which would be an event of default under the
indentures governing the Series B notes and the Series C notes. As a result of
the priority afforded the revolving credit facility, we cannot assure you that
we would have sufficient assets to pay debt then outstanding under the revolving
credit facility and the indentures. Any future refinancing of the revolving
credit facility is likely to contain similar restrictive covenants. See
"Description of Other Indebtedness -- Revolving Credit Facility."
FINANCING A CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE A CHANGE OF CONTROL OFFER IF REQUIRED BY THE
INDENTURES.
Upon the occurrence of a change of control, we will be required to make an
offer to purchase the notes at a price in cash equal to 101% of their aggregate
principal amount, plus any accrued and unpaid interest, to the date of
repurchase. Events involving a change of control may result in an event of
default under our revolving credit facility and other debt that may be incurred
in the future. This could result in an acceleration of the payment of that debt,
in which case the subordination provisions of the notes would require payment in
full of all senior debt
10
<PAGE> 17
before we can repurchase or make other payments in respect of the notes. See
"Description of the Notes -- Change of Control Offer," "Description of the
Notes -- Subordination" and "Description of Other Indebtedness -- Revolving
Credit Facility." We cannot assure you that we would have sufficient resources
to repurchase the notes or pay our obligations if the debt under the revolving
credit facility or other future senior debt were accelerated upon the occurrence
of a change of control event. We cannot assure you that we will be able to
obtain the consent of the lenders under the revolving credit facility to enable
us to repurchase the notes.
OUR SUBSIDIARIES ARE NOT GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE
NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR SUBSIDIARIES DECLARE BANKRUPTCY,
LIQUIDATE OR REORGANIZE.
We are a holding company and conduct substantially all of our operations
through various direct and indirect subsidiaries. We depend upon our ability to
receive cash from our subsidiaries to meet our debt service and other
obligations, including obligations under the notes and the revolving credit
facility. Our subsidiaries are separate and distinct legal entities and will
have no obligation, contingent or otherwise, to pay any amounts due under the
notes. Our rights, and the rights of our creditors, including holders of the
notes, to participate in the distributions of the assets of any subsidiary upon
that subsidiary's liquidation or reorganization will be subject to the prior
claims of that subsidiary's creditors, including trade creditors. All of our
material, domestic subsidiaries guarantee our debt under the revolving credit
facility.
RISKS SPECIFIC TO PARK-OHIO AND OUR BUSINESS
DEPENDENCE ON THE AUTOMOTIVE AND TRUCK INDUSTRIES -- THE LOSS OF ANY OF OUR
MAJOR AUTOMOTIVE OR TRUCK CUSTOMERS COULD AFFECT OUR FINANCIAL HEALTH.
We derived 19.6% and 14.9% of our net sales during 1998 from the automobile
and truck industries, respectively. Ford and Navistar, our two largest
customers, accounted for 7.5% and 5.4%, respectively of our total net sales for
the year ended December 31, 1998. The loss of a significant portion of business
to Ford, Navistar, or any of our other major automotive or truck customers could
have a material adverse effect on our financial condition, liquidity and results
of operations. Although we continually engage in efforts to improve and expand
our relationships with these customers, we cannot assure you that we will
maintain or improve these relationships or that we will continue to supply these
customers at current levels.
THE INDUSTRIES IN WHICH WE OPERATE ARE CYCLICAL AND ARE AFFECTED BY THE ECONOMY
IN GENERAL.
We sell products to customers in industries that experience cyclicality in
demand for products, such as the construction, industrial equipment, electrical
equipment, plumbing and lawn and garden equipment industries. In addition, the
automotive and truck industries are highly cyclical and are affected by consumer
spending, general economic conditions and the impact of international trade. A
downturn in the domestic automotive or truck industry could have a material
adverse effect on our financial condition, liquidity and results of operations.
RISKS ASSOCIATED WITH INTEGRATING ACQUISITIONS -- WE MAY NOT BE SUCCESSFUL IN
INTEGRATING THE BUSINESSES OBTAINED IN CONNECTION WITH OUR RECENT ACQUISITIONS
OR FUTURE ACQUISITIONS.
We believe we will realize substantial benefits from the successful
integration of our recent acquisitions. However, we cannot assure you that we
will be able to maintain or improve the operating results of the acquired
businesses or that they will be successfully integrated into our operations. We
continually evaluate potential acquisitions and intend to actively pursue
acquisition opportunities, some of which could be material to us. We may finance
future acquisitions from internally generated funds, bank borrowings, public
offerings or private placements of equity or debt securities, or a combination
of the foregoing. We cannot assure you that we will be able to make acquisitions
on terms favorable to us. If we complete any future acquisitions, we may
encounter various associated risks, including the possible inability to
integrate an acquired business into our operations, increased goodwill
amortization, diversion of management's attention and unanticipated problems or
liabilities, some or all of which could have a material adverse effect on our
operations and financial performance.
11
<PAGE> 18
DEPENDENCE ON THIRD-PARTY SUPPLIERS AND MANUFACTURERS -- WE DEPEND UPON THIRD
PARTIES FOR SUBSTANTIALLY ALL OF OUR RAW MATERIALS AND COMPONENT PARTS.
The Aluminum and Manufactured Products segments purchase substantially all
of their raw materials, principally metals and some component parts incorporated
into their products, and Integrated Logistics Solutions purchases substantially
all of its fasteners, from third-party suppliers and manufacturers. We believe
there are numerous available sources of supply for required raw materials and
component parts incorporated into our products with the exception of some
specialty fasteners. While we currently maintain alternative sources for raw
materials and these component parts, our businesses are subject to the risk of
price fluctuations and periodic delays in the delivery of specialty fasteners,
raw materials and component parts. Failure by suppliers to continue to supply us
with raw materials or these component parts on commercially reasonable terms, or
at all, would have a material adverse effect on us. We depend upon the ability
of these suppliers, among other things, to meet stringent performance and
quality specifications and to conform to delivery schedules. Failure by
third-party suppliers to comply with these and other requirements could have a
material adverse effect on our financial condition, liquidity and results of
operations.
COMPETITION -- WE OPERATE IN HIGHLY COMPETITIVE INDUSTRIES.
The markets in which the Aluminum and Manufactured Products segments sell
their products are highly competitive. Some of our competitors are large
companies that have greater financial resources than we have. We believe that
the principal competitive factors for Aluminum and Manufactured Products are
product quality and conformity to customer specifications, design and
engineering capabilities, product development, timeliness of delivery and price.
The rapidly evolving nature of the markets in which we compete may attract new
entrants as they perceive opportunities, and our competitors may foresee the
course of market development more accurately than we do. In addition, our
competitors may develop products that are superior to our products or may adapt
more quickly than we do to new technologies or evolving customer requirements.
Integrated Logistics Solutions competes with over 2,500 domestic full-line
industrial fastener distributors and other domestic distributors that offer
fasteners in addition to other products, as well as a number of fastener
manufacturers. In certain circumstances, some fastener manufacturers may sell
directly to original equipment manufacturers. Recent trends by original
equipment manufacturers to limit their number of outside vendors and moderate
growth in the industrial fastener industry have resulted in increased
competition as many manufacturers and distributors have reduced prices to
compete more effectively. We expect competitive pressures in our markets to
remain strong. These pressures arise from existing competitors, other companies
that may enter our existing or future markets and, in some cases, our customers,
which may decide to produce in-house items we sell. We cannot assure you that we
will be able to compete successfully with our competitors. Failure to compete
successfully could have a material adverse effect on our financial condition,
liquidity and results of operations.
POTENTIAL PRODUCT LIABILITY RISKS EXIST FROM THE PRODUCTS WHICH WE SELL.
Our businesses expose us to potential product liability risks that are
inherent in the design, manufacture and sale of our products and products of
third-party vendors that we use or resell. While we currently maintain what we
believe to be suitable and adequate product liability insurance, we cannot
assure you that we will be able to maintain our insurance on acceptable terms or
that our insurance will provide adequate protection against potential
liabilities. In the event of a claim against us, a lack of sufficient insurance
coverage could have a material adverse effect on our financial condition,
liquidity and results of operations. Moreover, even if we maintain adequate
insurance, any successful claim could have a material adverse effect on our
financial condition, liquidity and results of operations.
ENVIRONMENTAL COMPLIANCE -- IF WE FAIL TO COMPLY WITH ENVIRONMENTAL LAWS AND
REGULATIONS, THEN WE MAY INCUR COSTS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR FINANCIAL CONDITION.
We are subject to a variety of environmental laws including those which
regulate the use, handling, treatment, storage, discharge and disposal of
substances and hazardous wastes used or generated in our manufacturing
processes. If we fail to comply with present and future environmental laws, we
could be subject to
12
<PAGE> 19
future liabilities or the suspension of production. Environmental laws could
also restrict our ability to expand our facilities or could require us to
acquire costly equipment or to incur other significant expenses in connection
with our manufacturing processes. We believe compliance with existing laws and
the cost of remediation efforts will not have a material adverse impact on our
financial condition, liquidity and results of operations. However, material
future expenditures may be necessary if compliance standards change or material
unknown conditions are discovered. See "Business -- Environmental Regulations".
GOVERNMENT REGULATION -- PORTIONS OF OUR BUSINESS ARE SUBJECT TO REGULATION
UNDER THE FASTENER QUALITY ACT OF 1991.
The Fastener Quality Act of 1991 regulates the manufacture, importation and
distribution of certain high-grade industrial fasteners in the United States.
The Fastener Act, which was signed into law on June 8, 1999, requires testing,
certification and recordkeeping requirements by the manufacturers, importers and
distributors of those fasteners. As a result, we and other fastener suppliers
are required to maintain records and product tracking systems and comply with
other requirements imposed during the implementation of the Fastener Act. We
have tracking and traceability systems, which, to date, have not materially
increased expenses. However, we cannot assure you that future regulations will
not materially increase our costs.
WE DEPEND HEAVILY ON OUR INFORMATION SYSTEMS -- IF OUR INFORMATION SYSTEMS FAIL,
OUR BUSINESS WILL BE MATERIALLY AFFECTED.
We believe that our computer systems are an integral part of the Integrated
Logistics Solutions business, and to a lesser extent, the Aluminum and
Manufactured Products segments. We depend on our information systems to process
orders, manage inventory and accounts receivable collections, purchase products,
maintain cost-effective operations, route and re-route orders and provide
superior service to our customers. We cannot assure you that a disruption in the
operation of our information systems used by Integrated Logistics Solutions,
including the failure of the supply chain management software to function
properly, or those used by Aluminum and Manufactured Products will not occur.
Any such disruption could have a material adverse effect on our financial
condition, liquidity and results of operations.
LABOR RELATIONS -- SOME OF OUR EMPLOYEES BELONG TO LABOR UNIONS AND STRIKES OR
WORK STOPPAGES COULD ADVERSELY AFFECT OUR OPERATIONS.
We are a party to 16 collective bargaining agreements with various labor
unions, two of which will expire in 1999. In the aggregate, under those
agreements we currently employ approximately 1,000 full-time employees. Our
inability to negotiate acceptable contracts with these unions could result in,
among other things, strikes, work stoppages or other slowdowns by the affected
workers and increased operating costs as a result of higher wages or benefits
paid to union members. In the last three years, we have experienced labor
strikes at one operating unit of our Manufactured Products segment. While we
consider our current relations with our employees to be good, if the unionized
workers were to engage in a strike, work stoppage or other slowdown, or other
employees were to become unionized, we could experience a significant disruption
of our operations and higher ongoing labor costs, which could have a material
adverse effect on our business, financial condition and results of operations.
YEAR 2000 -- OUR FAILURE, OR THE FAILURE OF BUSINESSES ON WHICH WE RELY, TO BE
YEAR 2000 COMPLIANT COULD NEGATIVELY IMPACT OUR OPERATIONS.
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. If we
and/or third parties on which we rely do not successfully update computer
systems to avoid this issue, we could experience system failures or
miscalculations, and, as a result, disruptions in our operations. The possible
consequences could include, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
13
<PAGE> 20
During 1996, we developed a task force to monitor and track year 2000
compliance at our operating units. The target for completion of all phases of
remediation and testing of our computer systems is the third quarter of this
year. We believe, based upon assessments and remediations of our systems
completed to date, that the year 2000 issue will not have a material effect on
our business operations, consolidated financial condition, cash flows or results
of operations. However, we cannot assure you that all phases of our internal
assessments and remediations will be completed on schedule. Moreover, we cannot
assure you that further testing of our systems will not reveal that the year
2000 issue may have potential material adverse effects on our business.
Our task force also is reviewing the year 2000 compliance of our key
suppliers, customers and service providers in an effort to reduce the potential
adverse effect on our operations from non-compliance by those parties. This
review is expected to be completed by September 30, 1999. We cannot assure you,
however, that our assessment of our systems and those of third parties on which
we rely will be completed on schedule. Moreover, due to the general uncertainty
inherent in the year 2000 issues, we are unable to determine at this time
whether the consequences of year 2000 compliance failures by third parties with
whom we transact business would have a material adverse effect on our results of
operations or financial condition. Failure by these third parties to be year
2000 compliant, over which we have no control, could have a material adverse
effect on our operations.
RISKS ASSOCIATED WITH NOT PARTICIPATING IN THE EXCHANGE OFFER
ANY MARKET FOR THE OUTSTANDING NOTES IS LIKELY TO DECLINE AFTER THE COMPLETION
OF THE EXCHANGE OFFER.
As outstanding notes are tendered and accepted in the exchange offer, the
principal amount of remaining outstanding Series C notes and Series B notes will
decrease. This decrease will reduce the liquidity of the trading market for
those outstanding notes. There can be no assurance that any trading market that
has developed for those outstanding notes will continue to exist after the
completion of the exchange offer. See "The Exchange Offer -- Consequences of
Failure to Exchange."
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING SERIES C NOTES, YOU WILL REMAIN SUBJECT
TO TRANSFER RESTRICTIONS.
Park-Ohio has not registered the outstanding Series C notes under the
federal securities laws. Outstanding Series C notes that are not exchanged and
remain outstanding after the completion of the exchange offer will remain
subject to the transfer restrictions under applicable securities laws. This
means that you will be able to transfer, sell or trade your outstanding notes
only through an exemption from the registration requirements of the federal
securities laws. See "The Exchange Offer -- Consequences of Failure to
Exchange."
14
<PAGE> 21
USE OF PROCEEDS
There will be no cash proceeds from the issuance of the new notes. The
proceeds from the issuance and sale of the outstanding notes were used to repay
$49.0 million of our borrowings under the revolving credit facility which were
used to complete recent acquisitions. As of March 31, 1999, the interest rate on
our revolving credit facility was approximately 6.0%. Subsequent to the offering
of the Series C notes, we borrowed approximately $30 million under our revolving
credit facility to complete the acquisition of Columbia Nut & Bolt and
Industrial Fasteners. See "Summary -- Recent Developments." For a description of
the terms of our revolving credit facility see "Description of Other
Indebtedness -- Revolving Credit Facility."
CAPITALIZATION
The following table sets forth the capitalization of our company as of
March 31, 1999, on an actual basis and on a pro forma basis after giving effect
to the offering of the notes. You should read the information in this table in
conjunction with the "Selected Historical Consolidated Financial Data,"
"Unaudited Pro Forma Consolidated Income Statement Data," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
sections of this prospectus, as well as our consolidated financial statements
and the notes thereto, which are included in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-----------------------
ACTUAL PRO FORMA
--------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 4,482 $ 4,482
======== ========
Revolving credit facility(a)................................ $111,500 $ 62,500
Other debt(b)............................................... 8,816 8,816
Senior subordinated notes................................... 150,000 200,000
-------- --------
Total debt........................................ 270,316 271,316
Shareholder's equity........................................ 145,439 145,439
-------- --------
Total capitalization.............................. $415,755 $416,755
======== ========
</TABLE>
- ---------------
(a) The revolving credit facility is a $150.0 million senior unsecured revolving
credit facility. See "Description of Other Indebtedness -- Revolving Credit
Facility."
(b) Other debt is comprised primarily of industrial revenue bonds, state loans
and capital leases. See "Description of Other Indebtedness."
15
<PAGE> 22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The selected historical consolidated financial data set forth below for the
five years ended December 31, 1998 have been derived from our consolidated
financial statements. Our consolidated financial statements for the five years
ended December 31, 1998 have been audited by Ernst & Young LLP, independent
auditors. The selected historical consolidated financial data for the
three-month periods ended March 31, 1998 and 1999 have been derived from our
unaudited consolidated financial statements, which include all adjustments
(consisting of normal recurring accruals) that we consider necessary for a fair
presentation of our financial position and results of operations for these
periods. You should read the following data in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," our
consolidated financial statements and notes thereto, and other financial
information included elsewhere in this prospectus. The data for the periods
presented are not necessarily comparable because of acquisitions made throughout
such periods. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of results that may be expected for any
other interim period or for the year ending December 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales....................... $129,216 $289,501 $347,679 $441,110 $551,793 $136,503 $171,403
Cost of products sold........... 104,225 240,871 289,400 368,734 455,167 113,171 140,436
-------- -------- -------- -------- -------- -------- --------
Gross profit.................. 24,991 48,630 58,279 72,376 96,626 23,332 30,967
Selling, general and
administrative expenses....... 16,838 30,020 38,131 44,396 56,318 14,137 17,952
Restructuring charge............ -- -- 2,652 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (a).......... 8,153 18,610 17,496 27,980 40,308 9,195 13,015
Other income.................... -- (214) (4,204)(b) (320) -- -- --
Interest expense................ 1,501 5,911 6,947 9,101 17,488 4,152 5,378
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes......................... 6,652 12,913 14,753 19,199 22,820 5,043 7,637
Income taxes (benefit).......... (1,826) (6,900) 5,060 7,903 9,726 2,169 3,289
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before
extraordinary charge.......... $ 8,478 $ 19,813 $ 9,693 $ 11,296 $ 13,094 $ 2,874 $ 4,348
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Net cash flows provided (used)
by operating activities....... $ 9,027 $ (3,992) $ 7,726 $(10,039) $ 4,132 $(11,938) $ 10,926
Net cash flows provided (used)
by investing activities....... (16,772) (49,425) 31,611 (77,217) (62,957) (6,355) (35,896)
Net cash flows provided (used)
by financing activities....... 9,784 53,907 (37,340) 84,411 61,331 17,262 25,132
EBITDA (c)...................... 11,366 24,888 28,146 38,345 53,061 12,926 17,999
Capital expenditures............ 11,749 13,632 15,590 15,947 22,681 6,254 6,304
Ratio of earnings to fixed
charges (d)................... 3.8x 2.8x 2.7x 2.7x 2.1x 2.0x 2.2x
</TABLE>
See accompanying Notes to Selected Historical Consolidated Financial Data.
16
<PAGE> 23
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents........ $ 2,172 $ 2,662 $ 4,659 $ 1,814 $ 4,320 $ 783 $ 4,482
Working capital, as adjusted
(e)............................ 27,677 98,110 100,247 145,102 172,889 161,331 159,877
Total assets..................... 128,396 301,747 282,910 413,109 489,554 445,830 565,281
Total debt....................... 32,001 118,738 82,989 172,755 238,105 190,181 270,316
Shareholders' equity............. 46,530 95,542 115,069 129,010 140,842 134,196 145,439
</TABLE>
See accompanying Notes to Selected Historical Consolidated Financial Data
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(a) Operating income is defined as net sales less cost of products sold,
selling, general and administrative expenses and a restructuring charge. In
1996, we incurred a restructuring charge of $2.7 million relating to the
consolidation of three of our consumer products manufacturing facilities
into one and the discontinuance of certain or our product lines.
(b) In 1996, other income was comprised of:
- a gain of $2.7 million in connection with the full settlement of
subordinated notes receivable resulting from the sale of two manufacturing
facilities; and
- a gain of $1.5 million on the sale of certain securities by us in the
third quarter of 1996.
(c) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. Non-recurring items include a restructuring charge of $2.7 million in
the fourth quarter of 1996 relating to the consolidation of three of our
consumer products manufacturing facilities into one and the discontinuance
of certain product lines. EBITDA is not a measure of performance under GAAP.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity, we understand that EBITDA is customarily used as
an indication of a company's ability to incur and service debt. You should
read the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section in this prospectus for a discussion of other
measures of liquidity and operations that are covered by our consolidated
financial statements. EBITDA as defined by us may not be comparable to other
similarly titled measures of other companies.
(d) Earnings are defined as earnings from continuing operations before income
taxes and fixed charges. Fixed charges are defined as interest expense and a
portion of rental expense representing the interest factor, which we
estimate to be one-third of rental expense, and amortization of deferred
financing costs and premium on the notes.
(e) Working capital, as adjusted, is defined as total current assets excluding
cash and cash equivalents less total current liabilities excluding current
portion of long-term debt.
17
<PAGE> 24
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
The following Unaudited Pro Forma Consolidated Income Statement Data are
adjusted to give effect to our recent acquisitions and the consummation of the
offering of the notes as if these events occurred as of the beginning of the
periods presented. The Unaudited Pro Forma Consolidated Income Statement Data
combine our historical operating results with the historical operating results
of our recent acquisitions prior to the dates we made such acquisitions using
the purchase method of accounting. The pro forma operating results are presented
for informational purposes only and are not necessarily indicative of the
operating results that we would have achieved had these acquisitions actually
occurred at the beginning of each period presented, nor do they necessarily
indicate results of future operations.
The Unaudited Pro Forma Consolidated Income Statement Data are based on the
assumptions set forth in the notes to such statements, and you should read them
in conjunction with our consolidated financial statements and notes thereto
included elsewhere in this prospectus.
18
<PAGE> 25
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL REFINANCING PRO FORMA
COMPANY(A) ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales.............................................. $171,403 $ -- $171,403
Cost of products sold.................................. 140,436 -- 140,436
-------- ----- --------
Gross profit......................................... 30,967 -- 30,967
Selling, general and administrative expenses........... 17,952 -- 17,952
-------- ----- --------
Operating income..................................... 13,015 -- 13,015
Interest expense....................................... 5,378 464 (b) 5,842
-------- ----- --------
Income before income taxes........................... 7,637 (464) 7,173
Income taxes........................................... 3,289 (176)(c) 3,113
-------- ----- --------
Net income........................................... $ 4,348 $ (288) $ 4,060
======== ===== ========
OTHER FINANCIAL DATA:
Operating income....................................... $ 13,015 $ -- $ 13,015
Plus: Depreciation and amortization.................... 4,984 -- 4,984
-------- ----- --------
EBITDA (d)............................................. $ 17,999 $ -- $ 17,999
======== ===== ========
Capital expenditures................................... $ 6,304 $ -- $ 6,304
Ratio of earnings to fixed charges (e)................. 2.2x -- 2.1x
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statement
Data.
19
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
(a) Historical results for the three-month period ended March 31, 1999
include the results for Metalloy, St. Louis Screw and Bolt and PMC from
their respective dates of acquisition. Our acquisition of Metalloy
occurred on January 4, 1999. Our acquisition of St. Louis Screw and
Bolt on January 29, 1999 was considered effective January 1, 1999 and
PMC was not operating in 1999 until we acquired it. Acquisition
adjustments are therefore not required for these three acquisitions. As
the acquisitions of Columbia Nut & Bolt and Industrial Fasteners did
not take place until July 1999, and are not material to Park-Ohio,
their results have not been included in the pro forma financial
statements.
(b) Reflects the following adjustments to interest expense:
<TABLE>
<S> <C>
Interest expense -- notes offered hereby(1)............ $1,156
Interest expense -- existing notes(2).................. 3,469
Interest expense -- revolving credit facility(3)....... 937
Interest expense -- other debt......................... 109
Amortization of deferred financing fees, net of premium
on notes.............................................. 171
------
Pro forma interest expense............................. 5,842
Less: historical interest expense...................... 5,378
------
Total adjustment.................................. $ 464
======
</TABLE>
(1) Reflects an interest rate of 9.25%.
(2) Reflects an interest rate of 9.25%.
(3) Reflects the current interest rate of 6.00%.
(c) Adjustment necessary to reflect income tax expense at our incremental
effective income tax rate of 38%.
(d) EBITDA is defined as earnings from continuing operations before
interest, income taxes, depreciation and amortization. EBITDA is not a
measure of performance under GAAP. While EBITDA should not be
considered in isolation or as a substitute for net income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with GAAP or as a measure of profitability or
liquidity, we understand that EBITDA is customarily used as an
indication of a company's ability to incur and service debt. You should
read the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section included elsewhere in this
prospectus for a discussion of other measures of liquidity and
operations that are covered by our consolidated financial statements.
EBITDA as defined by us may not be comparable to other similarly titled
measures of other companies.
(e) Earnings are defined as earnings from continuing operations before
income taxes and fixed charges. Fixed charges are defined as interest
expense and a portion of rental expense representing the interest
factor, which we estimate to be one-third of rental expense, and
amortization of deferred financing costs and premium on the notes.
20
<PAGE> 27
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
RECENT ACQUISITION PRO FORMA REFINANCING PRO FORMA
COMPANY(A) ACQUISITIONS(B) ADJUSTMENTS(C) COMPANY ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Net sales................. $551,793 $146,079 $ -- $697,872 $ -- $697,872
Cost of products sold..... 455,167 119,737 (1,169)(d) 573,735 -- 573,735
-------- -------- ---------- -------- --------- --------
Gross profit............ 96,626 26,342 1,169 124,137 -- 124,137
Selling, general and
administrative
expenses................ 56,318 21,746 (4,508)(e) 74,314 -- 74,314
-- -- 758(f) -- -- --
-------- -------- ---------- -------- --------- --------
Operating income........ 40,308 4,596 4,919 49,823 -- 49,823
Interest expense.......... 17,488 3,304 -- 20,792 2,578(g) 23,370
-------- -------- ---------- -------- --------- --------
Income before income
taxes................. 22,820 1,292 4,919 29,031 (2,578) 26,453
Income taxes.............. 9,726 396 1,869(h) 11,991 (980)(h) 11,011
-------- -------- ---------- -------- --------- --------
Net income.............. $ 13,094 $ 896 $ 3,050 $ 17,040 $ (1,598) $ 15,442
======== ======== ========== ======== ========= ========
OTHER FINANCIAL DATA:
Operating income.......... $ 40,308 $ 4,596 $ 4,919 $ 49,823 $ -- $ 49,823
Plus: Depreciation and
amortization............ 12,753 5,429 758 18,940 -- 18,940
-------- -------- ---------- -------- --------- --------
EBITDA (i)................ $ 53,061 $ 10,025 $ 5,677 $ 68,763 $ -- $ 68,763
======== ======== ========== ======== ========= ========
Capital expenditures...... $ 22,681 $ 3,514 $ -- $ 26,195 $ -- $ 26,195
Ratio of earnings to fixed
charges (j)............. 2.1x -- -- -- -- 2.0x
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statement
Data.
21
<PAGE> 28
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(a) Historical results for the year ended December 31, 1998 include the
results for Direct as of April 14, 1998 and Gateway as of October 8,
1998.
(b) The following table reflects the operating results of our recent
acquisitions from January 1, 1998 to the earlier of their respective
dates of acquisition or December 31, 1998 (As the acquisition of
Columbia Nut & Bolt and Industrial Fasteners did not take place until
July 1999, and are not material to Park-Ohio, their results have not
been included in the pro forma financial statements.):
<TABLE>
<CAPTION>
ST. LOUIS
SCREW
DIRECT GATEWAY METALLOY AND BOLT PMC TOTAL
------ ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales........................... $2,046 $32,093 $94,789 $6,772 $10,379 $146,079
Cost of products sold............... 1,309 19,411 86,173 5,516 7,328 119,737
------ ------- ------- ------ ------- --------
Gross profit........................ 737 12,682 8,616 1,256 3,051 26,342
Selling, general and administrative
expenses.......................... 420 10,393 6,048 1,233 3,652 21,746
------ ------- ------- ------ ------- --------
Operating income (loss)............. 317 2,289 2,568 23 (601) 4,596
Interest expense.................... -- 396 873 -- 2,035 3,304
------ ------- ------- ------ ------- --------
Income (loss) before income taxes... 317 1,893 1,695 23 (2,636) 1,292
Income taxes........................ 12 -- 384 -- -- 396
------ ------- ------- ------ ------- --------
Net income (loss)................... $ 305 $1,893 $ 1,311 $ 23 $(2,636) $ 896
====== ======= ======= ====== ======= ========
OTHER FINANCIAL DATA:
EBITDA.............................. $ 323 $2,685 $ 7,315 $ 61 $ (359) $ 10,025
Depreciation and amortization....... 6 396 4,747 38 242 5,429
Capital expenditures................ -- 1,380 1,893 94 147 3,514
</TABLE>
(c) Reflects adjustments for certain cost savings that we believe would
have been realized and certain estimated incremental expenses relating
to selling, general and administrative expenses and amortization of
intangible assets that would have been incurred had we consummated our
recent acquisitions as of January 1, 1998.
(d) Reflects a cost saving adjustment of $1,169 to cost of products sold
due to the elimination of duplicative operating personnel in
conjunction with our recent acquisitions.
(e) Reflects the following cost saving adjustments to selling, general and
administrative expenses in conjunction with our recent acquisitions:
<TABLE>
<S> <C>
Elimination of duplicative personnel................... $3,299
Reduction in insurance and pension costs............... 834
Elimination of compensation to previous owners......... 375
------
Total adjustment.................................. $4,508
======
</TABLE>
(f) Reflects additional amortization of goodwill over 40 years as a result
of our recent acquisitions.
22
<PAGE> 29
(g) Reflects the following adjustments to interest expense:
<TABLE>
<S> <C>
Interest expense -- notes offered hereby(1)............ $ 4,625
Interest expense -- existing notes(2).................. 13,875
Interest expense -- revolving credit facility(3)....... 3,750
Interest expense -- other debt......................... 436
Amortization of deferred financing fees, net of premium
on notes.............................................. 684
-------
Pro forma interest expense............................. 23,370
Less: historical interest expense...................... 20,792
-------
Total adjustment.................................. $ 2,578
=======
</TABLE>
(1) Reflects an interest rate of 9.25%.
(2) Reflects an interest rate of 9.25%.
(3) Reflects the current interest rate of 6.00%.
(h) Adjustment necessary to reflect income tax expense at our incremental
effective income tax rate of 38%.
(i) EBITDA is defined as earnings from continuing operations before
interest, income taxes, depreciation and amortization. EBITDA is not a
measure of performance under GAAP. While EBITDA should not be
considered in isolation or as a substitute for net income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with GAAP or as a measure of profitability or
liquidity, we understand that EBITDA is customarily used as an
indication of a company's ability to incur and service debt. You should
read the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section included elsewhere in this
prospectus for a discussion of other measures of liquidity and
operations that are covered by our consolidated financial statements.
EBITDA as defined by us may not be comparable to other similarly titled
measures of other companies.
(j) Earnings are defined as earnings from continuing operations before
income taxes and fixed charges. Fixed charges are defined as interest
expense and a portion of rental expense representing the interest
factor, which we estimate to be one-third of rental expense, and
amortization of deferred financing costs and premium on the notes.
23
<PAGE> 30
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the Series C notes to the initial purchasers on June 2, 1999. As a
condition to the sale of those notes, we entered into a registration rights
agreement which requires us, unless not permitted by applicable law or
Securities and Exchange Commission policy, to:
- file with the SEC a registration statement under the Securities Act with
respect to the new notes within 45 days after June 2, 1999;
- use our best efforts to cause that registration statement to become
effective under the Securities Act within 130 days after June 2, 1999;
and
- upon effectiveness of the registration statement, commence the exchange
offer and keep it open for at least 30 days (or a longer period if
required by law) and deliver to the exchange agent new notes in the same
aggregate principal amount as the outstanding notes that were tendered by
holders in the exchange offer.
A copy of the registration rights agreement has been filed as an exhibit to
the registration statement which was filed with the SEC. The registration
statement also includes this prospectus.
You are a holder, or a person to whom this exchange offer is made, if you
are a person in whose name any outstanding notes are registered on Park-Ohio's
books or if you have obtained a properly completed assignment of those notes
from a registered holder.
In order to participate in the exchange offer, you must represent to
Park-Ohio that:
- the new notes being acquired in the exchange offer are being obtained in
the ordinary course of business of the person receiving those new notes;
- neither you nor any other person receiving the new notes is engaging in
or intends to engage in a distribution of the new notes;
- neither you nor any other person receiving the new notes has an
arrangement or understanding with any person to participate in the
distribution of the new notes; and
- neither you nor any other person receiving the new notes is an
"affiliate" of Park-Ohio. An affiliate is any person who "controls, is
controlled by, or is under the common control with," Park-Ohio.
RESALE OF THE NEW NOTES
In exchange for properly tendered outstanding notes, the new notes will be
issued without a restrictive legend and may be reoffered and resold by the
holder without the restrictions and limitations imposed by the Securities Act of
1933 on the outstanding Series C notes. Outstanding notes that are not tendered
for exchange under the exchange offer will remain outstanding and holders of
those notes will be entitled to the rights as set forth in the indentures.
However, the holders of the outstanding notes will not retain any rights under
the registration rights agreement, including the right to receive additional
incremental interest on the outstanding notes in the event that the registration
statement has not been filed or become effective within specified time periods.
Untendered outstanding Series C notes will remain subject to the transfer
restrictions imposed by the Securities Act of 1933. See "Consequences of Failure
to Exchange."
The conclusion that the new notes may be reoffered and resold by the holder
without transfer restrictions is based on previous interpretations by the Staff
of the SEC in no-action letters issued to third parties, including "Exxon
Capital Holdings Corporation" (available May 13, 1988), "Morgan Stanley & Co.
Incorporated" (the "Morgan Stanley Letter"), Mary Kay Cosmetics, Inc."
(available June 5, 1991), "Warnaco, Inc." (available October 11, 1991, and
"K-III Communications Corp." (available May 14, 1993). This conclusion also
relies on the representations described above that must be made by you and by
any other tendering holder before participating in the exchange offer.
24
<PAGE> 31
Any holder who tenders in the exchange offer with the intention of
participating in a distribution of the new notes cannot rely on this conclusion
and must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933 in connection with any resale transaction. If our
conclusion regarding resale of the new notes is inaccurate, holders who transfer
new notes in violation of the prospectus delivery provisions of the Securities
Act of 1933 and without an exemption from registration may incur liability. We
will not assume, or indemnify holders against, this liability.
The exchange offer is not being made to, and we will not accept tenders
from, holders of outstanding notes in any jurisdiction where the exchange offer
or the acceptance of outstanding notes would not be in compliance with the
securities or blue sky laws of that jurisdiction.
SPECIAL RULES FOR BROKER-DEALERS
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes, where the outstanding notes were acquired by that
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 new notes. In order to facilitate the disposition of new
notes by broker-dealers participating in the exchange offer, we have agreed, for
a period of 180 days following the expiration of the exchange offer and, subject
to specific conditions, to make this prospectus, as it may be amended or
supplemented from time to time, available for delivery by those broker-dealers
to satisfy their prospectus delivery obligations under the Securities Act.
TERMS OF THE EXCHANGE OFFER
If the terms and conditions described in this prospectus and in the
accompanying Letter of Transmittal are met, we will accept any and all
outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the expiration date.
This prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of the outstanding notes. There will be no fixed record
date for determining registered holders of the outstanding notes entitled to
participate in the exchange offer. Instead, holders of the outstanding notes
must tender their certificates or cause their outstanding notes to be tendered
by book-entry transfer prior to the expiration date in order to participate.
The exchange agent, Norwest Bank, National Association will act as agent
for the tendering holders for the purposes of receiving new notes from
Park-Ohio. Park-Ohio will be deemed to have accepted validly tendered
outstanding notes when we have given oral or written notice to the exchange
agent. If any tendered outstanding notes are not accepted for exchange because
of an invalid tender or any other reason, certificates for those unaccepted
outstanding notes will be returned, without expense to the tendering holder, as
promptly as practicable after the expiration date of the exchange offer. Any
unaccepted outstanding notes tendered by book-entry transfer will be credited to
an account maintained with The Depository Trust Company, without expense to the
tendering holder, as promptly as practicable after the expiration date. See
"Procedures for Tendering."
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the accompanying Letter of Transmittal, transfer taxes with respect to the
exchange.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date will be 5:00 p.m., New York City time on ,
1999, unless, in our sole discretion, we extend the exchange offer. If extended,
the expiration date will then be the latest date and time to which the exchange
offer is extended.
We will notify the exchange agent of any extension by oral (promptly
confirmed in writing) or written notice prior to 9:00 a.m., New York City time,
on the next business day after the previously schedule expiration date and will
also make a public announcement of any extension through a release to an
appropriate news agency.
25
<PAGE> 32
We reserve the right, in our sole discretion to:
- delay accepting any outstanding notes,
- extend the exchange offer, if any of the conditions set forth below under
"Conditions" have not been satisfied,
- terminate the exchange offer, if any of the conditions set forth below
under "Conditions" have not been satisfied,
- amend the terms of the exchange offer in any manner consistent with the
registration rights agreement.
Any delay in acceptances, extension, termination, or amendment of the
exchange offer will be followed as promptly as practicable by oral or written
notice to the registered holders. We have no obligation to publish, advertise or
otherwise communicate this notice other than our obligation to make a timely
release to a news agency.
If the exchange offer is amended in a manner determined by us to constitute
a material change, we will promptly disclose that amendment in a prospectus
supplement that will be distributed to all registered holders. Depending upon
the significance of the amendment and the manner of disclosure to the registered
holders, we will also extend the exchange offer for a period of five to ten
business days, if the exchange offer would otherwise expire during that five to
ten business day period.
Issuance of new notes in exchange for accepted outstanding notes will be
made only after the exchange agent receives:
- certificates for the outstanding notes, or a timely confirmation of
book-entry transfer of such outstanding notes into the exchange agent's
account at The Depository Trust Company;
- a properly completed and duly executed Letter of Transmittal; and
- all other required documents.
However, we reserve the absolute right to waive any defects or
irregularities in the tender of outstanding notes or in the satisfaction of
conditions of the exchange offer by a holder. If:
- any tendered outstanding notes are not accepted for any reason;
- the holder withdraws their previously tendered outstanding notes; or
- outstanding notes are submitted for a greater principal amount of
outstanding notes than the holder desires to exchange;
then any such unaccepted, withdrawn or portion of non-exchanged outstanding
notes will be returned as promptly as practicable after the expiration or
termination of the exchange offer without expense to the tendering holder. In
the case of outstanding notes tendered by book-entry transfer, such unaccepted,
withdrawn or portion of non-exchanged outstanding notes will be credited to an
account maintained with The Depository Trust Company without expense to the
tendering holder.
CONDITIONS
We will not be required to exchange any new notes for outstanding notes,
and we may terminate the exchange offer before the acceptance of any outstanding
notes for exchange, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer;
- any law, statute, rule or regulation is proposed, adopted or enacted, or
any interpretation of any existing law, statute, rule or regulation is
issued by the staff of the SEC, which, in our reasonable judgment, might
materially impair our ability to proceed with the exchange offer; or
26
<PAGE> 33
- any governmental approval or approval by holders of the outstanding notes
has not been obtained, if we deem, in our reasonable judgment, that such
approval is necessary for the consummation of the exchange offer.
If we determine in our sole discretion that any of these conditions are not
satisfied, we may:
- refuse to accept any outstanding notes and return all tendered
outstanding notes to the tendering holders, or, in the case of
outstanding notes tendered by book-entry transfer, credit such
outstanding notes to an account maintained with The Depository Trust
Company;
- extend the exchange offer and retain all outstanding notes tendered prior
to the expiration of the exchange offer, subject to the rights of holders
to withdraw their tender of outstanding notes; or
- waive any unsatisfied conditions and accept all properly tendered
outstanding notes that have not been withdrawn.
See "-- Expiration Date; Extensions; Amendments."
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must:
- complete, sign and date the Letter of Transmittal, or a facsimile;
- have the signatures on the Letter of Transmittal guaranteed if required
by the Letter of Transmittal, and
- mail or otherwise deliver the Letter of Transmittal or facsimile to the
exchange agent before the expiration date.
In addition, a holder must comply with the guaranteed delivery procedures
described below if:
- certificates for outstanding notes and the Letter of Transmittal will not
be received by the exchange agent before the expiration date; or
- a timely confirmation of book-entry transfer of outstanding notes into
the exchange agent's account at The Depository Trust Company will not be
received by the exchange agent before the expiration date.
To be effectively tendered, the Letter of Transmittal and other required
documents must be received by the exchange agent at the address set forth below
under "-- Exchange Agent" before the expiration date.
A tender by a holder of outstanding notes that is not withdrawn before the
expiration date will constitute an agreement between Park-Ohio and the holder in
accordance with the terms, and subject to the conditions, set forth in this
prospectus and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND
RISK. INSTEAD OF DELIVERY BY MAIL, YOU SHOULD USE AN OVERNIGHT OR HAND DELIVERY
SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND
THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO PARK-OHIO. YOU MAY REQUEST
THAT YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TENDER YOUR OUTSTANDING NOTES FOR YOU.
If you are a beneficial owner whose outstanding notes are registered in the
name of a broker, dealer, commercial bank, trust company, or other nominee, and
you wish to tender your outstanding notes, you should contact the registered
holder promptly and instruct the registered holder to tender your outstanding
notes on your behalf. If you are a beneficial owner and wish to tender your
outstanding notes on your own behalf, you must, before completing and executing
the Letter of Transmittal and delivering your outstanding notes, either make
appropriate arrangements to register ownership of the outstanding notes in your
name or obtain a properly completed assignment from the registered holder. The
transfer of registered ownership of outstanding notes may take a long time.
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Signatures on a Letter of Transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless the outstanding notes are
- tendered by a registered holder who has not completed the box entitled
"Special Payment Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal; or
- tendered for the account of an eligible institution.
If signatures on a Letter of Transmittal or a notice of withdrawal are required
to be guaranteed, the guarantor must be an eligible institution. Eligible
institutions include:
- a member firm of a registered national securities exchange;
- a member firm of the National Association of Securities Dealers, Inc.;
- a commercial bank having an office or correspondent in the U.S.; and
- an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934.
If the Letter of Transmittal is signed by a person other than the
registered holder, those outstanding notes must be endorsed or accompanied by a
properly completed bond power. The bond power must be signed by the registered
holder as their name appears on their outstanding notes.
If the Letter of Transmittal, any outstanding notes or any bond power is
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should indicate their capacity when signing. Unless
waived, evidence satisfactory to us of that person's authority to act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility, time of receipt,
acceptance of tendered outstanding notes, and withdrawal of tendered outstanding
notes will be determined by us in our sole discretion, which will be final and
binding. We reserve the absolute right to reject any and all outstanding notes
not properly tendered. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the Letter of Transmittal, will be
final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
outstanding notes must be cured within the time period we designate. Although we
intend to notify holders of defects or irregularities in the tender of
outstanding notes, neither we, nor the exchange agent or any other person will
be liable for failure to give such notification. Tenders of outstanding notes
will not be deemed to have been made until all defects or irregularities have
been cured or waived. Any outstanding notes received by the exchange agent that
are not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the exchange agent to the exchange
agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the expiration date.
In addition, we reserve the right, in our sole discretion, to purchase or
make offers for any outstanding notes that remain outstanding subsequent to the
expiration date. To the extent permitted by applicable law and the terms of our
agreements relating to our outstanding indebtedness, we may purchase outstanding
notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account for the
outstanding notes at The Depository Trust Company for the purposes of the
exchange offer within two business days after the date of this prospectus. Any
financial institution that is a participant in The Depository Trust Company's
system may make book-entry delivery of outstanding notes by causing The
Depository Trust Company to transfer such outstanding notes into the exchange
agent's account at The Depository Trust Company in accordance with its transfer
procedures. Even
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though delivery of outstanding notes may be effected through book-entry transfer
at The Depository Trust Company,
- a holder must comply with the guaranteed delivery procedures described
below; or
- the Letter of Transmittal or a facsimile, with any required signature
guarantees and any other required documents, must be received by the
exchange agent at the address set forth below under "Exchange Agent" on
or before the expiration date.
Delivery of documents to The Depository Trust Company in accordance with
its procedures does not constitute delivery to the exchange agent.
GUARANTEED DELIVERY PROCEDURES
If your outstanding notes are not immediately available or you are unable
to deliver your outstanding notes, the Letter of Transmittal, or any other
required documents to the exchange agent prior to the expiration date, you may
effect a tender if:
- the tender is made through an eligible institution; and
- before the expiration date, the exchange agent receives from an eligible
institution a properly completed and duly executed "Notice of Guaranteed
Delivery" substantially in the form provided by us which
- states the name and address of the holder;
- states the certificate number(s) of such outstanding notes;
- states the principal amount of outstanding notes tendered;
- states that the tender is being made through the guaranteed delivery
procedures; and
- guarantees that, within three New York Stock Exchange trading days
after the expiration date, the following documents will be deposited
by the eligible institution with the exchange agent:
- the Letter of Transmittal, or a facsimile thereof; and
- the certificate(s) representing the outstanding notes in proper
form for transfer or a confirmation of book-entry transfer; and
- any other documents required by the Letter of Transmittal; and
- a properly completed and executed Letter of Transmittal, or a
facsimile, the certificate(s) representing all tendered outstanding
notes in proper form for transfer and all other documents required by
the Letter of Transmittal are received by the exchange agent within
three New York Stock Exchange trading days after the expiration date
of the exchange offer.
Upon request, the exchange agent will send a Notice of Guaranteed Delivery
to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date of the exchange offer.
To withdraw a tender of outstanding notes, a written or facsimile
transmission of a notice of withdrawal must be received by the exchange agent at
its address set forth in this prospectus prior to 5:00 p.m., New York City time,
on the expiration date. Any notice of withdrawal must:
- specify the name of the person who deposited the outstanding notes that
are being withdrawn;
- identify the tendered outstanding notes to be withdrawn, including the
certificate number(s);
- be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which the outstanding notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the exchange agent register the
transfer of such outstanding notes in the name of the person withdrawing
the tender;
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- specify the name in which any outstanding notes are to be registered, if
different from that of the person who deposited the notes to be
withdrawn; and
- any outstanding notes so withdrawn will be deemed not to have been
validly tendered for purposes of the exchange offer, and no new notes
will be issued unless the withdrawn outstanding notes are validly
retendered. Properly withdrawn outstanding notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the expiration date.
TERMINATION OF RIGHTS ACCORDED BY THE REGISTRATION RIGHTS AGREEMENT
All rights under the registration rights agreement accorded to holders of
outstanding notes will terminate upon the consummation of the exchange offer.
However, Park-Ohio will be obligated:
- to keep the registration statement effective until the closing of
the exchange offer; and
- for up to 180 days after the expiration date, to provide copies of
the latest version of this prospectus to any broker-dealer that
requests copies of the prospectus for use in connection with any
resale of new notes received for its own account through the
exchange of outstanding notes acquired for its own account as a
result of market-making or other trading activities, subject to the
conditions described under "-- Resale of the Exchange Notes."
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as the
exchange agent for the exchange offer. All questions and requests for assistance
as well as all correspondence in connection with the exchange offer and the
Letter of Transmittal should be addressed to the exchange agent, as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National
Corporate Trust Operations Association
P.O. Box 1517 Corporate Trust Operations
Minneapolis, MN 55480-1517 Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-0113
</TABLE>
<TABLE>
<S> <C>
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National
Corporate Trust Operations Association
Northstar East, 12th Floor Corporate Trust Operations
608 2nd Avenue (612) 667-4927
Minneapolis, MN 55402 Confirm by telephone:
(612) 667-9764
</TABLE>
Requests for additional copies of this prospectus, the Letter of
Transmittal or the Notice of Guaranteed Delivery should be directed to the
exchange agent.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders of outstanding notes. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of Park-Ohio and its affiliates.
We have not retained any dealer-manager or other soliciting agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the exchange offer. We will, however,
pay the exchange agent reasonable and customary fees for its services and will
reimburse it for its related reasonable out-of-pocket expenses.
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We will pay the cash expenses to be incurred in connection with the
offering of the new notes. These expenses include fees and expenses of the
exchange agent and trustee, accounting and legal fees and printing costs, among
others.
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes in the exchange offer. If, however,
- certificates representing notes, or outstanding notes for principal
amounts not tendered or acceptable for exchange, are to be delivered to,
or are to be issued in the name of, any person other than the registered
holders of the outstanding notes tendered;
- if tendered outstanding notes are registered in the name of any person
other than the person signing the Letter of Transmittal; or
- if a transfer tax is imposed for any reason other than the exchange of
Original Notes pursuant to the exchange offer;
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption is not submitted
with the Letter of Transmittal, the amount of those transfer taxes will be
billed directly to the tendering holder of outstanding notes.
CONSEQUENCES OF FAILURE OF EXCHANGE
Participation in the exchange offer is voluntary. Holders of the
outstanding notes are urged to consult their financial and tax advisors in
making their own decisions on whether or not to participate in the exchange
offer.
Outstanding Series C notes that are not exchanged for new notes in the
exchange offer will remain "restricted securities" for the purposes of the
federal securities laws. Accordingly, those outstanding Series C notes may not
be offered, sold, pledged, or otherwise transferred except:
- to Park-Ohio or any of its subsidiaries;
- to a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act of 1933 purchasing for its own account or for
the account of a qualified institutional buyer in a transaction meeting
for the requirements of Rule 144A;
- in an offshore transaction complying with Rule 904 of Regulation S under
the Securities Act;
- pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder, if available;
- to "Institutional Accredited Investors" in a transaction exempt from the
registration requirements of the Securities Act; or
- pursuant to an effective registration statement under the Securities Act,
in accordance with all other applicable securities laws.
Outstanding Series B notes that are not exchange for new notes in the
exchange offer will not become subject to transfer restrictions and will remain
freely tradeable. However, the principal amount of outstanding Series B notes
will decrease as those notes are exchanged in the exchange offer. This decrease
will reduce the liquidity of any trading market that may exist for the
outstanding Series B notes.
Outstanding notes that are not exchanged for new notes in the exchange
offer will not retain any rights under the registration rights agreement.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The new notes will be recorded at the same carrying value as
the outstanding notes, as reflected in Park-Ohio's accounting records on the
date of the exchange. The expenses of the exchange offer will be amortized over
the term of the notes.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The consolidated financial statements of our company include the accounts
of Park-Ohio, a wholly-owned subsidiary of Park-Ohio Holdings Corp. and its
subsidiaries. All significant intercompany transactions have been eliminated in
consolidation. The historical financial information is not directly comparable
on a year-to-year basis due to acquisitions in 1998 and 1997. During 1998, we
acquired two businesses for $40.2 million. During 1999, we acquired all of the
shares of The Metalloy Corporation and St. Louis Screw and Bolt and the assets
of PMC Industries, Inc. for $29.1 million. Metalloy is a full service aluminum
casting and machining company. St. Louis Screw is a manufacturer of bolts and
PMC provides capital equipment and associated parts for the oil drilling
industry. During October 1998, we acquired all of the shares of GIS Industries,
Inc., known as Gateway. Gateway is a distributor of fasteners and other
industrial products and a manufacturer of metal products and fasteners. During
April, 1998, we acquired all of the shares of Direct Fasteners Limited, a
distributor of fasteners located in Ontario, Canada. During 1997, we acquired
five businesses for $60.4 million. The largest of the 1997 acquisitions was
Arden Industrial Products, Inc. which was acquired for $44 million as of August
1, 1997. Arden is a national supplier of specialty and standard fasteners to the
industrial market. All acquisitions are accounted for as purchases and
consequently their results are included in the consolidated financial statements
from their respective dates of acquisition. In 1996, we sold substantially all
of the assets of Bennett Industries, Inc., a manufacturer of plastic containers,
in order to focus on our remaining logistics and manufacturing businesses.
OVERVIEW
We operate diversified manufacturing and logistic businesses that serve a
wide variety of industrial markets. We define our businesses into three
operating segments: Integrated Logistics Solutions, Aluminum Products, and
Manufactured Products. Integrated Logistics Solutions is a leading national
supplier of fasteners, such as nuts, bolts and screws and other industrial
products to original equipment manufacturers, other manufacturers and
distributors. In connection with the supply of such industrial products,
Integrated Logistics Solutions provides a variety of value-added, cost-effective
procurement solutions. The principal customers of Integrated Logistics Solutions
are in the transportation, industrial, electrical and lawn and garden equipment
industries. Aluminum Products manufactures cast aluminum critical components
primarily for automotive original equipment manufacturers. Aluminum Products
provides value-added services such as design and engineering, machining and
assembly. Manufactured Products designs and manufactures a broad range of high
quality products engineered for specific customer applications. The principal
customers of Manufactured Products are original equipment manufacturers and
end-users in the automotive, railroad, truck and aerospace industries.
Between 1994 and 1998, we have grown significantly, both internally and
through acquisitions. Over this period, our net sales increased at a 43.8%
compounded annual growth rate ("CAGR"), from $129.2 million to $551.8 million,
and income from continuing operations on a fully taxed basis increased at a
33.2% CAGR from $4.1 million to $13.1 million.
This growth has been primarily attributable to our strategy of making
selective acquisitions in order to complement internal growth. Historically, we
have acquired underperforming businesses with potential for:
- significant cost reductions through improved labor, supplier and customer
relations and increased purchasing power and
- revenue enhancement due to better asset utilization and management
practices, as well as increased access to capital.
Our internal growth has been driven primarily by the addition of Integrated
Logistics Solutions customers under total fastener supply contracts and by the
leveraging of existing customer relationships in the Aluminum Products and
Manufactured Products segments.
Between January 1, 1994 and March 31, 1999, our continuing operations
incurred $70.5 million of capital expenditures, the majority of which was used
to expand and upgrade existing manufacturing facilities and enhance Integrated
Logistics Solutions' management information systems.
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RESULTS OF OPERATIONS
Three Months 1999 versus Three Months 1998
Net sales increased by $34.9 million, or 26%, from $136.5 million for the
first three months of 1998 to $171.4 million for the three months ended March
31, 1999. This growth results from acquisitions that we made subsequent to March
31, 1998 and relates primarily to the Integrated Logistics Solutions and the
Aluminum Products segments. For Integrated Logistics Solutions, the growth in
net sales from acquisitions amounted to $12.7 million and related to Gateway and
Direct Fasteners. For Aluminum Products, net sales increased by $21.7 million
and related primarily to the acquisition of Metalloy.
Gross profit increased by $7.6 million, or 33%, from $23.3 million for the
first three months of 1998 to $30.9 million for the first three months of 1999
and is directly related to acquisitions made in the preceding twelve months. Our
consolidated gross margin increased to 18.1% for the first three months of 1999
from 17.1% for the first three months of 1998. This increase in consolidated
gross margin was due to increased margins in both the Aluminum Products and
Integrated Logistics Solutions segments more than offsetting a decline in gross
margins in the Manufactured Products segment. The increase in the Aluminum
Products segment gross margin was due to increased production at General
Aluminum, thereby allocating fixed manufacturing overhead over a greater
production base and to the acquisition of Metalloy which has a higher overall
gross margin than the existing business. The increase in margins in the
Integrated Logistics Solutions segment is a result of spreading operating costs
over a growing revenue base resulting from the recent acquisitions in Integrated
Logistics Solutions and favorable raw material sourcing. The decline in margins
in the Manufactured Products segment results primarily from reduced production
activity at Ajax Manufacturing Company which caused fixed overhead costs to be
spread over a lesser production base.
Selling, general and administrative costs increased by 28% to $18.0 million
for the first three months of 1999 from $14.1 million for the first three months
of 1998. This increase was related to the acquisitions that have been
consummated subsequent to the first quarter of 1998. Consolidated selling,
general and administrative expenses as a percentage of net sales was
approximately 10.5% for both periods.
Interest expense increased by $1.2 million from $4.2 million for the
three-month period ended March 31, 1998 to $5.4 million for the three-month
period ended March 31, 1999 due to higher average debt outstanding during the
current period offset by lower average interest rates in 1999 versus 1998. For
the three-month period ended March 31, 1999, we averaged outstanding borrowings
of $265.2 million as compared to $182.6 million outstanding for the three months
ended March 31, 1998. The $82.6 million increase related primarily to
acquisitions completed during the latter part of 1998 and the first quarter of
1999 with the remainder primarily related to working capital increases to
support the realized and anticipated growth in business and to capital
expenditures to support growth in the business. The average borrowing rate of
8.1% for the three months ended March 31, 1999 is 1.0% lower than the average
rate of 9.1% for the three months ended March 31, 1998 primarily because of
averaging increased borrowings under our revolving credit facility which carry
lower effective interest rates with our subordinated debt which carries a higher
coupon rate.
The effective income tax rate for the three-month periods ended March 31,
1999 and 1998 was 43%. At December 31, 1998, our subsidiaries had $1.1 million
of net operating loss carryforwards for tax purposes.
1998 versus 1997
Net sales increased by $110.7 million, or 25%, from $441.1 million in 1997
to $551.8 million in 1998. Approximately 27% of this increase was attributable
to internal growth and 73% was a result of acquisitions completed in 1997 or
1998. Of the internal sales growth, approximately 66% was primarily attributable
to Integrated Logistics Solutions and the addition of total fastening service
customers, and the remainder was due to increased orders from Manufactured
Products' customers. The growth in net sales from acquisitions applies to
Integrated Logistics Solutions and primarily pertains to Arden and Gateway.
Gross profit increased by $24.2 million, or 34%, from $72.4 million in 1997
to $96.6 million in 1998. Of the increase, 67% relates to acquisitions and 33%
to internal growth. Our consolidated gross margin increased to 17.5% for 1998
from 16.4% for 1997. This increase in consolidated gross margin was due to
increased margins in
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both the Integrated Logistics Solutions and Manufactured Products segments. The
increase in Manufactured Products was due to a change in revenue mix and to
increased production thereby allocating fixed manufacturing overhead over a
greater production base. The increase in margins in the Integrated Logistics
Solutions segment is a result of reduced material costs.
Selling, general and administrative costs increased by $11.9 million or 27%
to $56.3 million in 1998 from $44.4 million in 1997. Approximately 78% of such
increase was related to acquisitions while the remainder related to the increase
in internally generated net sales. Consolidated selling, general and
administrative expenses as a percentage of net sales was approximately 10% for
both periods.
Interest expense increased by $8.4 million from $9.1 million for 1997 to
$17.5 million for 1998 due to higher average debt outstanding during 1998 and to
higher average interest rates in 1998 versus 1997. For the year ended December
31, 1998, we averaged outstanding borrowings of $205.3 million as compared to
$123.1 million outstanding for 1997. The $82.2 million increase related
primarily to acquisitions completed during the latter part of 1997 and 1998,
working capital increases to support the realized and anticipated growth in
business and capital expenditures to support the operations. The average
borrowing rate of 8.5% for the year ended December 31, 1998 is 1.1% higher than
the average rate of 7.4% for the year ended December 31, 1997 primarily because
of the $150 million debt offering in November, 1997 which carries a coupon of
9.25% versus a 7.3% rate on the bank debt it replaced.
The effective income tax rate for 1998 was 43% as compared to 41% for 1997.
The increase is directly attributable to an increase in expenses recorded for
financial reporting purposes, but not deductible for income tax purposes,
primarily goodwill amortization. At December 31, 1998, our subsidiaries had $1.1
million of net operating loss carryforwards for tax purposes.
1997 versus 1996
Net sales from continuing operations increased by $93.4 million, or 27%,
from $347.7 million in 1996 to $441.1 million in 1997. Approximately 42% of this
increase was attributable to internal growth and 58% was a result of
acquisitions completed in 1997. Of the internal sales growth, approximately 70%
was primarily attributable to the addition of total fastening service customers
in the Integrated Logistics Solutions segment and the remainder was due to
increased orders from Manufactured Products' customers. Of the growth in net
sales attributable to the 1997 acquisitions, the majority applies to the
Integrated Solutions Logistics segment and primarily pertains to Arden, which
was acquired as of August 1, 1997.
Gross profit from continuing operations increased by $14.1 million, or 24%,
from $58.3 million in 1996 to $72.4 million in 1997. Of the increase, 79%
relates to the 1997 acquisitions and 21% was due to internal growth. A majority
of the increase attributable to the 1997 acquisitions was related to Arden. Our
consolidated gross margin from continuing operations decreased to 16.4% in 1997
from 16.8% in 1996. This decrease in consolidated gross margin was primarily due
to a change in our revenue mix.
Selling, general and administrative costs from continuing operations
increased by $6.3 million or 16% to $44.4 million in 1997 from $38.1 million in
1996. Approximately 93% of such increase was related to the 1997 acquisitions.
Consolidated selling, general and administrative expenses decreased as a
percentage of net sales to 10.1% in 1997 from 11.0% in 1996 due to economies of
scale resulting from higher sales volume.
Interest expense from continuing operations increased by $2.2 million from
$6.9 million in 1996 to $9.1 million in 1997 due to average debt outstanding in
1997 increasing by $19.9 million and to the reclassification in 1996 of
approximately $.8 million of interest expense to discontinued operations
resulting from the sale of Bennett Industries. Average interest rates for the
period were approximately the same in 1997 and 1996.
As a result of the early extinguishment of our 7 1/4% Convertible Senior
Subordinated Debentures due June 15, 2004, and our then existing bank credit
facility, we recorded an extraordinary charge of $1.5 million, net of income
taxes, in 1997.
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At December 31, 1997, our subsidiaries had net operating loss carryforwards
for tax purposes of approximately $9.4 million, subject to certain limitations
that expire between 2001 and 2007.
LIQUIDITY AND SOURCES OF CAPITAL
Our liquidity needs are primarily for working capital and capital
expenditures. Our primary sources of liquidity have been funds provided by
operations and funds available from existing bank credit arrangements. On
November 2, 1998, we amended and restated our credit agreement with a group of
banks under which we may borrow up to $150 million on an unsecured basis. This
agreement, the proceeds of which will be used for general corporate purposes,
expires on April 30, 2001. Amounts borrowed under the agreement may be, at our
election, either (a) the bank's prime lending rate less 100-30 basis points or
(b) LIBOR plus 90-170 basis points depending on the aggregate amount borrowed
under the agreement. Outstanding borrowings under this facility were $86.0
million at December 31, 1998 and $113.0 million at April 30, 1999.
On November 25, 1997, we sold $150 million of our 9.25% Senior Subordinated
Notes due 2007. We used the net proceeds of those 1997 Notes along with
borrowings under our new credit facility to (a) redeem our 7 1/4% Convertible
Senior Subordinated Debentures due June 15, 2004 and (b) to repay substantially
all amounts outstanding under our then existing credit facility. On June 3,
1999, we sold $50 million of our 9.25% Senior Subordinated Notes. We used the
net proceeds of these 1999 Notes to repay $49.0 million outstanding under our
revolving credit facility.
Current financial resources (working capital and available bank borrowing
arrangements) and anticipated funds from operations are expected to be adequate
to meet current cash requirements. Capital expenditures for 1999 are projected
to be approximately $15 million which will be used to invest in our current
facilities for projected new business, and for scheduled improvements and new
equipment to expand existing products.
The ratio of current assets to current liabilities was 2.38 at March 31,
1999, 3.17 at December 31, 1998, and 2.83 at December 31, 1997. Working capital
increased by $30.2 million to $176.6 million at December 31, 1998 from $146.4
million at December 31, 1997 as a result of the inclusion of acquisitions
completed in 1998 and to support our internal growth. Working capital decreased
by $12.5 million to $164.1 million at March 31, 1999 from $176.6 million at
December 31, 1998 largely as a result of implementing systems throughout
Park-Ohio to more efficiently utilize and minimize levels of working capital
necessary to operate our diverse and separate operations, and to purchase
accounting adjustments related to acquisitions completed in 1999.
During the first three months of 1999, we generated $9.3 million from
operations before changes in operating assets and liabilities. After giving
effect to the generation of $1.6 million in the operating accounts, we provided
$10.9 million from operating activities. During the period we invested $6.3
million in capital expenditures, used $29.1 for acquisitions and used $.5
million for other purposes. These activities were primarily funded by a net
increase in bank borrowings of $25.1 million.
During 1998, we generated $32.5 million of cash from operations before
changes in operating assets and liabilities. After giving effect to the use of
$28.4 million in the operating accounts, we provided $4.1 million from operating
activities. During the year, we invested $22.7 million in facilities, machinery
and equipment, and information systems, used $40.2 for acquisitions and used
$3.0 million for dividends. These activities were funded by a net increase in
bank borrowings of $64.3 million offset by a $2.5 million increase in cash
during the period.
During 1997, we generated $27.0 million from continuing operations before
changes in operating assets and liabilities. After giving effect to the use of
$37.0 million in the operating accounts, we used $10.0 million for operating
activities. During the period, we invested $15.9 million in capital expenditures
and $60.4 million for acquisitions and investments including the acquisition of
Arden for $44.0 million. During the year, we bought 221,494 shares of our common
stock in the open market for $3.0 million. As of December 31, 1997, after
issuing 199,000 common shares from the treasury for the exercise of stock
options, we had 148,719 shares of our common stock in the treasury. During the
year, 351,000 shares of common stock were issued under stock option agreements
for which we received $3.2 million from the option holders. In addition, we
purchased in the open
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market $1.2 million of our convertible senior subordinated debentures. These
activities were funded by a net increase in long-term borrowings of $85.4
million and a decrease in cash balances of $2.8 million.
During 1996, we generated $20.4 million from continuing operations before
changes in operating assets and liabilities. After giving effect to the use of
$14.7 million in the operating accounts and $2.0 million provided from
discontinued operations, we provided $7.7 million from operating activities.
During 1996, we invested $15.6 million in capital expenditures and purchased
126,225 shares of our common stock for $1.8 million, all of which were funded by
internally generated cash flow and bank borrowings.
IMPACT OF INFLATION
Although inflation was not a significant factor in 1998, we continue to
seek ways to cope with its impact. To the extent permitted by competition, our
operations generally attempt to pass on increased costs by increasing sales
prices over time. We primarily use the first in, first out method of accounting
for our inventories. Under this method, current costs are generally reflected in
cost of products. The charges to operations for depreciation represent the
allocation of historical costs incurred over past years and are significantly
less than if they were based on the current cost of productive capacity being
consumed.
YEAR 2000 CONVERSION
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruption of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
During 1996, we developed a Year 2000 Task Force, which was established to
monitor and track the Year 2000 compliance at our operating units. The Task
Force developed a Year 2000 plan in order to minimize the risk to our operating
units and its customers. The plan to resolve the Year 2000 issues involves four
phases: assessment, remediation, testing and implementation.
To date, the Task Force has completed its assessment of our computer
hardware and software applications, process control equipment, and other
non-information technology equipment. After taking into consideration
investments in new equipment and systems that have already been made, this
assessment has determined that with only a few exceptions, the systems are Year
2000 compliant. The exceptions require upgrades of software programs or changes
to existing programs. The remediation and testing phases are currently underway,
and upgrades and software corrections are being completed. The target for
completion of all phases is by the third quarter of 1999. We also expect
critical contingency plans to be developed by the end of the third quarter of
1999. Based upon the assessments and remediations completed to date, we do not
expect that the Year 2000 issue will have a material effect on our business
operations, consolidated financial condition, cash flows, or results of
operations.
In addition, the Task Force is reviewing the Year 2000 compliance of our
significant third parties, including key suppliers, customers and service
providers in an effort to reduce the potential adverse effect on our operations
from non-compliance by those parties. This review of significant third parties
has begun and is expected to be completed by September 30, 1999. Interfaces to
external suppliers and customers are part of this assessment and validation
process. As these significant third parties are reviewed, the Task Force intends
to develop contingency plans, if necessary, for those parties that exhibit
possible Year 2000 problems. We have identified the most likely risk of Year
2000 non-compliance as the risk that significant third parties will not be Year
2000 compliant. Due to the general uncertainty inherent in the Year 2000
problem, we are unable to determine at this time whether the consequences of
Year 2000 compliance failures will have a material effect on our results of
operations or financial condition. If Year 2000 compliance is not achieved by
these significant third parties, over which we have no control, it could,
depending on duration, have a material adverse effect on our operations.
We are utilizing both internal and external resources to remedy, test, and
implement the software and operating equipment for Year 2000 modifications. The
total cost to achieve Year 2000 compliance is estimated at
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<PAGE> 43
$9 million. Approximately 75% of this cost represents new systems, which we may
have initiated during the period, notwithstanding the Year 2000 issue. To date,
we have incurred approximately $8.5 million for new systems and equipment, with
the majority of these costs for the conversion/development of systems. The
remaining $.5 million will be funded through operating cash flows. We generally
do not separately identify the direct costs of internal employees working on
Year 2000 projects.
ENVIRONMENTAL
We have been identified as a potentially responsible party at certain
third-party sites under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 or comparable state laws which provide for strict and,
under certain circumstances, joint and several liability. We are participating
in the cost of certain clean-up efforts at several of these sites. However, our
share of these costs has not been material and based on available information,
we do not expect our exposure at any of these locations to have a material
adverse effect on our results of operations, liquidity or financial condition.
SEASONALITY; VARIABILITY OF OPERATING RESULTS
As a result of the significant growth in our net sales and operating income
in recent years, seasonal fluctuations have been substantially mitigated.
However, we perform scheduled plant maintenance in the third quarter to coincide
with customer plant shut downs.
The timing of orders placed by our customers has varied with, among other
factors, orders for customers' finished goods, customer production schedules,
competitive conditions and general economic conditions. The variability of the
level and timing of orders has, from time to time, resulted in significant
periodic and quarterly fluctuations in the operations of our business units.
This variability is particularly evident at the capital equipment businesses,
which are included in the Manufactured Products segment, which typically ship a
few large systems per year.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Park-Ohio is exposed to market risk including changes in interest rates. We
are subject to interest rate risk on our floating rate revolving credit facility
which consisted of borrowings of $111.5 million at March 31, 1999. A 100 basis
point increase in the interest rate would result in an increase in interest
expense of $.3 million during the period.
FORWARD-LOOKING STATEMENTS
This registration statement contains certain statements that are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Certain statements in this Management's
Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements, including without limitation, discussion regarding
our anticipated levels and funding of capital expenditures and the Year 2000
conversion. Forward-looking statements are necessarily subject to risks,
uncertainties and other factors, many of which are outside our control, that
could cause actual results to differ materially from such statements. These
uncertainties and other factors include such things as: general business
conditions, competitive factors, including pricing pressures and product
innovation and quality; raw material availability and pricing; changes in our
relationships with customers and suppliers; our ability to successfully
integrate recent and future acquisitions into our existing operations; changes
in general domestic economic conditions such as inflation rates, interest rates
and tax rates; increasingly stringent domestic and foreign governmental
regulations including those affecting the environment; inherent uncertainties
involved in assessing our potential liability for environmental
remediation-related activities; the outcome of pending and future litigation and
other claims; dependence on the automotive industry; dependence on key
management; dependence on information systems; and our ability, our vendors and
customers to achieve Year 2000 compliance. Any forward-looking statement speaks
only as of the date on which such statement is made, and we undertake no
obligation to update any forward-looking statement, whether as a result of new
information, future events or
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<PAGE> 44
otherwise. In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
us that our plans and objectives will be achieved.
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<PAGE> 45
DESCRIPTION OF OTHER INDEBTEDNESS
REVOLVING CREDIT FACILITY
On November 2, 1998, we entered into an amended and restated credit
agreement with KeyBank National Association and The Huntington National Bank.
The lenders under this agreement agreed to lend us up to $150.0 million under a
revolving credit facility.
Term. Commitments under the revolving credit facility will terminate on
April 30, 2001. We have the option, with the consent of the lenders, to extend
the commitment period by one year.
Repayment. We have the right to prepay, without penalty at any time, all or
any part of the amount outstanding under the revolving credit facility. Amounts
borrowed and repaid under the revolving credit facility may be reborrowed,
subject to limitations.
Security and Guaranty. The revolving credit facility is not secured by any
of our assets. However, we have agreed to a negative pledge on our assets which
requires us to keep all of our assets free and clear of liens except for capital
leases and certain purchase money liens. All of our material domestic
subsidiaries guarantee, and any future domestic subsidiaries are required to
guarantee, our debt outstanding under the revolving credit facility.
Interest. At our option, the interest rates per annum applicable to the
revolving credit facility will be a fluctuating rate of interest measured by
reference to either:
- LIBOR plus the applicable borrowing margin (the "LIBOR Loans"); or
- a rate per annum equal to the higher of the published prime rate of the
administrative agent bank or one and one-half percent (1 1/2%) in excess
of the Federal Funds Effective Rate (as defined in the revolving credit
facility) plus the applicable borrowing margin ("Prime Rate Loans").
The applicable borrowing margins for the LIBOR Loans and the Prime Rate
Loans are based upon whether the loan is in Tranche A, Tranche B or Tranche C.
The commitments for Tranche A, B and C are $100.0 million, $25.0 million and
$25.0 million, respectively. The following matrix sets forth the applicable
borrowing margins for the various loans:
<TABLE>
<CAPTION>
APPLICABLE BORROWING MARGIN APPLICABLE BORROWING MARGIN
TYPE OF LOAN FOR LIBOR LOANS FOR PRIME RATE LOANS
------------ ------------------------------- -------------------------------
<S> <C> <C>
Tranche A 90 basis points (100) basis points
Tranche B 150 basis points (50) basis points
Tranche C 170 basis points (30) basis points
</TABLE>
Fees. We pay customary fees with respect to the revolving credit facility,
including agent fees and commitment fees on the unused portion of the revolving
credit facility.
Use of Proceeds. As of March 31, 1999, $111.5 million was outstanding under
the revolving credit facility. After giving pro forma effect to this offering
and the use of the proceeds therefrom, we would have had $62.5 million
outstanding under the revolving credit facility. Subsequent to the offering of
the Series C notes, we borrowed approximately $30 million under our revolving
credit facility to complete the acquisition of Columbia Nut & Bolt and
Industrial Fastener. The revolving credit facility is available to finance
permitted acquisitions, working capital requirements and general corporate
purposes.
INDUSTRIAL REVENUE BONDS
Our subsidiary, Metalloy, is obligated to repay a loan from the Mississippi
Business Finance Corporation in connection with the Taxable Adjustable Rate
Industrial Revenue Bonds, Series 1994 (the "Bonds") which were issued in June
1994 in connection with a construction project to expand its facilities in
Tupelo, Mississippi. The Bonds bear interest at a floating rate based on
commercial paper rates and will mature in 2003. A portion of the Bonds,
approximately $1.2 million, are required to be redeemed on June 1 of each year
until maturity at 100% of the principal amount redeemed plus accrued interest.
As of March 31, 1999, the Bonds had an interest rate of
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<PAGE> 46
approximately 5.0% per annum, and $6.1 million aggregate principal amount of
Bonds were outstanding. We recently borrowed $4.5 million under our revolving
credit facility and intend to redeem the Bonds in August, 1999.
STATE LOANS
We are a borrower under a State of Ohio Department of Development loan,
which was issued in April 1997 in connection with the refurbishment of our
corporate headquarters. This loan bears interest at a rate of 5.0% per annum and
will mature in 2002. As of March 31, 1999, $0.7 million aggregate principal
amount was outstanding under this loan.
Our subsidiary, General Aluminum Mfg. Company, is a borrower under a State
of Ohio Department of Development loan, which was issued in October 1993 in
connection with the expansion of its facility and the purchase of certain
equipment. This loan bears interest at a rate of 3.0% per annum and will mature
in 2003. As of March 31, 1999, $0.4 million aggregate principal amount was
outstanding under this loan.
OTHER INDEBTEDNESS
In addition, as of March 31, 1999, Park-Ohio had $1.7 million of other debt
outstanding, which was comprised of capital leases.
SERIES B NOTES
In November 1997, we issued $150.0 million of Series A 9 1/4% Senior
Subordinated Notes due 2007. In February 1998, we consummated an exchange offer
in which we exchanged all of these Series A notes for our Series B 9 1/4% Senior
Subordinated Notes due 2007 in an offering registered under the Securities Act
of 1933.
The principal terms of the Series B notes are the same as those of the
Series C notes, including the interest rate, the interest payment dates,
redemption dates, redemption premiums and the maturity date. The indenture
relating to the Series B notes contains covenants which are substantially the
same as those contained in the indenture relating to the Series C notes
described in this prospectus. We are offering to exchange all of the Series B
notes in return for new notes. It is likely that all of the Series C notes and
all of our currently outstanding Series B notes will be tendered for exchange in
the exchange offer; however, we cannot assure you that a significant amount of
the Series B notes will be so tendered. Series B notes not exchanged in the
exchange offer will continue as a separate series of notes under a separate
indenture. If all of the Series B notes and Series C notes are exchanged for new
notes, $200.0 million aggregate principal amount of new notes will be
outstanding following consummation of the exchange offer, and the new exchanged
notes will be deemed to be a single series of notes outstanding under the
indenture relating to the Series C notes described in this prospectus. If all of
the Series B notes are exchanged for new notes, your voting interest in your
Series B notes will be significantly diluted.
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<PAGE> 47
BUSINESS
Park-Ohio is an industrial logistics and diversified manufacturing business
which conducts its operations through three business segments: Integrated
Logistics Solutions, Aluminum Products and Manufactured Products.
INTEGRATED LOGISTICS SOLUTIONS is the leading national supplier of over
150,000 standard and specialty fasteners and other industrial products to a
broad base of industrial original equipment manufacturers. Most of the products
are supplied to customers through integrated supply management programs which
include value-added services, such as:
<TABLE>
<S> <C>
- - part usage and cost analysis - product redesign recommendations
- - supplier selection - quality assurance
- - bar coding - product packaging and tracking
- - just-in-time delivery - electronic billing services
- - ongoing technical support
</TABLE>
Integrated Logistics Solutions supplies over 12,000 customers and generated
net sales of $364.5 million for the year ended December 31, 1998. Integrated
Logistics Solutions' customers typically enter into exclusive, multi-year total
fastening service contracts which enable those customers to both reduce
procurement costs and better focus on their company's core manufacturing
competencies. Integrated Logistics Solutions operates out of 56 branches located
throughout the United States and has branches in Mexico, Canada, Puerto Rico and
England, and has a central distribution center located in Dayton, Ohio.
ALUMINUM PRODUCTS specializes in casting and machining aluminum components
primarily for the automotive industry. Aluminum Products generated net sales of
$39.9 million for the year ended December 31, 1998. We have invested more than
$36.4 million for capital expenditures (including one acquisition) in this
segment during the last two years to capitalize on the increasing amount of
aluminum being used in automobiles and trucks. Aluminum Products has grown
rapidly recently due to our:
- acquisition of Metalloy, which added sand and die casting to our existing
permanent mold casting capabilities;
- investment in state-of-the-art equipment in connection with a new
contract with Chrysler which is expected to generate annual net sales of
approximately $25 million; and
- additional new business which we have attracted due to our reputation for
high quality, low production costs and extensive casting capabilities.
MANUFACTURED PRODUCTS operates a diverse group of niche manufacturing
businesses which vary in net sales from approximately $5 million to $40 million.
This segment generated net sales of $147.4 million for the year ended December
31, 1998. This segment manufactures:
- large forgings, such as locomotive crankshafts and camshafts, aircraft
landing gears and specialized hardware for the construction industry;
- rubber products, such as valve seals, wire harnesses and spark plug
boots; and
- capital equipment, such as induction heating systems, forging presses and
heat processing and curing systems.
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The following table highlights Park-Ohio's three business segments, the key
products they sell and the primary industries they serve:
<TABLE>
<CAPTION>
1998
SALES
SEGMENT PRIMARY INDUSTRIES SERVED KEY PRODUCTS/SERVICES (MILLIONS)
------- ------------------------- ----------------------- ----------
<S> <C> <C> <C>
INTEGRATED LOGISTICS SOLUTIONS Automotive parts and Inventory management, $364.5
accessories, electrical engineering and
equipment, lawn and procurement of standard
garden equipment, HVAC, and specialty
industrial equipment, fasteners, fittings,
railroad and heavy truck rubber and other
industrial products.
ALUMINUM PRODUCTS Automotive, truck Engineering and 39.9
manufacturing of
aluminum permanent mold
castings such as
transmission pump
housings, pinion
carriers, clutch
retainers and other
die, sand and permanent
mold machined castings.
MANUFACTURED PRODUCTS Automotive, aerospace, Engineering and 147.4
power generation, manufacturing forged
railroad, shipbuilding, and machined products
steel, telecommunications such as aircraft
and truck landing gears,
locomotive crankshafts
and camshafts;
induction and heating
systems; and industrial
rubber products.
</TABLE>
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<PAGE> 49
OUR OPERATIONS
INTEGRATED LOGISTICS SOLUTIONS
Products and Services. Supply chain management, which is Integrated
Logistics' primary focus for future growth, involves offering customers
procurement solutions and comprehensive, on-site management for most of their
fastener and related hardware needs. Supply chain management customers receive
value-added services, such as part usage and cost analysis, product redesign
recommendations, supplier selection, quality assurance, bar coding, product
packaging and tracking, just-in-time delivery, electronic billing services and
ongoing technical support. Supply chain management services are typically
provided to customers pursuant to total fastening services contracts. Those
contracts enable Integrated Logistics' customers to both reduce procurement
costs and better focus on their companies' core manufacturing competencies by:
- significantly reducing the administrative and labor costs associated with
fastener procurement by outsourcing certain internal purchasing, quality
control and inventory fulfillment responsibilities;
- reducing the amount of working capital invested in inventory;
- achieving purchasing efficiencies as a result of vendor consolidation;
and
- receiving technical expertise in the selection of fastener and other
components for certain manufacturing processes.
Management believes that total fastening service contracts foster
longer-lasting supply relationships with customers, who increasingly rely on us
for their fastener needs, as compared to traditional buy/sell distribution
relationships. Sales pursuant to these contracts have increased significantly in
recent years and represented over 59% of Integrated Logistics' net sales for the
year ended December 31, 1998. Integrated Logistics' remaining sales are
generated through the wholesale supply of fasteners and other industrial
products to original equipment manufacturers, other manufacturers and
distributors pursuant to master or authorized distributor relationships.
Integrated Logistics supplies standard and specialty engineered fasteners
such as nuts, bolts, screws and washers on a fully integrated basis. The segment
engineers and manufactures precision cold formed and cold extruded products
including locknuts, spac nuts and wheel hardware, which are principally used in
applications where controlled tightening is required due to high vibration.
These are manufactured by shaping cold raw materials. Standard and specialty
nuts are produced to customer specifications, which are used in large volumes by
customers in the automotive, truck and railroad industries.
In addition to fasteners, Integrated Logistics supplies, among other
things, valves, fittings, clamps and rubber products, which currently represent
approximately 9% of Integrated Logistics' net sales. Integrated Logistics also
provides engineering and design services to its customers.
Applications-engineering specialists and the direct sales force work closely
with the engineering staff of original equipment customers to recommend the
appropriate fasteners for a new product or to suggest alternative fasteners that
reduce overall production costs, streamline assembly or enhance the appearance
or performance of the end product.
Markets and Customers. In 1998, approximately 89% of Integrated Logistics'
net sales were to domestic customers. Remaining sales were primarily to Canada
and Mexico. The domestic industrial fastener market is estimated by industry
sources to have generated between $7 and $9 billion in annual sales in 1998 at
the wholesale level. Fasteners are used extensively by original equipment
manufacturers in a variety of industries, and demand is generally related to the
state of the economy and to the overall level of manufacturing activity.
Integrated Logistics markets and sells fasteners and other industrial
products to over 12,000 customers domestically and internationally. The
principal markets served by Integrated Logistics are transportation equipment,
including manufacturers of heavy trucks and recreational vehicles, automotive
parts and accessories, industrial equipment, electrical equipment, including
manufacturers of electrical controls, appliances and motors, lawn and garden
equipment and HVAC.
In recent years, original equipment manufacturers have made it a priority
to reduce their total cost of purchasing and handling fasteners. Due to the low
unit cost and the large number of different fasteners used to
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<PAGE> 50
manufacture or assemble a single product, administrative and overhead costs
comprise a substantial portion of an original equipment manufacturers
fastener-related costs. As a result, management believes industrial fastener
suppliers are consolidating as original equipment manufacturers rely on fewer
suppliers to achieve purchasing efficiencies. Integrated Logistics provides a
wide array of value-added services and is a reliable source for just-in-time
delivery and is well positioned to capitalize on these trends. In addition,
original equipment manufacturers are increasingly relying on fastener suppliers
to provide design and applications engineering support, enabling more efficient
use of internal engineering resources and thereby allowing Integrated Logistics
to increase the amount of low unit cost fastener and non-fastener items supplied
to original equipment manufacturers.
Competition. The industrial fastener supply industry is highly competitive
and fragmented. Management believes that substantially all of Integrated
Logistics' competitors operate on a regional basis and do not provide customers
with the wide array of value-added services offered by Integrated Logistics.
Integrated Logistics competes primarily on the basis of its value-added
services, extensive product selection and price with primarily domestic
competitors who are capable of providing inventory management programs.
MANUFACTURED PRODUCTS
The Manufactured Products segment includes forged and machined products,
capital equipment, industrial rubber products and other manufactured products.
The three largest customers, of which we sell to multiple operating divisions,
accounted for approximately 31% of Manufactured Products sales in 1998. The loss
of business from any one of these customers would have an adverse effect on this
segment.
Forged and Machined Products
Our forged and machined products business is carried out at four operating
units consisting of Park Drop Forge, Ohio Crankshaft, Cleveland City Forge, and
Blue Falcon Forge. The forging process enables metal to be shaped while
generally retaining higher structural integrity than metal shaped through other
processes. Park Drop Forge manufactures closed-die metal forgings of up to 6,000
pounds, including crankshafts and aircraft landing gears, primarily for
customers in the railroad and aerospace industries. Park Drop Forge's products
are sold primarily to machining companies and subassemblers who finish the
products for sale to original equipment manufacturers in the railroad and
aerospace industries. Ohio Crankshaft machines, induction hardens and surface
finishes crankshafts and camshafts used primarily in locomotives, power
generators and ships. Cleveland City Forge manufactures and machines specialized
hardware such as turnbuckles and clevises for construction companies. Its
products are manufactured according to customers' specific dimensional and/or
strength requirements. Blue Falcon Forge produces large forged products such as
center plates and couplings, both of which are used in the undercarriage of rail
cars. Forged and machined products are sold to a wide variety of domestic and
international original equipment manufactures and other manufacturers in the
transportation, power generation and construction industries. Our forged and
machined products business competes domestically and internationally with other
small to medium-sized businesses on the basis of product quality and precision.
Capital Equipment
We manufacture large industrial equipment through our Tocco, Ajax, and Feco
operating units. Tocco specializes in the engineering and construction of
induction heating systems primarily for the automotive and truck industries.
Tocco's induction heating systems are engineered and built to customer
specifications and are used primarily by original equipment manufacturers for
surface hardening. Ajax engineers, manufactures and services mechanical forging
presses ranging in size from 500 to 8,000 tons that are used worldwide in the
automotive and truck manufacturing industries. Feco produces complete oven
systems that combine heat processing and curing technologies with material
handling and conveying methods. Feco's principal products include industrial
drying and curing ovens for automotive components, metal can curing ovens,
specialized conveyor and automation systems for lightweight containers, and
plastic and glass bottle coating and finishing systems. Our capital equipment
units compete with large equipment manufacturers on the basis of service
capability, ability to meet customer specifications, delivery performance and
engineering expertise and exists at both domestic and international levels.
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Industrial Rubber Products
We manufacture injection and transfer molded products, lathe-cut goods,
roll coverings and various items requiring rubber to metal bonding for use in
industrial applications through three operating units consisting of Castle
Rubber, Cicero Flexible Products and Geneva Rubber. Castle manufactures valve
seals, power and conveyor rolls and slitter rings. Cicero is a developer and
manufacturer of injection molded silicone rubber products for customers in the
automotive, food processing and consumer appliance industries, such as wire
harnesses, spark plug boots and nipples and general sealing gaskets. Geneva is a
manufacturer of injection molded rubber products for customers in the
automotive, telecommunications, funeral and heavy truck industries. Its products
include primary wire harnesses, transoceanic cable boots, casket gaskets and
shock and vibration mounts. The industrial rubber products operating units
compete primarily on the basis of price and product quality with other domestic
small to medium-sized manufacturers of rubber products.
ALUMINUM PRODUCTS
Aluminum permanent mold castings are produced at General Aluminum Mfg.
Company and its wholly owned subsidiary. General Aluminum's cast aluminum parts
are critical components manufactured primarily for automotive original equipment
manufacturers. General Aluminum's principal automotive products include:
transmission pump housings, planetary pinion carriers, clutch retainers, rotor
castings and bearing cups. In addition, General Aluminum manufactures products
for non-automotive end users such as surgical table components, light housings
and electrical meter housings. General Aluminum also provides value-added
services such as secondary casting, machining, drilling, tapping and part
assembly. Although these parts are lightweight, they possess high durability and
integrity characteristics even under extreme pressure and temperature
conditions. Demand by automotive original equipment manufacturers for aluminum
permanent mold products has increased in recent years as original equipment
manufacturers have sought lighter alternatives to heavier steel and iron
components. Lighter aluminum cast components increase an automobile's fuel
efficiency without decreasing its structural integrity. Management believes this
replacement trend will continue as government standards regarding fuel
efficiency become increasingly stringent.
General Aluminum sells its products primarily to customers located in North
America. The market for aluminum permanent mold castings is comprised of two
segments: automotive and non-automotive. The domestic aluminum permanent mold
industry is highly competitive. General Aluminum competes principally on the
basis of its ability to:
- engineer and manufacture high quality, semi-machined castings in large
volumes;
- provide timely delivery; and
- retain the manufacturing flexibility necessary to quickly adjust to the
needs of its customers.
Although there are a number of smaller domestic companies with aluminum
permanent mold casting capabilities, the automotive industry's stringent quality
and service standards enable only large suppliers with the requisite quality
certifications to compete effectively. As one of these suppliers, General
Aluminum has benefitted in recent years as automotive original equipment
manufacturers have consolidated their supplier base. General Aluminum, a
well-established name in the aluminum permanent mold industry, has achieved QS
9000 and ISO 9002 certifications and has been awarded numerous supplier quality
awards.
In January 1999, General Aluminum acquired all of the shares of The
Metalloy Corporation. Metalloy is a full service aluminum casting and machining
company with operations located in Indiana, Michigan and Mississippi. The
acquisition of Metalloy provides sand and die casting capabilities to complement
General Aluminum's permanent mold process. Our management believes that General
Aluminum is one of the few automotive parts suppliers which has the capabilities
of providing permanent mold, sand-casted and die-casted products.
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SALES AND MARKETING
Integrated Logistics markets its products and services in the United
States, Mexico, Canada and Europe, primarily through its direct sales force,
which is assisted by applications engineers who provide the technical expertise
necessary to assist the engineering staff of original equipment customers in
designing new products and improving existing products. Integrated Logistics
often obtains new customers as a result of referrals from existing customers.
Manufactured Products and Aluminum Products market and sell their products
through both internal sales personnel and independent sales representatives. In
some instances, the internal engineering staff assists in the sales and
marketing effort through joint design and applications-engineering efforts with
major customers. In addition, Manufactured Products markets certain of its
products through various regional and national trade shows.
RAW MATERIALS AND SUPPLIERS
Integrated Logistics purchases substantially all of its fasteners and
Aluminum Products and Manufactured Products purchase substantially all of their
raw materials, principally metals and certain component parts incorporated into
their products, from third-party suppliers and manufacturers. Management
believes that raw materials and component parts other than certain specialty
fasteners are available from alternative sources. Integrated Logistics has
multiple sources of supply for standard products, but has limited supply sources
for certain specialty products. Approximately 10% of Integrated Logistics'
fasteners are purchased from suppliers in foreign countries, primarily Taiwan,
Japan and Korea. We are dependent upon the ability of those suppliers to meet
stringent quality and performance standards and to conform to delivery
schedules. Most raw materials required by Aluminum Products and Manufactured
Products are commodity products available from several domestic suppliers.
BACKLOG
Management believes that backlog is not a meaningful measure for our
Integrated Logistics operating units, as a majority of Integrated Logistics'
customers require just-in-time delivery of fasteners and other industrial
products. Management believes that neither Aluminum Products' nor Manufactured
Products' backlog as of any particular date is a meaningful measure of sales for
any future period as a significant portion of sales are on a release or firm
order basis.
ENVIRONMENTAL REGULATIONS
We are subject to numerous federal, state and local laws and regulations
designed to protect public health and the environment, particularly with regard
to discharges and emissions, as well as handling, storage, treatment and
disposal, of various substances and wastes. Pursuant to these environmental
laws, owners or operators of facilities may be liable for the costs of response
or other corrective actions for contamination identified at or emanating from
current or former locations, without regard to whether the owner or operator
knew of, or was responsible for, the presence of any such contamination, and for
related damages to natural resources. Additionally, persons who arrange for the
disposal or treatment of hazardous substances or materials may be liable for
costs of response at sites where they are located, whether or not the site is
owned or operated by that person.
We believe that we are currently in material compliance with applicable
environmental laws. In general, we have not experienced difficulty in complying
with environmental laws in the past, and compliance with environmental laws has
not had a material adverse effect on our financial condition, liquidity and
results of operations. Our capital expenditures on environmental control
facilities were not material during the past five years and these expenditures
are not expected to be material to us in the foreseeable future.
We have been identified as a potentially responsible party at certain
third-party sites under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, or comparable state laws, which provide for strict
and, under certain circumstances, joint and several liability. We are
participating in the cost of certain clean-up efforts at several of these sites.
The availability of third-party payments or insurance for environmental
remediation activities is subject to risks associated with the willingness and
ability of the third party to make
46
<PAGE> 53
payments. However, our share of these costs has not been material and based on
available information, we do not expect its exposure at any of these locations
to have a material adverse effect on our results of operations, liquidity or
financial condition.
EMPLOYEES
As of March 31, 1999, we had a total of approximately 3,000 employees.
INFORMATION ABOUT INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
Approximately 89% of our net sales for the year ended December 31, 1998
were within the United States. None of the net sales to any foreign country
represented more than 6% of our total sales in 1998. Approximately 96% of our
assets are maintained in the United States. For more information see Note F to
Notes to Consolidated Financial Statements (Unaudited) as of March 31, 1999 and
Note K to Notes to Consolidated Financial Statements as of December 31, 1998,
included in this prospectus.
PROPERTIES
Park-Ohio's operations include numerous manufacturing and warehousing
facilities located in 23 states in the United States and in 4 other countries.
Approximately 54% of the available square footage is owned. In 1998,
approximately 55% of the available domestic square footage was used by the
Manufactured Products segment, 6% was used by the Aluminum Products segment and
39% by the Integrated Logistics segment. Approximately 19% of the foreign
facilities were used by the Manufactured Products segment and approximately 81%
of these facilities were used by the Integrated Logistics segment. In the
opinion of management, Park-Ohio's facilities are generally well maintained and
are suitable and adequate for their intended uses.
LEGAL PROCEEDINGS
We are subject to various pending and threatened lawsuits in which claims
for monetary damages are asserted in the ordinary course of business. While any
litigation involves an element of uncertainty, in the opinion of management,
liabilities, if any, arising from currently pending or threatened litigation
will not have a material adverse effect on Park- Ohio's financial condition,
liquidity and results of operations.
47
<PAGE> 54
MANAGEMENT
DIRECTORS AND OFFICERS OF PARK-OHIO
Information with respect to the executive officers and employee Directors
of Park-Ohio is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS
Edward F. Crawford 60 Chairman of the Board, Chief Executive Officer and President
James S. Walker 57 Vice President and Chief Financial Officer
Felix J. Tarorick 56 Vice Chairman of the Board, Vice President of Operations and
Director
Ronald J. Cozean 35 Secretary and General Counsel
Matthew V. Crawford 30 Assistant Secretary, Corporate Counsel and Director
Patrick W. Fogarty 38 Director of Corporate Development
</TABLE>
Edward F. Crawford has been Chairman of the Board and Chief Executive
Officer of Park-Ohio since 1992 and President since 1997. Mr. E. Crawford has
also been the Chairman and Chief Executive Officer of Crawford Group, Inc.
(manufacturing businesses) since 1964 and serves as a director of Continental
Global Group, Inc. and Lesco Inc.
James S. Walker has served as Vice President and Chief Financial Officer of
Park-Ohio since 1991. Mr. Walker has been with Park-Ohio for over 20 years and
has served in several capacities, including Corporate Controller and Assistant
Treasurer.
Felix J. Tarorick became Vice Chairman of the Board in 1998 and has been
Vice President of Operations since 1996. From 1992 to 1995, Mr. Tarorick served
as President of the former consumer products group. Mr. Tarorick joined
Park-Ohio in 1992. Mr. Tarorick became a director of Park-Ohio in February,
1998.
Ronald J. Cozean has served as Secretary and General Counsel since joining
Park-Ohio in 1994. Mr. Cozean was an associate at the law firm of Squire,
Sanders & Dempsey L.L.P. from 1991 to 1994.
Matthew V. Crawford has served as Assistant Secretary and Corporate Counsel
since joining Park-Ohio in February 1995 and has served as President of Crawford
Container Company since 1991. Mr. M. Crawford became a director of Park-Ohio in
August 1997. Prior to joining Park-Ohio, Mr. M. Crawford worked as a Corporate
Finance Analyst at McDonald & Co. Securities, Inc. Mr. E. Crawford is the father
of Mr. M. Crawford.
Patrick W. Fogarty has been Director of Corporate Development since 1997
and joined Park-Ohio in 1995 as Director of Finance. Prior thereto, Mr. Fogarty
held various positions, including Senior Manager, at Ernst & Young LLP from 1983
to 1995.
Information is set forth below regarding the non-employee directors of
Park-Ohio, including their ages, principal occupations during the past five
years and other directorships presently held. Also set forth is the date each
was first elected as a director of Park-Ohio or a corporation that has been
merged into Park-Ohio.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND OTHER DIRECTORSHIPS
---- --- -----------------------
<S> <C> <C>
Kevin R. Greene 40 Director of Park-Ohio since 1998; Chairman and Chief
Executive Officer of Value Investing Partners, Inc.
(international investment banking firm) since 1992; formerly
a management consultant with McKinsey & Company (consulting
firm); President of Board of Trustees of Oratory Prep in
Summit, NJ
Thomas E. McGinty 69 Director of Park-Ohio since 1986; President, Belvoir
Consultants, Inc. (management consultants) since 1983
Lewis E. Hatch, Jr. 73 Director of Park-Ohio since 1992; retired, former Chairman
and Chief Operating Officer, Rusch International
(international medical device company); Director, ImageMax,
Inc.
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND OTHER DIRECTORSHIPS
---- --- -----------------------
<S> <C> <C>
Lawrence O. Selhorst 66 Director of Park-Ohio since 1995; Chairman of the Board and
Chief Executive Officer of American Spring Wire Corporation
(spring wire manufacturer) since 1968; former Chairman of
the Board of RB&W Corporation (logistics and manufacturing
business) from September, 1992 to March, 1995
James W. Wert 52 Director of Park-Ohio since 1992; retired, former Senior
Executive Vice President and Chief Investment Officer,
KeyCorp (financial services company) from August, 1995 to
July, 1996; Chief Financial Officer, KeyCorp from 1994 to
1995; Vice Chairman and Chief Financial Officer, Society
Corporation (financial services company) from 1990 to 1994;
Director of Continental Global Group, Inc., Marlin Leasing
Corporation and Paragon Corporate Holdings, Inc.
</TABLE>
COMPENSATION OF THE BOARD OF DIRECTORS
We compensate non-employee directors for serving on the Board of Directors
and reimburse them for any expenses incurred in connection with Board of
Directors meetings. During 1998, non-employee directors received compensation in
the form of grants of options to purchase 6,000 shares of common stock of our
parent, Park-Ohio Holdings, in accordance with the 1996 Non-employee Director
Stock Option Plan.
49
<PAGE> 56
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth the respective amounts of compensation paid
to the Chairman of the Board and Chief Executive Officer and the four other
highest paid executive officers of Park-Ohio for each of the years indicated.
All information relating to common stock or options to purchase common stock
refers to shares of common stock of our parent, Park-Ohio Holdings.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- SECURITIES ------------
UNDERLYING ALL OTHER
NAME AND OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#)(1) ($)(2)
------------------ ---- --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Edward F. Crawford............................ 1998 500,000 25,000 0 164
Chairman of the Board, 1997 225,000 80,000 0 164
Chief Executive Officer and President 1996 225,000 2,000 500,000 164
Felix J. Tarorick............................. 1998 150,000 55,000 2,000 3,164
Vice Chairman of the Board and 1997 150,000 50,000 0 3,164
Vice President of Operations 1996 150,000 45,000 10,000 3,164
James S. Walker............................... 1998 170,000 30,000 2,000 3,164
Vice President and 1997 170,000 36,250 0 3,164
Chief Financial Officer 1996 140,000 30,000 10,000 3,464
Ronald J. Cozean.............................. 1998 100,000 25,000 3,000 2,664
Secretary and General Counsel 1997 100,000 25,000 0 2,664
1996 100,000 25,000 7,000 2,664
Patrick W. Fogarty............................ 1998 110,000 35,000 3,000 3,064
Director of Corporate Development 1997 110,000 35,000 0 3,064
1996 110,000 10,000 4,000 2,564
</TABLE>
- ---------------
(1) Reflects the number of shares of common stock covered by stock options
granted during the years shown. No stock appreciation rights ("SARs") were
granted to the officers named in the table above during the years shown.
(2) For the year ended December 31, 1998, all other compensation includes
contributions made by Park-Ohio under our Supplemental Defined Contribution
Plan as follows: Mr. Tarorick $3,000 and Mr. Walker $3,000, and under the
Company's Individual Account Retirement Plan: Mr. Cozean $2,500 and Mr.
Fogarty $2,900; and insurance premiums of $164 paid by Park-Ohio to each of
the officers named in the table above.
STOCK BASED COMPENSATION, INCLUDING OPTIONS
Our 1998 Long-Term Incentive Plan (the "1998 Plan") permits the granting of
stock options (either "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code or nonstatutory stock options), stock
appreciation rights, restricted shares, performance shares or stock awards. The
1998 Plan is administered by the Compensation Committee of the Board of
Directors, which has authority to select officers and key employees to be
participants and to determine the type and number of awards to be granted.
The number of shares currently available for grant under the 1998 Plan
shall not exceed 550,000, subject to adjustment under certain circumstances when
the number of outstanding shares changes. The option price for stock options
granted under the 1998 Plan is fixed by the Compensation Committee, but in no
event will it be less than the fair market value of Park-Ohio Holdings' common
stock on the date of grant. The 1998 Plan will continue in effect until
terminated by the Board of Directors.
No awards were made in 1998 under the 1998 Plan. Prior to the 1998 annual
meeting of Park-Ohio Holdings, our Amended and Restated 1992 Stock Option Plan
(the "1992 Plan") was in effect. The Compensation Committee granted stock
options during 1998 under the 1992 Plan. The following tables set forth
information regarding the grant of stock options to the officers named in the
summary compensation table in 1998 and the value of unexercised options as of
December 31, 1998.
50
<PAGE> 57
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES OR BASE EXPIRATION -----------------------------
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SH)(2) DATE 0%($) 5%($) 10%($)
---- ------------- -------------- --------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald J. Cozean.............. 3,000 2.6% 18.25 5/27/08 0 34,440 87,270
Edward F. Crawford............ 0 0% N/A N/A N/A N/A N/A
Patrick W. Fogarty............ 3,000 2.6% 18.25 5/27/08 0 34,440 87,270
Felix J. Tarorick............. 2,000 1.7% 18.25 5/27/08 0 22,960 58,180
James S. Walker............... 2,000 1.7% 18.25 5/27/08 0 22,960 58,180
</TABLE>
- ---------------
(1) Options become exercisable to the extent of 33 1/3% of the subject shares
after one year from the date of grant, 66 2/3% after two years from the date
of grant, and 100% after three years from the date of grant.
(2) Represents the NASDAQ closing price on the day prior to grant.
(3) The assumed rates of appreciation are not intended to represent either past
or future appreciation rates with respect to Park-Ohio Holdings' common
stock. The rates are prescribed in the applicable SEC rules for use by all
companies for the purpose of this table.
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Ronald J. Cozean.......................... None N/A 34,667/5,333 $ 92,000/$3,500
Edward F. Crawford........................ None N/A 200,000/300,000 $300,000/$450,000
Patrick W. Fogarty........................ None N/A 22,667/4,333 $ 21,500/$2,000
Felix J. Tarorick......................... None N/A 36,667/5,333 $ 153,125/$5,000
James S. Walker........................... 1,500 $6,563 35,167/5,333 $ 144,125/$5,000
</TABLE>
- ---------------
(1) The "Value of Unexercised In-the-Money Options/SARs at December 31, 1998"
was calculated by determining the difference between the fair market value
of the underlying common stock at December 31, 1998 (the Nasdaq closing
price of the Park-Ohio Holdings' common stock on December 31, 1998 was
$15.125) and the exercise price of the option. An option is "In-the-Money"
when the fair market value of the underlying Park-Ohio Holdings' common
stock exceeds the exercise price of the option.
51
<PAGE> 58
PRINCIPAL SHAREHOLDERS
All of our outstanding common stock is held by our parent, Park-Ohio
Holdings Corp. The following table sets forth information with respect to the
beneficial ownership of the common stock of Park-Ohio Holdings by:
- each person (or group of affiliated persons) known to us to be the
beneficial owner of more than five percent of the outstanding common
stock of Park-Ohio Holdings;
- each director of Park-Ohio and Park-Ohio Holdings;
- each executive officer named in the summary compensation table
individually; and
- all directors and executive officers of Park-Ohio and Park-Ohio Holdings
as a group.
Unless otherwise indicated, the information is as of June 1, 1999 and the
nature of beneficial ownership consists of sole voting and investment power.
<TABLE>
<CAPTION>
TOTAL CURRENTLY
SHARES OF EXERCISABLE PERCENT
NAME OF BENEFICIAL OWNER COMMON STOCK(A) OPTIONS OF CLASS
------------------------ --------------- ----------- --------
<S> <C> <C> <C>
Edward F. Crawford.................................... 2,807,000(b)(c) 300,000 25.3%
Matthew V. Crawford................................... 583,934(c) 28,334 5.4%
Thomas E. McGinty..................................... 129,700 18,000 1.2%
Felix J. Tarorick..................................... 93,167 40,667 *
James W. Wert......................................... 60,000 18,000 *
James S. Walker....................................... 58,267 39,167 *
Lawrence O. Selhorst.................................. 49,701 18,000 *
Ronald J. Cozean...................................... 38,000 38,000 *
Lewis E. Hatch, Jr.................................... 32,060 18,000 *
Patrick W. Fogarty.................................... 25,000 25,000 *
Kevin R. Greene....................................... 11,000 6,000 *
Capital Research and Management Company............... 750,000(d) 7.0%
Artisan Partners Limited Partnership.................. 730,400(e) 6.8%
Dimensional Fund Advisors, Inc........................ 704,561(f) 6.5%
GAMCO Investors, Inc.................................. 913,929(g) 8.5%
Directors and executive Officers as a group (11
persons)............................................ 3,837,829 33.9%
</TABLE>
- ---------------
* Less than one percent.
(a) Total includes currently exercisable options.
(b) The total includes 2,525,000 shares over which Mr. E. Crawford has sole
voting and investment power, 22,500 shares owned by L'Accent de Provence of
which Mr. E. Crawford is President and owner of 25% of its capital stock and
over which Mr. E. Crawford shares voting and investment power, and 9,500
shares owned by Mr. E. Crawford's wife as to which Mr. E. Crawford disclaims
beneficial ownership. The address of Mr. E. Crawford is the business address
of Park-Ohio
(c) Messrs. E. Crawford and M. Crawford have shared voting power and investment
power with respect to 50,000 shares held by a charitable foundation. The
50,000 shares are included in the beneficial ownership amounts reported for
both Mr. E. Crawford and Mr. M. Crawford.
(d) Based on information set forth on Schedule 13G dated February 8, 1999.
Capital Research and Management Company, a registered investment adviser,
reported no voting power and sole investment power over 750,000 shares, but
disclaimed beneficial ownership of all such shares, as of December 31, 1998.
The address for Capital Research is 333 South Hope Street, Los Angeles,
California 90071.
52
<PAGE> 59
(e) Based on information set forth on Amendment No. 1 to Schedule 13G dated
February 10, 1999. Artisan Partners Limited Partnership reported beneficial
ownership of 730,400 shares as of December 31, 1998. Artisan Partners
reported shared voting and investment power with respect to all such shares.
The address for Artisan Partners is 1000 North Water Street, #1770,
Milwaukee, Wisconsin 53202.
(f) Based on information set forth on Amendment No. 2 to Schedule 13G dated
February 11, 1999. Dimensional Fund Advisors Inc., a registered investment
advisor, furnishes investment advice to four investment companies and serves
as investment manager to certain other investment vehicles, including
commingled group trusts (the "Portfolios"). Dimensional reported beneficial
ownership of 704,561 shares as of December 31, 1998, all of which shares
were held by the Portfolios. Dimensional reported sole voting and investment
power with respect to all of such shares, but disclaimed beneficial
ownership of all such shares. The address for Dimensional is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.
(g) Based on information set forth on Amendment No. 4 to Schedule 13D dated June
17, 1999. Includes 730,375 shares held by GAMCO Investors, Inc., 170,715
shares held by Gabelli Funds, LLC, 7,500 shares held by Gabelli Performance
Partnership L.P., 2,000 shares held by Gabelli International Limited and
3,339 shares held by Mr. Mario J. Gabelli, as of June 14, 1999. Gabelli
Funds, Inc. is the ultimate parent holding company for the above listed
companies, and Mr. Mario J. Gabelli is the majority owner of Gabelli Funds,
Inc. which has its principal business office at One Corporate Center, Rye,
New York 10580.
RELATED PARTY TRANSACTIONS
General Aluminum, a wholly-owned subsidiary of Park-Ohio, leases space in
three buildings in Conneaut, Ohio:
- a 91,500 square foot facility owned by a company owned by Mr. M.
Crawford, at a monthly rent of $27,000;
- a 70,000 square foot attached facility owned by the same company, at a
monthly rent of $9,000; and
- a separate 50,000 square foot facility owned by Mrs. E. Crawford, at a
monthly rent of $3,000.
In addition, Ajax, a wholly owned subsidiary of Park-Ohio, leases a
facility in Cleveland, Ohio at a monthly rent of $23,833. This facility is owned
by a corporation whose shareholders are Mr. E. Crawford and his son, Mr. M.
Crawford.
We believe that all of these transactions were on terms at least as
favorable to us as if negotiated on an arms-length basis with unrelated third
parties.
53
<PAGE> 60
DESCRIPTION OF THE NOTES
The notes and the Exchange Notes (collectively the "Notes") were issued
under an indenture, dated as of June 2, 1999 (the "Indenture") by and between
Park-Ohio Industries, Inc. (the "Company") and Norwest Bank Minnesota, N.A., as
trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") as in effect on
the date of the Indenture. The Notes are subject to all such terms, and holders
of the Notes are referred to the Indenture and the Trust Indenture Act for a
statement of them. The following is a summary of the material terms and
provisions of the Notes. This summary does not purport to be a complete
description of the Notes and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Notes and the Indenture
(including the definitions contained therein). A copy of the form of Indenture
may be obtained from the Company by any holder or prospective investor upon
request. Definitions relating to certain capitalized terms are set forth under
"-- Certain Definitions". Capitalized terms that are used but not otherwise
defined herein have the meanings ascribed to them in the Indenture and such
definitions are incorporated herein by reference.
GENERAL
The Notes will be limited in aggregate principal amount to $200.0 million,
provided that $150.0 million of notes reserved for issuance under the Indenture
will be available only in connection with the exchange of Series B Notes for
Exchange Notes pursuant to the Exchange Offer. The Notes will be general
unsecured obligations of the Company and will rank subordinate in right of
payment to any Senior Indebtedness of the Company, pari passu with any senior
subordinated indebtedness and senior in right of payment to any existing or
future subordinated Indebtedness of the Company.
A majority of the operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Notes.
The Notes will be effectively subordinated to all Indebtedness and other
liabilities (including trade payables) of the Company's Subsidiaries. Any right
of the Company to receive assets of any of its Subsidiaries upon a Subsidiary's
liquidation or reorganization (and the consequent right of the holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of that Subsidiary's creditors.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on December 1, 2007. The Notes will bear interest at
a rate of 9 1/4% per annum from the Issue Date until maturity. Interest is
payable semiannually in arrears on each June 1 and December 1 commencing
December 1, 1999, to holders of record of the Notes at the close of business on
the immediately preceding May 15 and November 15, respectively. The interest
rate on the Notes is subject to increase, and such Additional Interest will be
payable on the payment dates set forth above, in certain circumstances, if the
Notes (or other securities substantially similar to the Notes) are not
registered with the Securities and Exchange Commission within the prescribed
time periods. See "Exchange Offer; Registration Rights."
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole at any
time or in part from time to time on or after December 1, 2002 at the following
redemption prices (expressed as percentages of the principal amount thereof),
together, in each case, with accrued and unpaid interest, if any, to the
redemption date, if redeemed during the twelve-month period beginning on
December 1 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002............................................... 104.625%
2003............................................... 103.083%
2004............................................... 101.542%
2005 and thereafter................................ 100.000%
</TABLE>
54
<PAGE> 61
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 35% of the original principal amount of Notes at any time and from time to
time prior to December 1, 2000 at a redemption price equal to 109.250% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest, if
any, to the redemption date out of the Net Proceeds of one or more Public Equity
Offerings; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after the occurrence of any
such redemption and that any such redemption occurs within 60 days following the
closing of any such Public Equity Offering.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, or while such Notes are listed,
or if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem fair and
equitable. The Notes will be redeemable in whole or in part upon not less than
30 nor more than 60 days' prior written notice, mailed by first class mail to a
holder's last address as it shall appear on the register maintained by the
Registrar of the Notes. On and after any redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption unless the Company
shall fail to redeem any such Note.
SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the prior
indefeasible payment and satisfaction in full in cash of all existing and future
Senior Indebtedness of the Company. As of March 31, 1999, after giving pro forma
effect to the application of the net proceeds of the Offering, the principal
amount of outstanding Senior Indebtedness of the Company, on a consolidated
basis, would have been $71.3 million.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, arrangement, reorganization, liquidation, dissolution or other
winding-up or other similar case or proceeding in connection therewith whether
or not involving insolvency or bankruptcy, relative to the Company or to its
creditors, as such, or to the Company's assets, whether voluntary or
involuntary, or any general assignment for the benefit of creditors or other
marshaling of assets or liabilities of the Company (except in connection with
the merger or consolidation of the Company or its liquidation or dissolution
following the transfer of all or substantially all of its assets, upon the terms
and conditions permitted under the circumstances described under ' -- Merger,
Consolidation or Sale of Assets" below) (all of the foregoing referred to herein
individually as a "Bankruptcy Proceeding" and collectively as "Bankruptcy
Proceedings"), the holders of Senior Indebtedness of the Company will be
entitled to receive payment and satisfaction in full in cash of all amounts due
on or in respect of all Senior Indebtedness of the Company before the holders of
the Notes are entitled to receive or retain any payment or distribution of any
kind on account of the Notes.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind, whether in cash, property or securities, including, without limitation, by
way of set-off or otherwise, in respect of the Notes before all Senior
Indebtedness of the Company is paid and satisfied in full in cash, then such
payment or distribution will be held by the recipient in trust for the benefit
of holders of Senior Indebtedness and will be immediately paid over or delivered
to the holders of Senior Indebtedness or their representative or representatives
to the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of Senior Indebtedness. By reason
of such subordination, in the event of any such Bankruptcy Proceeding, creditors
of the Company who are holders of Senior Indebtedness may recover more, ratably,
than other creditors of the Company, including holders of the Notes.
Upon the occurrence of a Payment Default on Designated Senior Indebtedness,
no payment or distribution of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by or
on behalf of the Company or any Subsidiary of the Company, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of any Notes,
and neither the Trustee nor any
55
<PAGE> 62
holder or owner of any Notes shall take or receive from the Company or any
Subsidiary of the Company, directly or indirectly in any manner, payment in
respect of all or any portion of Notes commencing on the date of receipt by the
Trustee of written notice from the representative of the holders of Designated
Senior Indebtedness (the "Representative") of the occurrence of such Payment
Default, and in any such event, such prohibition shall continue until such
Payment Default is cured, waived in writing or otherwise ceases to exist. At
such time as the prohibition set forth in the preceding sentence shall no longer
be in effect, subject to the provisions of the following paragraph, the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of the Notes by the Company) may be
made by the Company or any Subsidiary of the Company, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of any Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company or any Subsidiary of the Company, directly or
indirectly in any manner, payment in respect of all or any portion of the Notes
for a period (a "Payment Blockage Period") commencing on the date of receipt by
the Trustee of written notice from the Representative of such Non-Payment Event
of Default unless and until (subject to any blockage of payments that may then
be in effect under the preceding paragraph) the earliest of:
(i) more than 179 days shall have elapsed since receipt of such
written notice by the Trustee,
(ii) such Non-Payment Event of Default shall have been cured or waived
in writing or otherwise shall have ceased to exist or such Designated
Senior Indebtedness shall have been paid in full, or
(iii) such Payment Blockage Period shall have been terminated by
written notice to the Company or the Trustee from such Representative,
after which, in the case of clause (i), (ii) or (iii), the Company shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
Notwithstanding any other provision of the Indenture, in no event shall a
Payment Blockage Period commenced in accordance with the provisions of the
Indenture described in this paragraph extend beyond 179 days from the date of
the receipt by the Trustee of the notice referred to above (the "Initial
Blockage Period"). Any number of additional Payment Blockage Periods may be
commenced during the Initial Blockage Period; provided, however, that no such
additional Payment Blockage Period shall extend beyond the Initial Blockage
Period. After the expiration of the Initial Blockage Period, no Payment Blockage
Period may be commenced until at least 180 consecutive days have elapsed from
the last day of the Initial Blockage Period. Notwithstanding any other provision
of the Indenture, no Non-Payment Event of Default with respect to Designated
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative, whether or not within the
Initial Blockage Period, unless such Non-Payment Event of Default shall have
been cured or waived for a period of not less than 90 consecutive days.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of payment blockage
provisions, such failure would constitute an Event of Default under the
Indenture and would enable the holders of the Notes to accelerate the maturity
thereof. See "-- Events of Default."
A holder of Notes by its acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on its behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purpose.
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COVENANTS
The Indenture will contain, among others, the following covenants:
LIMITATION ON ADDITIONAL INDEBTEDNESS
The Company will not, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness); provided that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Company may incur
Indebtedness (including Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Consolidated Fixed Charge Coverage Ratio is at least 2.25
to 1. In addition, none of the Subsidiaries of the Company will, directly or
indirectly, incur any Subsidiary Indebtedness; provided that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Subsidiary Indebtedness, any of the
Company's Subsidiaries may incur Subsidiary Indebtedness if after giving effect
to the incurrence of such Subsidiary Indebtedness and the receipt and
application of the proceeds thereof, such Subsidiary's Consolidated Fixed Charge
Coverage Ratio is at least 2.5 to 1.
Notwithstanding the foregoing, the Company and its Subsidiaries may incur
Permitted Indebtedness; provided that the Company will not incur any Permitted
Indebtedness that ranks junior in right of payment to the Notes that has a
maturity or mandatory sinking fund payment prior to the maturity of the Notes.
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur, contingently or otherwise, any Indebtedness that
is both:
(i) subordinated in right of payment to any Senior Indebtedness of the
Company or any of its Subsidiaries, as the case may be, and
(ii) in right of payment to the Notes.
For purposes of this covenant, Indebtedness is deemed to be senior in right
of payment to the Notes, if it is not explicitly subordinated in right of
payment to Senior Indebtedness at least to the same extent as the Notes are
subordinated to such Senior Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not make, and will not permit any of its Subsidiaries to,
directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment,
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under " -- Limitation on Additional
Indebtedness" above, and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Original
Issue Date does not exceed the sum of:
(1) 50% of the Company's cumulative Consolidated Net Income
subsequent to the Original Issue Date (or minus 100% of any cumulative
deficit in Consolidated Net Income during such period) subsequent to the
Original Issue Date, plus
(2) 100% of the aggregate Net Proceeds received by the Company from
the issue or sale after the Original Issue Date of Capital Stock (other
than Disqualified Capital Stock or Capital Stock of the Company issued
to any Subsidiary of the Company) of the Company or any Indebtedness or
other securities of the Company convertible into or exercisable or
exchangeable for Capital Stock (other than
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Disqualified Capital Stock) of the Company which has been so converted,
exercised or exchanged, as the case may be, plus
(3) without duplication of any amounts included in clause (c)(2)
above, 100% of the aggregate Net Proceeds received by the Company of any
equity contribution from a holder of the Company's Capital Stock, plus
(4) $5,000,000, excluding in the case of clauses (c)(2) and (3),
any Net Proceeds from a Public Equity Offering to the extent used to
redeem the Notes.
For purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit:
(i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of the Indenture,
(ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company or Indebtedness subordinated to
the Notes by conversion into, or by or in exchange for, shares of Capital
Stock of the Company (other than Disqualified Capital Stock), or out of the
Net Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Capital Stock of the Company
(other than Disqualified Capital Stock),
(iii) the redemption or retirement of Indebtedness of the Company
subordinated to the Notes in exchange for, by conversion into, or out of
the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness of the Company (other than any Indebtedness owed to a
Subsidiary) that is contractually subordinated in right of payment to the
Notes to at least the same extent as the Indebtedness being redeemed or
retired,
(iv) the retirement of any shares of Disqualified Capital Stock of the
Company by conversion into, or by exchange for, shares of Disqualified
Capital Stock of the Company, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Disqualified Capital Stock of the Company,
(v) so long as no Default or Event of Default shall have occurred and
be continuing, payments made with respect to extinguishment of fractional
shares or odd-lot shares not to exceed $250,000 in the aggregate,
(vi) payments to a holding company that, directly or indirectly, owns
all of the outstanding Capital Stock of the Company, in amounts sufficient
to pay:
(a) franchise taxes and other fees required to maintain its
corporate existence,
(b) costs associated with preparation of required documents for
filing with the Securities and Exchange Commission and with any exchange
on which such company's securities are traded,
(c) federal, state, foreign and local taxes to the extent that such
taxes are attributable to the ownership of the Company and its
Subsidiaries, and
(d) other operating or administrative costs of up to $200,000 per
year, or
(vii) payments, directly or indirectly, to employees to repurchase
Capital Stock or other securities of the Company or of a holding company
that, directly or indirectly, owns all of the outstanding Capital Stock of
the Company upon the death, disability or termination of employment of such
employees, in amounts not to exceed, in the aggregate, $1,500,000 per year;
provided that in calculating the aggregate amount of Restricted Payments made
subsequent to the Original Issue Date for purposes of clause (c) of the
immediately preceding paragraph, amounts expended pursuant to clauses (i), (v)
and (vii) shall be included in such calculation.
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Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant described above were computed, which calculations may
be based upon the Company's latest available financial statements, and that no
Default or Event of Default has occurred and is continuing and no Default or
Event of Default will occur immediately after giving effect to any such
Restricted Payments.
LIMITATION ON LIENS
The Company will not, and will not permit any of its Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of the
Company or any of its Subsidiaries or any shares of Capital Stock or
Indebtedness of any Subsidiary of the Company which owns property or assets, now
owned or hereafter acquired, unless:
(i) if such Lien secures Indebtedness which is pari passu with the
Notes, then the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligation is no longer
secured by a Lien, or
(ii) if such Lien secures Indebtedness which is subordinated to the
Notes, any such Lien shall be subordinated to the Lien granted to the
holders of the Notes to the same extent as such Indebtedness is
subordinated to the Notes.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate (each an
"Affiliate Transaction") or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Original Issue Date
unless:
(i) such Affiliate Transaction is between or among the Company and its
Wholly Owned Subsidiaries, or
(ii) the terms of such Affiliate Transaction are fair and reasonable
to the Company or such Subsidiary, as the case may be, and the terms of
such Affiliate Transaction are at least as favorable as the terms which
could be obtained by the Company or such Subsidiary, as the case may be, in
a comparable transaction made on an arm's-length basis between unaffiliated
parties.
In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $2 million which is not permitted under
clause (i) above, the Company must obtain a resolution of the Board of Directors
of the Company certifying that such Affiliate Transaction complies with clause
(ii) above. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $10 million which is not permitted under
clause (i) above, the Company must obtain a favorable written opinion as to the
fairness of such transaction or transactions, as the case may be, from an
Independent Financial Advisor.
The foregoing provisions will not apply to:
(i) any Restricted Payment that is not prohibited by the provisions
described under "-- Limitation on Restricted Payments" above, or
(ii) reasonable fees and compensation paid to and indemnity provided
on behalf of, officers, directors or employees of the Company or any
Subsidiary of the Company as determined in good faith by the Company's
Board of Directors or senior management.
LIMITATION ON CERTAIN ASSET SALES
The Company will not, and will not permit any of its Subsidiaries to,
consummate an Asset Sale unless:
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(i) the Company or such applicable Subsidiary, as the case may be,
receives consideration at the time of such sale or other disposition at
least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by the Board of Directors of the
Company, and evidenced by a board resolution),
(ii) not less than 80% of the consideration received by the Company or
such applicable Subsidiary, as the case may be, is in the form of cash or
Cash Equivalents, and
(iii) the Asset Sale Proceeds received by the Company or such
Subsidiary are applied:
(a) first, to the extent the Company or any such Subsidiary, as the
case may be, elects, or is required, to prepay, repay or purchase
indebtedness under any then existing Senior Indebtedness of the Company
or any such Subsidiary within 12 months following the receipt of the
Asset Sale Proceeds from any Asset Sale; provided that any such
repayment shall result in a permanent reduction of the commitments
thereunder in an amount equal to the principal amount so repaid,
(b) second, to the extent of the balance of Asset Sale Proceeds
after application as described above, to the extent the Company elects,
to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or
property of another Person) used or useful in businesses similar or
ancillary to the business of the Company or any such Subsidiary as
conducted on the Original Issue Date; provided that such investment
occurs on or prior to the 365th day following receipt of such Asset Sale
Proceeds (the "Reinvestment Date"), and
(c) third, if on the Reinvestment Date the Available Asset Sale
Proceeds exceed $10 million, the Company shall apply an amount equal to
such Available Asset Sale Proceeds, first, to an offer to purchase the
Series A/B Notes, if any are outstanding, in accordance with the terms
of the Series A/B Indenture (as in effect on the Issue Date) (the
"Series A/B Asset Sale Offer") and second, in the event that any
available Asset Sale Proceeds are not applied to a Series A/B Asset Sale
Offer, an offer to repurchase the Notes, at a purchase price in cash
equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the purchase date (an "Excess Proceeds Offer"). If
an Excess Proceeds Offer is not fully subscribed, the Company may retain
the portion of the Available Asset Sale Proceeds not required to
purchase Notes.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders stating, among other things:
(i) that such holders have the right to require the Company to apply
the Available Asset Sale Proceeds to repurchase such Notes at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to the purchase date,
(ii) the purchase date, which shall be no earlier than 30 days and not
later than 45 days from the date such notice is mailed,
(iii) the instructions that each holder must follow in order to have
such Notes purchased, and
(iv) the calculations used in determining the amount of Available
Asset Sale Proceeds to be applied to the purchase of such Notes.
In the event of the transfer of substantially all of the property and
assets of the Company and its Subsidiaries as an entirety to a Person in a
transaction permitted under "-- Merger, Consolidation or Sale of Assets" below,
the successor Person shall be deemed to have sold the properties and assets of
the Company and its Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with the "Asset Sale" provisions of
the Indenture, the Company shall comply with the
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applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES
The Company will not permit any of its Subsidiaries to issue any Preferred
Stock (except Preferred Stock issued to the Company or a Wholly Owned Subsidiary
of the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to hold any such Preferred Stock unless the Company
or such Subsidiary would be entitled to incur or assume Indebtedness under
"-- Limitation on Additional Indebtedness" above (other than Permitted
Indebtedness) in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
LIMITATION ON CAPITAL STOCK OF SUBSIDIARIES
The Company will not:
(i) sell, pledge, hypothecate or otherwise convey or dispose of any
Capital Stock of a Subsidiary of the Company, or
(ii) permit any of its Subsidiaries to issue any Capital Stock, other
than to the Company or a Wholly Owned Subsidiary of the Company.
The foregoing restrictions shall not apply to an Asset Sale made in
compliance with "-- Limitation on Certain Asset Sales" above or the issuance of
Preferred Stock in compliance with "-- Limitation on Preferred Stock of
Subsidiaries" above.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to:
(i) (a) pay dividends or make any other distributions to the Company
or any Subsidiary of the Company:
(1) on its Capital Stock, or
(2) with respect to any other interest or participation in, or
measured by, its profits, or
(b) repay any Indebtedness or any other obligation owed to the Company
or any Subsidiary of the Company,
(ii) make loans or advances or capital contributions 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) encumbrances or restrictions existing on the Original Issue
Date to the extent and in the manner such encumbrances and restrictions
are in effect on the Original Issue Date or encumbrances or restrictions
existing on the Issue Date in compliance with the Series A/B Indenture,
(b) applicable law,
(c) any instrument governing Acquired Indebtedness, 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 (including any Subsidiary of the
Person), so acquired,
(d) customary non-assignment provisions in leases or other
agreements entered in the ordinary course of business and consistent
with past practices,
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(e) Refinancing Indebtedness; provided that such restrictions are
no more restrictive than those contained in the agreements governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, or
(f) customary restrictions in security agreements or mortgages
securing Indebtedness of the Company or a Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such
security agreements and mortgages.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
The Company will not, and will not permit any of its Subsidiaries to, enter
into any Sale and Lease-Back Transaction unless:
(i) the consideration received in such Sale and Lease-Back Transaction
is at least equal to the fair market value of the property sold, as
determined in good faith by the Board of Directors of the Company and
evidenced by a board resolution, and
(ii) the Company could incur the Attributable Indebtedness in respect
of such Sale and Lease-Back Transaction in compliance with "-- Limitation
on Additional Indebtedness" above.
PAYMENTS FOR CONSENT
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to purchase (the "Change of Control Offer") each holder's
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Payment Date (as defined) in accordance with
the procedures set forth below.
Within 20 days of the occurrence of a Change of Control, the Company shall:
(i) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States, and
(ii) send by first-class mail, postage prepaid, to the Trustee and to
each holder of the Notes, at the address appearing in the register
maintained by the Registrar of the Notes, a notice stating:
(a) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment,
(b) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days nor later than 45
days from the date such notice is mailed (the "Change of Control Payment
Date"),
(c) that any Note not tendered will continue to accrue interest,
(d) that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date,
(e) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day preceding the Change of
Control Payment Date,
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(f) that holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the holder, the principal amount of the Notes delivered for purchase,
and a statement that such holder is withdrawing his election to have
such Notes purchased,
(g) that holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered,
(h) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance, and
(i) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful:
(i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer,
(ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so tendered, and
(iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or
portions thereof tendered to the Company.
The Paying Agent shall promptly mail to each holder of Notes so accepted
payment in an amount equal to the purchase price for such Notes, and the Company
shall execute and issue, and the Trustee shall promptly authenticate and mail to
such holder, a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered; provided that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
The Indenture requires that if the Revolving Credit Facility is in effect,
or any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the second preceding paragraph, but in any event within 20 days
following any Change of Control, the Company covenants to:
(i) repay in full all obligations and terminate all commitments under
or in respect of the Revolving Credit Facility and all other Senior
Indebtedness the terms of which require repayment upon a Change of Control
or offer to repay in full all obligations and terminate all commitments
under or in respect of the Revolving Credit Facility and all such Senior
Indebtedness and repay the Indebtedness owed to each such lender who has
accepted such offer, or
(ii) obtain the requisite consents under the Revolving Credit Facility
and all such other Senior Indebtedness to permit the repurchase of the
Notes as described above.
The Company must first comply with the covenant described in the preceding
sentence before it shall be required to purchase Notes in the event of a Change
of Control; provided that the Company's failure to comply with the covenant
described in the preceding sentence constitutes an Event of Default described in
clause (iii) under "-- Events of Default" below if not cured within 30 days
after the notice required by such clause. As a result of the foregoing, a holder
of the Notes may not be able to compel the Company to purchase the Notes unless
the Company is able at the time to refinance all of the obligations under or in
respect of the Revolving Credit Facility and all such other Senior Indebtedness
or obtain requisite consents under the Revolving Credit Facility and all such
other Senior Indebtedness.
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The Indenture will further provide that:
(i) if the Company or any Subsidiary thereof has issued any
outstanding:
(a) indebtedness that is subordinated in right of payment to the
Notes, or
(b) Preferred Stock, and the Company or such Subsidiary is required
to make a Change of Control Offer or to make a distribution with respect
to such subordinated indebtedness or Preferred Stock in the event of a
Change of Control, the Company shall not consummate any such offer or
distribution with respect to such subordinated indebtedness or Preferred
Stock until such time as the Company shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have
accepted the Company's Change of Control Offer and shall otherwise have
consummated the Change of Control Offer made to holders of the Notes,
and
(ii) the Company will not issue Indebtedness that is subordinated in
right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock
prior to the payment of the Notes in the event of a Change in Control under
the Indenture.
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 Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any of its Subsidiaries to
consolidate with, merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of the assets of the Company
(as an entirety or substantially as an entirety in one transaction or a series
of related transactions), to any Person unless:
(i) the Company or such Subsidiary, as the case may be, shall be the
continuing Person, or the Person (if other than the Company or such
Subsidiary) formed by such consolidation or into which the Company or such
Subsidiary, as the case may be, is merged or to which the properties and
assets of the Company or such Subsidiary, as the case may be, are sold,
assigned, transferred, leased, conveyed or otherwise disposed of shall be a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and shall expressly assume,
by a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company or such
Subsidiary, as the case may be, under the Indenture, the Notes and the
obligations thereunder shall remain in full force and effect,
(ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing, and
(iii) immediately after giving effect to such transaction on a pro
forma basis the Company or such Person could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
"-- Certain Covenants -- Limitation on Additional Indebtedness" above;
provided, however that this provision will not prevent the Company from merging
into an Affiliate of the Company for the sole purpose of creating a holding
company whose sole asset will be all of the outstanding capital stock of the
Company.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
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For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes whether at maturity, upon redemption or otherwise (whether or not
such payment shall be prohibited by the subordination provisions of the
Indenture),
(ii) default for 30 days in payment of any interest on the Notes,
(iii) default by the Company or any Subsidiary in the observance or
performance of any other covenant in the Notes or the Indenture for 30 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding (except in the
case of a default with respect to the "Change of Control" or "Merger,
Consolidation or Sale of Assets" covenant which shall constitute an Event
of Default with such notice requirement but with such passage of time
requirement),
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5 million or more with respect to any Indebtedness of
the Company or any Subsidiary thereof, or the acceleration of any such
Indebtedness aggregating $3 million or more which default shall not be
cured, waived or postponed pursuant to an agreement with the holders of
such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture,
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Company or any Subsidiary thereof, and shall not be discharged for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect, and
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration and
(i) such amounts shall become immediately due and payable, or
(ii) if there are any amounts outstanding under the Revolving Credit
Facility, such amounts shall become immediately due and payable upon the
first to occur of an acceleration under the Revolving Credit Facility or
five business days after receipt by the Company and the representative
under the Revolving Credit Facility of a notice of acceleration;
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provided, however, that after such acceleration but before a judgment or decree
based on acceleration is obtained by the Trustee, the holders of a majority in
aggregate principal amount of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if:
(i) all Events of Default, other than nonpayment of principal,
premium, if any, or interest that has become due solely because of the
acceleration, have been cured or waived as provided in the Indenture,
(ii) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid,
(iii) in the event of the cure or waiver of an Event of Default of the
type described in clause (vi) of the above Events of Default, the Trustee
shall have received an officers' certificate and an opinion of counsel that
such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the principal, premium and
interest amount with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations provided for in the Indenture and under the Trust Indenture
Act.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request and offered reasonable
indemnity to the Trustee to institute such proceeding as Trustee, and unless the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
Notwithstanding the foregoing, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, the Company may elect either:
(i) to defease and be discharged from any and all of its obligations
with respect to the Notes (except for the obligations to register the
transfer or exchange of such Notes, to replace temporary or mutilated,
destroyed, lost or stolen Notes, to maintain an office or agency in respect
of the Notes and to hold monies for payment in trust) ("defeasance"), or
(ii) to be released from its obligations with respect to the Notes
under certain covenants contained in the Indenture ("covenant defeasance")
upon the deposit with the Trustee (or other qualifying trustee), in trust
for such purpose, of money and/or non-callable U.S. government obligations
which through the payment of principal and interest in accordance with
their terms will provide money, in an amount sufficient to pay the
principal of, premium, if any, and interest on the Notes, on the scheduled
due dates therefor or on a selected date of redemption in accordance with
the terms of the Indenture.
Such a trust may only be established if, among other things:
(i) the Company has delivered to the Trustee an opinion of counsel (as
specified in the Indenture):
(a) to the effect that neither the trust nor the Trustee will be
required to register as an investment company under the Investment
Company Act of 1940, as amended, and
(b) describing either a private ruling concerning the Notes or a
published ruling of the Internal Revenue Service, to the effect that
holders of the Notes or persons in their positions will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and
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discharge and will be subject to federal income tax on the same amount
and in the same manner and at the same times, as would have been the
case if such deposit, defeasance and discharge had not occurred,
(ii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy, insolvency or reorganization events are concerned, at any time
in the period ending on the 91st day after the date of deposit,
(iii) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any or its Subsidiaries
is bound,
(iv) 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 of the Notes over any other creditors of
the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others,
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the defeasance or the covenant
defeasance have been complied with,
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that:
(a) the trust funds will not be subject to any rights of holders of
Senior Indebtedness, including, without limitation, those arising under
the Indenture, and
(b) after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally,
and
(vii) certain other customary conditions precedent are satisfied.
MODIFICATION OF INDENTURE
From time to time, the Company and the Trustee may, without the consent of
holders of the Notes, amend or supplement the Indenture for certain specified
purposes, including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
holder.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of holders of at least a majority in principal amount of the
outstanding Notes, to modify or supplement the Indenture, except that no such
modification shall, without the consent of each holder affected thereby:
(i) reduce the amount of Notes whose holders must consent to an
amendment, supplement, or waiver to the Indenture or the Notes,
(ii) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Note,
(iii) reduce the principal of or premium on or change the stated
maturity of any Note or change the date on which any Notes may be subject
to redemption or repurchase or reduce the redemption or repurchase price
therefor,
(iv) make any Note payable in money other than that stated in the Note
or change the place of payment from New York, New York,
(v) waive a default on the payment of the principal of, interest on,
or redemption payment with respect to any Note,
(vi) make any change in provisions of the Indenture protecting the
right of each holder of Notes to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit to
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enforce such payment, or permitting holders of a majority in principal
amount of Notes to waive Defaults or Events of Default,
(vii) amend, change or modify in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate an Asset Sale Offer
with respect to any Asset Sale that has been consummated or modify any of
the provisions or definitions with respect thereto, or
(viii) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes in a manner
which adversely affects the holders of Notes.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Securities and Exchange Commission and to the holders of the Notes. The
Indenture provides that even if the Company is entitled under the Exchange Act
not to furnish such information to the Securities and Exchange Commission or to
the holders of the Notes, it will nonetheless continue to furnish such
information to the Securities and Exchange Commission and holders of the Notes.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 90 days after the end
of the Company's fiscal year and on or before 45 days after the end of each of
the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the Default
or Event of Default, its status and the intended method of cure, if any.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption and,
further, is not required to transfer or exchange any Note for a period of 15
days before selection of the Notes to be redeemed.
The Notes will be issued in a transaction exempt from registration under
the Act and will be subject to the restrictions on transfer described in "Notice
to Investors."
The registered holder of a Note may be treated as the owner of it for all
purposes.
DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary or is merged into or consolidated with any
other Person or which is assumed in connection with the acquisition of assets
from such Person and, in each case, not incurred by such Person in connection
with, or in
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anticipation or contemplation of, such Person becoming a Subsidiary or such
merger, consolidation or acquisition.
"Affiliate" means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
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, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Acquisition" means:
(i) an Investment by the Company or any Subsidiary of the Company in
any other Person pursuant to which such Person shall become a Subsidiary of
the Company or any Subsidiary of the Company, or shall be merged with or
into the Company or any Subsidiary of the Company, or
(ii) the acquisition by the Company or any Subsidiary of the Company
of the assets of any Person (other than a Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person or
comprise any division or line of business of such Person or any other
properties or assets of such Person or any other properties or assets of
such Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (including any Sale and
Lease-Back Transaction), other than to the Company or any of its Wholly Owned
Subsidiaries, in any single transaction or series of related transactions of:
(i) any Capital Stock of or other equity interest in any Subsidiary of
the Company, or
(ii) any other property or assets of the Company or of any Subsidiary
thereof; provided that Asset Sales shall not include:
(a) a transaction or series of related transactions for which the
Company or its Subsidiaries receive aggregate consideration of less than
$2 million,
(b) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of the Company as permitted under
"--Merger, Consolidation or Sale of Assets,"
(c) a disposition of inventory in the ordinary course of business,
(d) an exchange of property for other similar property structured
on a tax-free, like-kind basis, or
(e) the issuance of shares of a wholly owned Subsidiary of the
Company solely to the shareholders of the Company in a transaction
pursuant to which the Company becomes a wholly owned direct or indirect
subsidiary of such Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale:
(i) cash received by the Company or any Subsidiary of the Company from
such Asset Sale (including cash received as consideration for the
assumption of liabilities incurred in connection with or in anticipation of
such Asset Sale), after
(a) provision for all income or other taxes measured by or
resulting from such Asset Sale,
(b) payment of all brokerage commissions, underwriting and other
fees and expenses related to such Asset Sale,
(c) provision for minority interest holders in any Subsidiary of
the Company as a result of such Asset Sale,
(d) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale, and
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(e) deduction of appropriate amounts to be provided by the Company
or a Subsidiary of the Company as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of
in such Asset Sale and retained by the Company or a Subsidiary after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations
associated with the assets sold or disposed of in such Asset Sale, and
(ii) promissory notes and other noncash consideration received by the
Company or any Subsidiary of the Company from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of:
(i) the fair value of the property subject to such arrangement, and
(ii) the present value (discounted at the rate of 10%, compounded
annually) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and Lease-Back
Transaction (including any period for which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (iii)(a) or (iii)(b), and which have not yet been the
basis for a Series A/B Asset Sale Offer or an Excess Proceeds Offer in
accordance with clause (iii)(c) of the first paragraph of "-- Certain
Covenants -- Limitation on Certain Asset Sales".
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, Common Stock and Preferred Stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
"Capitalized Lease Obligations" means, with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"Cash Equivalents" means:
(i) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof,
(ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"),
(iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's,
(iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000, and
(v) shares of any mutual funds or other pooled investment vehicles, in
each case having assets of $500,000,000, investing solely in investments of
the types described in (i) through (iv) above.
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A "Change of Control" of the Company will be deemed to have occurred at
such time as:
(i) any Person (including a Person's Affiliates and associates), other
than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of 50% or more of the total voting or economic power of the
Company's Common Stock,
(ii) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner of more than
33 1/3% of the total voting power of the Company's Common Stock, and the
Permitted Holders beneficially own, in the aggregate, a lesser percentage
of the total voting power of the Common Stock of the Company than such
other Person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company,
(iii) there shall be consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation
or pursuant to which the Common Stock of the Company would be converted
into cash, securities or other property, other than:
(a) a merger or consolidation of the Company in which the holders
of the Common Stock of the Company outstanding immediately prior to the
consolidation or merger hold, directly or indirectly, at least a
majority of the Common Stock of the surviving corporation immediately
after such consolidation or merger, or
(b) a merger of the Company with an Affiliate of the Company (or a
shell corporation with no shareholders formed solely for the purpose of
creating a holding company) for the sole purpose of creating a holding
company whose sole asset, directly or indirectly, will be all of the
outstanding capital stock of the Company, or
(iv) during any period of two consecutive 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 such Board of
Directors or whose nomination for election by the shareholders of the
Company has been approved by 66 2/3% of the directors then still in office
who either were directors at the beginning of such period or whose election
or recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors of the Company.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to:
(i) vote in the election of directors of such Person, or
(ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or
others that will control the management and policies of such Person.
"Company" means Park-Ohio Industries, Inc.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of EBITDA of such Person during the four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for
the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
(i) the incurrence (and the application of the proceeds thereof) or
repayment of any Indebtedness of such Person or any of its Subsidiaries
giving rise to the need to make such calculation and any incurrence (and
the application of the proceeds thereof) or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence (and the application
of the proceeds thereof) or repayment, as the case may be, occurred on the
first day of the Four Quarter Period, and
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(ii) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any EBITDA (provided that such EBITDA shall
be included only to the extent includable pursuant to the definition of
"Consolidated Net Income") attributable to the assets which are the subject
of the Asset Acquisition or Asset Sale during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the
last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such Asset Sale or Asset Acquisition (including the incurrence,
assumption or liability for any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period.
If such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":
(i) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date,
(ii) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the Transaction
Date will be deemed to have been in effect during the Four Quarter Period,
and
(iii) notwithstanding clause (i) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by one or more Interest Rate Agreements, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Consolidated Fixed Charges" means, with respect to any Person, for any
period, the sum, without duplication, of:
(i) Consolidated Interest Expense, plus
(ii) the product of:
(a) the amount of all dividend payments on any series of Preferred
Stock of such Person (other than dividends paid in Capital Stock (other
than Disqualified Capital Stock)) paid, accrued or scheduled to be paid
or accrued during such period times,
(b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal,
state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to:
(i) Redeemable Dividends, whether paid or accrued,
(ii) imputed interest included in Capitalized Lease Obligations,
(iii) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(iv) the net costs associated with Interest Rate Agreements and other
hedging obligations,
(v) the interest portion of any deferred payment obligation,
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(vi) amortization of discount or premium, if any, and
(vii) all other non-cash interest expense (other than interest
amortized to cost of sales), plus, without duplication, all net capitalized
interest for such period and all interest incurred or paid under any
guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person,
plus the amount of all dividends or distributions paid on Disqualified
Capital Stock (other than dividends paid or payable in shares of Capital Stock
of the Company) minus amortization of deferred financing costs and expenses.
"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, however, that:
(i) the Net Income of any Person (the "other Person") in which the
Person in question or any of its Subsidiaries has less than a 100% interest
(which interest does not cause the Net Income of such other Person to be
consolidated into the Net Income of the Person in question in accordance
with GAAP) shall be included only to the extent of the amount of dividends
or distributions paid to the Person in question or the Subsidiary,
(ii) the Net Income of any Subsidiary of the Person in question that
is subject to any restriction or limitation on the payment of dividends or
the making of other distributions shall be excluded to the extent of such
restriction or limitation,
(iii) (a) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition,
and
(b) any net gain (but not loss) resulting from an Asset Sale by the
Person in question or any of its Subsidiaries other than in the ordinary
course of business shall be excluded,
(iv) extraordinary or unusual and non-recurring gains and losses shall
be excluded,
(v) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued) shall be excluded, and
(vi) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets shall be excluded.
"Designated Senior Indebtedness," means:
(i) any Senior Indebtedness under the Revolving Credit Facility, and
(ii) any other Senior Indebtedness which at the time of determination
exceeds $25 million in aggregate principal amount (or accreted value in the
case of Indebtedness issued at a discount) outstanding or available under a
committed facility, which is specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by
such Person and as to which the Trustee has been given written notice of
such designation.
"Disqualified Capital Stock" means any Capital Stock of a Person or a
Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, 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, on or prior to the
maturity date of the Notes, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall be
deemed to include any Preferred Stock of a Person or a Subsidiary of such
Person, with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Person or Subsidiary is obligated to pay
current dividends or distributions in cash during the period prior to the
maturity date of the Notes; provided, however, that Preferred
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Stock of a Person or any Subsidiary thereof that is issued with the benefit of
provisions requiring a change of control offer to be made for such Preferred
Stock in the event of a change of control of such Person or Subsidiary which
provisions have substantially the same effect as the provisions of the Indenture
described under "Change of Control," shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions.
"EBITDA" means, with respect to any Person and its Subsidiaries, for any
period, an amount equal to:
(i) the sum of:
(a) Consolidated Net Income for such period, plus
(b) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (a) hereof, plus
(c) Consolidated Interest Expense for such period (but only
including Redeemable Dividends in the calculation of such Consolidated
Interest Expense to the extent that such Redeemable Dividends have not
been excluded in the calculation of Consolidated Net Income), plus
(d) depreciation for such period on a consolidated basis, plus
(e) amortization of intangibles for such period on a consolidated
basis, plus
(f) any other non-cash items reducing Consolidated Net Income for
such period, minus
(ii) all non-cash items increasing Consolidated Net Income for such
period, all for such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP,
and provided, however, that, for purposes of calculating EBITDA during any
fiscal quarter, cash income from a particular Investment of such Person shall be
included only:
(i) if cash income has been received by such Person with respect to
such Investment during each of the previous four fiscal quarters, or
(ii) if the cash income derived from such Investment is attributable
to Cash Equivalents.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time, except that with respect to
changes in generally accepted accounting principles that become effective
following the Original Issue Date with respect to non-cash items, such changes
shall not be given effect if the Company and its lenders under the Revolving
Credit Facility agree not to give effect to such changes for the purpose of
evaluating the Company and its Subsidiaries' financial condition or performance
under the Revolving Credit Facility.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
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"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included:
(i) any Capitalized Lease Obligations of such Person,
(ii) obligations secured by a lien to which the property or assets
owned or held by such Person is subject, whether or not the obligation or
obligations secured thereby shall have been assumed,
(iii) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items
would appear upon the balance sheet of the guarantor),
(iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction,
(v) Disqualified Capital Stock of such Person or any Subsidiary
thereof, and
(vi) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to
the extent such currency agreement or Interest Rate Agreement obligations
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP).
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that:
(i) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the principal amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP,
(ii) Indebtedness shall not include any liability for federal, state,
local or other taxes, and
(iii) Indebtedness shall not include interest on, and any and all
other fees, expense reimbursement obligations and other amounts due
pursuant to any Indebtedness.
"Independent Financial Advisor" means an investment banking firm of
national reputation in the United States:
(i) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in the
Company, and
(ii) which, in the judgment of the Board of Directors of the Company,
is otherwise independent and qualified to perform the task for which it is
to be engaged.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, with respect of any Person, directly or indirectly,
any advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any Capital Stock,
bonds, notes, debentures, partnership or joint venture interests or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any Person or the making of any investment in any
Person.
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Investments shall exclude:
(i) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices of such Person, and
(ii) the repurchase of securities of any Person by such Person.
For the purposes of the "Limitation on Restricted Payments" covenant, the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income.
If the Company or any Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, the Company no longer
owns, directly or indirectly, greater than 50% of the outstanding Common Stock
of such Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Subsidiary not sold or disposed of.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person, for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means in the case of any sale of Capital Stock by or equity
contribution to any Person, the aggregate net cash proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer, Treasurer or any Corporate Controller of such
Person that shall comply with applicable provisions of the Indenture.
"Original Issue Date" means November 25, 1997.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of or premium, if any, or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Holders" means:
(i) a holding company formed for the sole purpose of owning, directly
or indirectly all of the outstanding capital stock of the Company,
(ii) Edward F. Crawford, his children or other lineal descendants,
probate estate of any such individual, and any trust, so long as one or
more of the foregoing individuals is the beneficiary thereunder, and any
other
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corporation, partnership or other entity all of the shareholders, partners,
members or owners of which are any of the foregoing, or
(iii) any employee stock ownership plan, or any "group" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) in which employees of the
Company or its subsidiaries beneficially own at least 33 1/3% of the Common
Stock of the Company or of a holding company that directly or indirectly
owns all of the outstanding Capital stock of the Company.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Subsidiary solely for working
capital purposes and not for acquisitions arising under or in connection
with the Revolving Credit Facility in an aggregate principal amount not to
exceed the greater of:
(a) $50 million, or
(b) the sum of:
(1) 45% of the book value of the accounts receivable of the
Company and its Subsidiaries on a consolidated basis, and
(2) 25% of the book value of the inventory of the Company and
its Subsidiaries on a consolidated basis outstanding at any time,
less any mandatory prepayment actually made thereunder (to the
extent, in the case of payments of revolving credit borrowings, that
the corresponding commitments have been permanently reduced below $50
million) or scheduled payments actually made thereunder,
(ii) Indebtedness under the Series A/B Notes and the Notes,
(iii) Indebtedness not covered by any other clause of this definition
which was outstanding on the Original Issue Date or is outstanding on the
Issue Date and was incurred subsequent to the Original Issue Date in
compliance with the Series A/B Indenture,
(iv) Indebtedness of the Company to any Wholly Owned Subsidiary and
Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary,
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed 5% of the Company's tangible consolidated total assets,
(vi) Interest Rate Agreements,
(vii) Refinancing Indebtedness, and
(viii) additional Indebtedness of the Company and its Subsidiaries not
to exceed $10 million in aggregate principal amount at any one time
outstanding.
"Permitted Investments" means Investments made on or after the Original
Issue Date consisting of:
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Wholly Owned Subsidiary,
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Subsidiary of the Company,
or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary thereof,
(iii) Investments in cash and Cash Equivalents,
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(iv) reasonable and customary loans made to employees in connection
with their relocation not to exceed $1 million in the aggregate at any one
time outstanding,
(v) an Investment that is made by the Company or a Subsidiary thereof
in the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration for
the consummation of an Asset Sale that is otherwise permitted under
"-- Certain Covenants -- Limitation on Certain Asset Sales" above,
(vi) Interest Rate Agreement entered into in the ordinary course of
the Company's or its Subsidiaries' business, and
(vii) additional Investments not to exceed $10 million at any one time
outstanding.
"Permitted Liens" means:
(i) Liens on property or assets of, or any shares of Capital
Stock of or secured indebtedness of, any corporation existing at the time
such corporation becomes a Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Subsidiaries; provided
that such Liens are not incurred in connection with, or in contemplation
of, such corporation becoming a Subsidiary of the Company or merging into
the Company or any of its Subsidiaries,
(ii) Liens securing Refinancing Indebtedness; provided that any such
Lien does not extend to or cover any Property, Capital Stock or
Indebtedness other than the Property, shares or debt securing the
Indebtedness so refunded, refinanced or extended,
(iii) Liens in favor of the Company or any of its Subsidiaries,
(iv) Liens securing industrial revenue bonds,
(v) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under the Indenture; provided that:
(a) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund,
the cost (including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or
charged in connection with, such purchase or construction) of such
Property,
(b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such costs, and
(c) such Lien does not extend to or cover any Property other than
such item of Property and any improvements on such item,
(vi) statutory liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor,
(vii) other Liens securing obligations incurred in the ordinary course
of business which obligations do not exceed $3 million in the aggregate at
any one time outstanding,
(viii) Liens for taxes, assessments or governmental charges that are
being contested in good faith by appropriate proceedings,
(ix) Liens securing Capitalized Lease Obligations permitted to be
incurred under clause (v) of the definition of "Permitted Indebtedness";
provided that such Lien does not extend to any property other than that
subject to the underlying lease,
(x) liens to secure the Revolving Credit Facility,
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(xi) Liens securing Interest Rate Agreements,
(xii) easements or other minor defect or irregularities in title and
other charges and encumbrances on property not interfering in any material
respect with the use of such property in the business of the Company or the
applicable Subsidiary,
(xiii) liens that arose subsequent to the Original Issue Date in
compliance with the Series A/B Indenture, and
(xiv) any extensions, substitutions, replacements or renewals of the
foregoing.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means a public offering by the Company or by a
holding company which owns, directly or indirectly, all of the outstanding
capital stock of the Company of shares of its Common Stock (however designated
and whether voting or non-voting) and any and all rights, warrants or options to
acquire such Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of:
(i) 100% of such cost, and
(ii) reasonable fees and expenses of such Person incurred in
connection therewith.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Original Issue Date
or which is outstanding on the Issue Date and was incurred subsequent to the
Issue Date in compliance with the Series A/B Indenture or other Indebtedness
permitted to be incurred by the Company or its Subsidiaries pursuant to the
terms of the Indenture, but only to the extent that:
(i) the Refinancing Indebtedness is subordinated to the Notes to at
least the same extent as the Indebtedness being refunded, refinanced or
extended, if at all,
(ii) the Refinancing Indebtedness is scheduled to mature either:
(a) no earlier than the Indebtedness being refunded, refinanced or
extended, or
(b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a
weighted average life to maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the weighted average life to
maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of
the Notes,
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(iv) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the sum of:
(a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended,
(b) the amount of accrued and unpaid interest, if any, and premiums
owed, if any, not in excess of preexisting prepayment provisions on such
Indebtedness being refunded, refinanced or extended, and
(c) the amount of customary fees, expenses and costs related to the
incurrence of such Refinancing Indebtedness, and
(v) such Refinancing Indebtedness is incurred by the same Person that
initially incurred the Indebtedness being refunded, refinanced or extended.
"Restricted Payment" means any of the following:
(i) the declaration or payment of any dividend or any other
distribution or payment on Capital Stock of the Company or any Subsidiary
of the Company or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company or any Subsidiary
of the Company (other than:
(a) dividends or distributions payable solely in Capital Stock
(other than Disqualified Capital Stock) or in options, warrants or other
rights to purchase such Capital Stock (other than Disqualified Capital
Stock), and
(b) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly Owned Subsidiary of
the Company),
(ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries (other
than Capital Stock owned by the Company or a Wholly Owned Subsidiary of the
Company, excluding Disqualified Capital Stock) or any option, warrants or
other rights to purchase such Capital Stock,
(iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for
value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment of any Indebtedness which is subordinated in right of
payment to the Notes other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity (in each case due within one year of the date
of acquisition),
(iv) the making of any Investment or guarantee of any Investment in
any Person other than a Permitted Investment, and
(v) forgiveness of any Indebtedness of an Affiliate of the Company to
the Company or a Subsidiary of the Company.
For purposes of determining the amount expended for Restricted Payments,
cash distributed or invested shall be valued at the face amount thereof and
property other than cash shall be valued at its fair market value.
"Revolving Credit Facility" means the Amended and Restated Credit Agreement
dated as of November 2, 1998, between the Company, the lenders party thereto in
their capacities as lenders thereunder and Key Bank, National Association, as
agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be or have been amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
"Limitation on Additional Indebtedness" covenant) or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
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"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on, and any and all other fees, expense reimbursement obligations and
other amounts due pursuant to the terms of all agreements, documents and
instruments providing for, creating, securing or evidencing or otherwise entered
into in connection with:
(i) all Indebtedness of the Company owed to lenders under the
Revolving Credit Facility,
(ii) all obligations of the Company with respect to any Interest Rate
Agreement,
(iii) all obligations of the Company to reimburse any bank or other
person in respect of amounts paid under letters of credit, acceptances or
other similar instruments,
(iv) all other Indebtedness of the Company which does not provide that
it is to rank pari passu with or subordinate to the Notes, and
(v) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Senior
Indebtedness described above.
Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include:
(i) Indebtedness of the Company to any of its Subsidiaries, or to any
Affiliate of the Company or any of such Affiliate's Subsidiaries,
(ii) Indebtedness represented by the Notes,
(iii) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Senior Indebtedness,
(iv) any trade payable arising from the purchase of goods or materials
or for services obtained in the ordinary course of business,
(v) Indebtedness incurred in violation of the Indenture,
(vi) Indebtedness represented by Disqualified Capital Stock, and
(vii) any Indebtedness to or guaranteed on behalf of, any
shareholders, director, officer or employee of the Company or any
Subsidiary of the Company.
"Series A/B Indenture" means the indenture dated as of November 25, 1997
between the Company and the Trustee relating to the Series A/B Notes.
"Series A/B Notes" means the $150.0 million aggregate principal amount of
9 1/4% Senior Subordinated Notes due 2007 issued under the Series A/B Indenture.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired:
(i) in the case of a corporation, of which more than 50% of the total
voting power of the Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of
its Subsidiaries, or
(ii) in the case of a partnership, joint venture, association or other
business entity, with respect to which such first-named Person or any of
its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named
Person for financial statement purposes.
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"Subsidiary Indebtedness" means any Indebtedness other than:
(i) Indebtedness in the form of, or represented by, bonds or other
securities or any guarantee thereof, and
(ii) Indebtedness which is, or may be, quoted, listed or ordinarily
purchased and sold on any stock exchange, automated trading system or
over-the-counter or other securities market (including, without prejudice
to the generality of the foregoing, the market for securities eligible for
resale pursuant to Rule 144A under the Securities Act).
"Wholly Owned Subsidiary" means any Subsidiary, all of the outstanding
voting securities (other than directors' qualifying shares) of which are owned,
directly or indirectly, by the Company.
BOOK-ENTRY; DELIVERY AND FORM
The Notes are being offered and sold to QIBs (as defined) in reliance on
Rule 144A under the Securities Act ("Rule 144A Notes"). Notes also may be
offered and sold in offshore transactions in reliance on Regulation S
("Regulation S Notes"). In addition, Notes may be subsequently transferred to
institutional "accredited investors" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act ("Institutional Accredited
Investors") in transactions exempt from registration under the Securities Act
not made in reliance on Rule 144A or Regulation S under the Securities Act
("Other Notes").
Rule 144A Notes initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global Note"). The Rule 144A Global Note will be deposited upon issuance with
the Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
Other Notes held by Institutional Accredited Investors will be represented by
one or more certificated Notes bearing the restrictive legend described under
"Notice to Investors" ("Accredited Investor Certificated Notes"). Regulation S
Notes initially will be represented by one or more notes in registered, global
form without interest coupons (collectively, the "Regulation S Global Note,"
and, together with the Rule 144A Global Note, the "Global Notes"). The
Regulation S Global Note will be deposited upon issuance with the Trustee as
custodian for DTC, and registered in the name of a nominee of DTC, in each case
for credit to the accounts of Euroclear System ("Euroclear") and Cedel Bank,
S.A. ("CEDEL"). On or prior to the 40th day after the later of the commencement
of the Offering and the Issue Date (such period through and including such 40th
day, the "Restricted Period"), beneficial interests in the Regulation S Note may
be held only through Euroclear or CEDEL, as indirect participants in DTC, unless
transferred to a person that takes delivery in the form of an interest in the
corresponding Rule 144A Global Note in accordance with the certification
requirements described below. Beneficial interests in the Rule 144A Global Note
may not be exchanged for beneficial interests in the Regulation S Global Note at
any time except in the limited circumstances described below. See "--Exchanges
between Regulation S Notes and Rule 144A Notes and Other Notes."
Except as set forth below, the Global Notes may be transferred, in whole
but not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes."
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Note), Regulation S Notes (including beneficial interests in the Regulation S
Note) and Other Notes will be subject to certain restrictions on transfer and
will bear a restrictive legend as described under "Notice to Investors." In
addition, transfer of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
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Depository Procedures
DTC has advised the issuer 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 the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the issuer that pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Notes).
Investors in the Rule 144A Global Note 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. Investors in the Regulation S Global Note must initially hold their
interests therein through Euroclear or CEDEL, if they are accountholders in such
systems, or indirectly through organizations which are accountholders in such
systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold interests in the Regulation S Global Note through
organizations other than Euroclear and CEDEL that are Participants in the DTC
system. Euroclear and CEDEL will hold interests in the Regulation S Global Note
on behalf of their participants through their respective depositories, which in
turn will hold such interests in the Regulation S Global Note customers'
securities accounts in their respective names on the books of DTC. The Chase
Manhattan Bank, Brussels office, will initially act as depository for Euroclear,
and Citibank, N.A., will initially act as depository for CEDEL. All interests in
a Global Note, 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 system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of the Participants, which in
turn act on behalf of the Indirect Participants and certain banks, the ability
of a person having beneficial interests in a Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "--Exchange of Book-Entry
Notes for Certificated Notes" and "--Exchanges between Regulation S Notes and
Rule 144A Notes and Other Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on a Global Note registered in the name of DTC or its nominee will be payable to
DTC or its nominee in its capacity as the registered holder under the Indenture.
Under the terms of the Indenture, the issuer and the Trustee will treat the
persons in whose names the Notes, including the Global Notes, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, none of the issuer, the Initial
Purchasers, the Trustee nor any agent of the issuer, the Initial Purchasers or
the Trustee has or will have any responsibility or liability for (i) any aspect
or accuracy of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Notes, or for maintaining,
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supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes, or (ii) any other matter relating to the actions and practices of
DTC or any of the Participants or the Indirect Participants.
DTC has advised the issuer that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will not be the responsibility of DTC,
the Trustee or us. Neither we nor the Trustee will be liable for any delay by
DTC or any of the Participants in identifying the beneficial owners of the
Notes, and we and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Global Notes for all purposes.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Notes will 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 the Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds. Transfers between
accountholders 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
Notes described herein, cross-market transfers between the accountholders in
DTC, on the one hand, and directly or indirectly through Euroclear or CEDEL
accountholders, 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 depository; 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 depository to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear and CEDEL accountholders may not deliver instructions directly to the
depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL accountholder purchasing an interest in a Global Note from an
accountholder 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 or CEDEL) immediately
following the settlement date of DTC. Cash received in Euroclear or CEDEL as a
result of sales of interests in a Global Note by or through a Euroclear or CEDEL
accountholder 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.
DTC has advised the issuer that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if any of the events described under "--Exchange of Book Entry Notes
for Certificated Notes" occurs, DTC reserves the right to exchange the Global
Notes for (in the case of the Rule 144A Global Note) legended Notes in
certificated form and to distribute such Notes to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
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Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Regulation S Global Note and in the
Rule 144A Global Note among accountholders in DTC and accountholders of
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.
None of the issuer, the Initial Purchasers or the Trustee nor any agent of the
issuer, the Initial Purchasers or the Trustee will have any responsibility for
the performance by DTC, Euroclear or CEDEL or their respective participants,
indirect participants or accountholders of their respective obligations under
the rules and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
Notes transferred to Institutional Accredited Investors who are not QIBs
will be issued in registered certificated form. In addition, a Global Note is
exchangeable for definitive Notes in registered certificated form if (i) DTC (x)
notifies the issuer that it is unwilling or unable to continue as depository for
the Global Note and the Issuer thereupon fails to appoint a successor depository
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the issuer, at its option, notifies the Trustee in writing that it elects
to cause the issuance of the Notes in certificated form or (iii) there shall
have occurred and be continuing a Default or an Event of Default with respect to
the Notes. In all cases, certificated Notes delivered in exchange for any Global
Note or beneficial interests therein will be registered in the names, and issued
in any approved denominations, requested by or on behalf of DTC (in accordance
with its customary procedures) and will bear the restrictive legend described in
"Notice to Investors" unless the issuer determines otherwise in compliance with
applicable law.
Exchanges between Regulation S Notes and Rule 144A Notes and Other Notes
Prior to the expiration of the Restricted Period, a beneficial interest in
a Regulation S Global Note may be transferred to a person who takes delivery in
the form of an interest in the corresponding Rule 144A Global Note or in the
form of an Accredited Investor Certificated Note only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being made (i)(a) to a person whom the transferor reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A or (b)
pursuant to another exemption from the registration requirements under the
Securities Act which is accompanied by an opinion of counsel regarding the
availability of such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other jurisdiction.
Beneficial interests in a Rule 144A Global Note may be transferred to a
person who takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the Trustee a written certificate to the effect
that such transfer is being made in accordance with Rule 903 or 904 of
Regulation S or Rule 144 under the Securities Act (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
Beneficial interests in a Global Note may be transferred to a person who
takes delivery in the form of an Accredited Investor Certificated Note only upon
compliance with the procedures set forth in "Notice to Investors."
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
Transfers involving an exchange of a beneficial interest in the Regulation
S Global Note for a beneficial interest in the Rule 144A Global Note or vice
versa will be effected in DTC by means of an instruction originated by DTC
through the DTC/Deposit Withdraw at Custodian ("DWAC") system. Accordingly, in
connection with such transfer, upon notice from DTC through the DWAC system
appropriate adjustments, this is initiated by beneficial holder through
Participant through DTC to Trustee, will be made to reflect a decrease in the
principal amount of the Regulation S Global Note and a corresponding increase in
the principal amount of the Rule 144A Global Note or vice versa, as applicable.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material U.S. federal income tax
aspects of your acceptance of, and participation in, the exchange offer. This
discussion is a summary for general information purposes and does not consider
all aspects of U.S. federal income taxation that may be relevant to your
surrender of outstanding notes in the exchange offer or your ownership or
disposition of new notes thereafter. This discussion also does not address the
U.S. federal income tax consequences of ownership of notes not held as capital
assets within the meaning of Section 1221 of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), or the U.S. federal income tax consequences to
investors subject to special treatment under the U.S. federal income tax laws,
such as dealers in securities or foreign currency, tax-exempt entities,
financial institutions, insurance companies, persons that hold the notes as part
of a "straddle," a "hedge" or a "conversion transaction," persons that have a
"functional currency" other than the U.S. dollar, and investors in pass-through
entities. In addition, this discussion does not describe any tax consequences
arising under U.S. federal gift and estate taxes or out of the tax laws of any
state, local or foreign jurisdiction.
This discussion is based upon the Code, existing Treasury regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing is subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR
SITUATIONS.
U.S HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a beneficial owner of a note that is (i) a citizen or
resident (as defined in Section 7701 (b) (1) of the Code) of the United States,
(ii) a corporation organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate, the income of which
is subject to U.S. federal income tax regardless of the source or (iv) a trust
with respect to which a court within the United States is able to exercise
primary supervision over its administration and one or more United States
persons have the authority to control all of its substantial decisions (a "U.S.
Holder"). Certain U.S. federal income tax consequences relevant to a holder
other than a U.S. Holder are discussed separately below.
Stated Interest
Stated interest on a note should be taxable to a U.S. Holder as ordinary
interest income at the time it accrues or is received in accordance with such
Holder's method of accounting for U.S. federal income tax purposes.
Market Discount
If a note is acquired at a "market discount," some or all of any gain
realized upon a sale or other disposition or payment at maturity or some or all
of a partial principal payment of such note may be treated as ordinary income,
as described below. For this purpose, "market discount" is the excess (if any)
of the stated redemption price at maturity of a note over its purchase price,
subject to a statutory de minimis exception. Unless a U.S. Holder has elected to
include market discount in income as it accrues, any gain realized on a
subsequent disposition of a note (other than in connection with certain
nonrecognition transactions) or payment at maturity, or some or all of any
partial principal payment with respect to the note, will be treated as ordinary
income to the extent of the market discount that is treated as having accrued
during the period such U.S. Holder held the note.
The amount of market discount treated as having accrued will be determined
either (i) on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the note was held by the
U.S. Holder and the denominator of which is the total number of days after the
date such U.S. Holder acquired the note up to and including the date of its
maturity or (ii) if the U.S. Holder so elects, on a constant interest rate
method. A U.S. Holder may make that election with respect to any note but, once
made, such election is irrevocable.
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In lieu of recharacterizing gain upon disposition as ordinary income to the
extent of accrued market discount at the time of disposition, a U.S. Holder of a
note acquired at a market discount may elect to include market discount in
income currently, through the use of either the straight-line inclusion method
or the elective constant interest method. Once made, the election to include
market discount in income currently applies to all notes and other obligations
held by the U.S. Holder that are purchased at a market discount during the
taxable year for which the election is made, and all subsequent taxable years of
the U.S. Holder, unless the Internal Revenue Service (the "IRS") consents to a
revocation of the election. If an election is made to include market discount in
income currently, the basis of the note in the hands of the U.S. Holder will be
increased by the market discount thereon as it is included in income.
Unless a U.S. Holder who acquires a note at a market discount elects to
include market discount in income currently, such U.S. Holder may be required to
defer deductions for any interest paid on indebtedness allocable to such notes
in an amount not exceeding the deferred income until such income is realized.
BOND PREMIUM
If a U.S. Holder purchases a note and immediately after the purchase the
adjusted basis of the note exceeds the sum of all amounts payable on the
instrument after the purchase date (other than qualified stated interest), the
note has "bond premium." A U.S. Holder may elect to amortize such bond premium
over the remaining term of such note (or if it results in a smaller amount of
amortizable bond premium, until an earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an interest payment date
or at the stated maturity, as the case may be, will be reduced by the portion of
premium allocable to such period based on the note's yield to maturity. If such
an election to amortize bond premium is not made, a U.S. Holder must include the
full amount of each interest payment in income in accordance with its regular
method of accounting and will receive a tax benefit from the premium only in
computing such U.S. Holder's gain or loss upon the sale or other disposition or
payment of the principal amount of the note.
An election to amortize premium will apply to amortizable bond premium on
all notes and other bonds, the interest on which is includable in the U.S.
Holder's gross income, held at the beginning of the U.S. Holder's first taxable
year to which the election applies or that are thereafter acquired and may be
revoked only with the consent of the IRS.
Exchange Offer
The exchange of outstanding notes for new notes pursuant to the exchange
offer will not be a taxable exchange. Therefore, you will not recognize any
taxable income or loss as a result of exchanging an outstanding note for a new
note. The holding period for new notes received pursuant to the exchange offer
will include the holding period of the outstanding notes exchanged therefor.
Your federal income tax basis in new notes received pursuant to the exchange
offer will be the same as your federal income tax basis in the outstanding notes
surrendered in the exchange. We must pay additional cash interest on the notes
if we fail to comply with certain of our obligations in connection with the
exchange offer. That additional interest should be treated for tax purposes as
interest, taxable to holders in the manner described in "Stated Interest" above.
However, it is possible that the IRS may take a different position, in which
case a United States holder may have to include such additional interest in
income as the interest accrues or becomes fixed, regardless of that holder's
usual method of accounting.
Disposition of the Notes
Upon sale, redemption or other disposition of a note, a U.S. Holder will
generally recognize gain or loss equal to the difference between (i) the amount
realized on the disposition (other than amounts attributable to accrued interest
not yet taken into income which will be taxed as ordinary income) and (ii) the
U.S. Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax basis
in a note generally will equal the cost of the note to the U.S. Holder increased
by amounts includable in income as market discount (if the U.S. Holder elects to
include market discount on a current basis) and reduced by any bond premium
amortized by any U.S. Holder.
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Such gain or loss (except to the extent that the market discount rules
otherwise provide) will generally constitute capital gain or loss and will be
long-term capital gain (taxed, in the case of individuals, at a maximum rate of
20%) or loss if the U.S. Holder has held such note for longer than 12 months.
Backup Withholding and Information Reporting
Under the Code, a U.S. Holder of a note may be subject, under certain
circumstances, to information reporting and/or backup withholding at a 31% rate
with respect to cash payments in respect of interest on, or the gross proceeds
from disposition of, a note. This withholding applies only if a U.S. Holder (I)
fails to furnish its social security or other taxpayer identification number
("TIN") within a reasonable time after a request therefor, (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that it has failed to report
interest or dividends properly, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that it is not subject to backup withholding.
Any amount withheld from a payment to a U.S. Holder under the backup withholding
rules is allowable as a credit (and may entitle such holder to a refund) against
such Holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS. Certain persons are exempt from backup
withholding, including corporations and financial institutions. Holders of notes
should consult their tax advisors as to their qualification for exemption from
withholding and the procedure for obtaining such exemption.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a note that is not a U.S. Holder (a
"Non-U.S. Holder").
This discussion does not address all aspects of U.S. federal income
taxation that may be relevant to your surrender of outstanding notes in the
exchange offer or your ownership or disposition of new notes thereafter. For
example, persons who are partners in foreign partnerships or beneficiaries of
foreign trusts or estates and who are subject to U.S. federal income tax because
of their own status, such as U.S. residence or foreign persons engaged in a
trade or business in the United States, may be subject to U.S. federal income
tax even though the entity is not subject to income tax on disposition of its
note.
For purposes of the following discussion, interest and gain on the sale,
redemption or other disposition of the note will be considered "U.S. trade or
business income" if such income or gain is (i) effectively connected with the
conduct of a U.S. trade or business or (ii) in the case of an applicable income
tax treaty between the United States and the country of which the Holder is a
qualified resident, attributable to a U.S. permanent establishment (or to a
fixed base) in the United States.
Stated Interest
Generally, any interest paid to a Non-U.S. Holder of a note that is not
U.S. trade or business income will not be subject to U.S. federal income tax if
the interest qualifies as "portfolio interest." Interest on the notes will
qualify as portfolio interest if (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the voting power of the Company and is not a
"controlled foreign corporation" with respect to which the issuer is a "related
person" within the meaning of Section 881(c)(3)(C) of the Code, and (ii) the
beneficial owner, under penalties of perjury, certifies using the requisite form
that the beneficial owner is not a U.S. person and such certificate provides the
beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exception and that are not U.S. trade or
business income will be subject to U.S. withholding tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding. U.S.
trade or business income will be taxed at regular U.S. federal income tax rates
rather than the 30% gross rate. To claim the benefit of a tax treaty or to claim
exemption from withholding because the income is U.S. trade or business income,
the Non-U.S. Holder must provide a properly executed Form 1001 or 4224 (or such
successor forms as the IRS designates), as applicable, prior to payment of
interest. These forms must be periodically updated. Under regulations effective
beginning after December 31, 2000, the Forms 1001 and 4224 will be replaced by
Form W-8, and a Non-U.S.
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Holder who is claiming the benefits of a tax treaty may be required to obtain a
U.S. TIN and to provide certain documentary evidence issued by foreign
governmental authorities to prove residence in the foreign country.
Disposition of the Notes
Subject to the discussion concerning backup withholding, any gain realized
by a Non-U.S. Holder on the sale, redemption or other disposition of a note
generally will not be subject to U.S. federal income tax unless (i) such gain is
U.S. trade or business income or (ii) subject to certain exceptions, the
Non-U.S. Holder is an individual who holds the note as a capital asset and is
present in the United States for 183 days or more in the taxable year of the
disposition.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The issuers must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to U.S. withholding tax or that is exempt from
withholding pursuant to a tax treaty or the portfolio interest exception. Copies
of these information returns may also be made available under the provisions of
a specific treaty or agreement to the tax authorities of the country in which
the Non-U.S. Holder resides.
Backup withholding and information reporting will not apply to payments of
principal on the notes by the issuers to a Non-U.S. Holder, if the Holder
certifies as to its non-U.S. status under penalties of perjury or otherwise
establishes an exemption (provided that neither the issuers nor their paying
agent has actual knowledge that the Holder is a U.S. Holder or that the
conditions of any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a note
to or through a non-U.S. office of a foreign broker that is not a "U.S. related
person" will not be subject to information reporting or backup withholding. (For
this purpose, a "U.S. related person" is (i) a "controlled foreign corporation"
for U.S. federal income tax purposes or (ii) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment (or for such part of the period
that the broker has been in existence) is derived from activities that are
effectively connected with the conduct of a U.S. trade or business).
In the case of the payment of proceeds from the disposition of notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. Holder).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Securities and Exchange
Commission in no-action letters issued to third parties, we believe that new
notes may be offered for resale, resold and otherwise transferred by holders
unless the holder is:
- an "affiliate" of Park-Ohio,
- a broker-dealer who acquired outstanding notes directly from Park-Ohio,
or
- a broker-dealer who acquired outstanding notes as a result of
market-making or other trading activities.
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Transfers will be permitted without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933, provided that the
new notes are acquired in the ordinary course of the holders' business and the
holder has no arrangement with any person to participate in a distribution of
the new notes. Broker-dealers receiving new notes in the exchange offer will be
subject to a prospectus delivery requirement with respect to resales of those
new notes.
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for outstanding notes where such
outstanding notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
expiration date of the exchange offer, we will make this prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
resale.
We will not receive any proceeds from the sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account in
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market transactions, in negotiated transactions, through
the writing of options on the new notes or a combination of those methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any 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 the broker-dealer or
the purchasers of any new notes. Any broker-dealer that resells new notes that
were received by it for its own account in the exchange offer and any broker or
dealer that participates in a distribution of new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on the
resale of new notes and any commission or concessions received by any of those
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver,
and by delivering the SEC a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Despite this acknowledgment, a broker-dealer may nonetheless be determined to be
an "underwriter" by the SEC.
For a period of 180 days after the expiration date of the exchange offer,
we will promptly send additional copies of this prospectus and any amendment or
supplement to any broker-dealer that requests those documents in the Letter of
Transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the notes, other than
commissions or concessions of any broker-dealer.
The initial purchasers and their affiliates have provided in the past, and
may provide in the future, investment banking and financial advisory services to
us for which they have received, and in the future may receive, customary fees.
LEGAL MATTERS
The validity of the new notes we will issue in the exchange offer will be
passed upon for us by Jones, Day, Reavis & Pogue, Cleveland, Ohio.
EXPERTS
The consolidated financial statements of Park-Ohio Industries, Inc. and
Subsidiaries at December 31, 1998 and 1997, and for each of the three years in
the period ended December 31, 1998 appearing in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
90
<PAGE> 97
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Consolidated Balance Sheet -- March 31, 1999 (Unaudited).... F-2
Consolidated Statements of Income -- Three Months Ended
March 31, 1998 and March 31, 1999 (Unaudited)............. F-3
Consolidated Statement of Shareholder's Equity -- Three
Months Ended March 31, 1999 (Unaudited)................... F-4
Consolidated Statements of Cash Flows -- Three Months Ended
March 31, 1998 and March 31, 1999 (Unaudited)............. F-5
Notes to Consolidated Financial Statements (Unaudited)...... F-6
Report of Ernst & Young LLP, Independent Auditors........... F-9
Consolidated Balance Sheets --
December 31, 1997 and December 31, 1998................... F-10
Consolidated Statements of Income --
Years Ended December 31, 1996, 1997 and 1998.............. F-11
Consolidated Statements of Shareholder's Equity -- Years
Ended December 31, 1996, 1997 and 1998.................... F-12
Consolidated Statements of Cash Flows --
Years Ended December 31, 1996, 1997 and 1998.............. F-13
Notes to Consolidated Financial Statements.................. F-14
</TABLE>
F-1
<PAGE> 98
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 4,482
Accounts receivable, less allowances for doubtful accounts
of $3,060 at March 31, 1999............................ 101,761
Inventories............................................... 168,072
Deferred tax assets....................................... 2,232
Other current assets...................................... 6,614
--------
Total Current Assets.............................. 283,161
Property, Plant and Equipment............................... 198,909
Less accumulated depreciation............................. 74,488
--------
124,421
Other Assets
Excess purchase price over net assets acquired, net of
accumulated amortization of $8,919 at March 31, 1999... 109,873
Deferred taxes............................................ 8,900
Other..................................................... 38,926
--------
$565,281
========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Trade accounts payable.................................... $ 62,066
Accrued expenses.......................................... 54,986
Current portion of long-term liabilities.................. 2,034
--------
Total Current Liabilities......................... 119,086
Long-Term Liabilities, less current portion
Long-term debt............................................ 270,032
Other postretirement benefits............................. 26,152
Other..................................................... 4,572
--------
300,756
Shareholder's Equity
Common stock, par value $1 a share........................ -0-
Additional paid-in capital................................ 64,844
Retained earnings......................................... 81,928
Accumulated other comprehensive earnings (loss)........... (1,333)
--------
145,439
--------
$565,281
========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 99
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Net sales................................................... $136,503 $171,403
Cost of products sold....................................... 113,171 140,436
-------- --------
Gross profit.............................................. 23,332 30,967
Selling, general and administrative expenses................ 14,137 17,952
-------- --------
Operating income.......................................... 9,195 13,015
Interest expense............................................ 4,152 5,378
-------- --------
Income before income taxes................................ 5,043 7,637
Income taxes................................................ 2,169 3,289
-------- --------
Net income................................................ $ 2,874 $ 4,348
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 100
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED EARNINGS
STOCK CAPITAL EARNINGS (LOSS) TOTAL
------ ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1999................. $ -0- $64,844 $77,580 $(1,582) $140,842
Comprehensive income:
Net income............................ 4,348 4,348
Foreign currency translation
adjustment......................... 249 249
--------
Comprehensive income............... 4,597
----- ------- ------- ------- --------
Balance March 31, 1999.................. $ -0- $64,844 $81,928 $(1,333) $145,439
===== ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 101
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 2,874 $ 4,348
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization........................ 3,731 4,984
-------- --------
6,605 9,332
Changes in operating assets and liabilities excluding
acquisitions of businesses:
Accounts receivable....................................... (9,348) 2,002
Inventories and other current assets...................... (17,148) (8,737)
Accounts payable and accrued expenses..................... 10,249 11,066
Other..................................................... (2,296) (2,737)
-------- --------
Net Cash Provided (Used) by Operating Activities....... (11,938) 10,926
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net........... (6,254) (6,304)
Costs of acquisitions, net of cash acquired............... -0- (29,146)
Purchase of investments................................... (101) (446)
-------- --------
Net Cash (Used) by Investing Activities................ (6,355) (35,896)
FINANCING ACTIVITIES
Proceeds from bank arrangements for acquisitions.......... -0- 29,000
Proceeds from bank arrangements for operations............ 17,500 -0-
Payments on debt.......................................... (74) (3,868)
Purchase of treasury stock................................ (237) -0-
Issuance of common stock under stock option plan.......... 73 -0-
-------- --------
Net Cash Provided by Financing Activities.............. 17,262 25,132
-------- --------
Increase (Decrease) in Cash and Cash Equivalents....... (1,031) 162
Cash and Cash Equivalents at Beginning of Period....... 1,814 4,320
-------- --------
Cash and Cash Equivalents at End of Period............. $ 783 $ 4,482
======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 102
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(DOLLARS IN THOUSANDS)
NOTE A -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Park-Ohio
Industries, Inc. and its subsidiaries ("Park-Ohio," "the Company"). Park-Ohio is
a wholly-owned subsidiary of Park-Ohio Holdings Corp. as of June 10, 1998. All
significant intercompany transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
NOTE B -- ACQUISITIONS AND DISPOSITION
During April 1998, the Company completed the acquisition of Direct
Fasteners Limited ("Direct") located in Ontario, Canada. The transaction was
accounted for as a purchase. Direct is a distributor of fasteners. The aggregate
purchase price and the results of operations of Direct prior to the date of
acquisition were not material to the Company.
During September 1998, the Company completed the sale of the assets of
Friendly and Safe Packaging Systems, Inc. to Kerr Group. The transaction had an
immaterial effect on the consolidated results of operation and financial
position of the Company.
During October 1998, the Company acquired all of the shares of GIS
Industries, Inc. ("Gateway"). The transaction has been accounted for as a
purchase. Gateway is a distributor of fasteners and a manufacturer of fabricated
metal products and fasteners. The aggregate purchase price and the results of
operations of Gateway prior to the date of acquisition were not material to the
Company.
During 1999, the Company acquired all of the shares of The Metalloy
Corporation ("Metalloy") and substantially all of the assets of St. Louis Screw
and Bolt ("St. Louis Screw") and PMC Industries, Inc. ("PMC") for cash. Metalloy
is a full service aluminum casting and machining company. St. Louis Screw is a
manufacturer of bolts and PMC provides capital equipment and associated parts
for the oil drilling industry. Each of these transactions has been accounted for
as a purchase. The purchase price and the results of operations of Metalloy and
the two other businesses prior to the date of acquisition were not material to
the Company.
NOTE C -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
In process and finished goods............................... $135,709
Raw materials and supplies.................................. 32,363
--------
$168,072
========
</TABLE>
F-6
<PAGE> 103
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE D -- CORPORATE REORGANIZATION
At the 1998 Annual Meeting of Shareholders of Park-Ohio Industries, Inc.
("Park-Ohio") held on May 28, 1998, the shareholders of Park-Ohio approved an
agreement of Merger ("Merger Agreement") dated February 20, 1998 by and among
Park-Ohio, PKOH Holding Corp. ("Holdings") and PKOH Merger Corp. ("Merger
Corp.") providing for a reorganization of Park-Ohio into a holding company form
of ownership with Holdings as its sole parent. On June 10, 1998, Holdings
amended and restated its articles of incorporation to increase its authorized
shares from 100 shares of common stock, $1.00 par value per share, to 40,000,000
shares of common stock and 632,470 shares of preferred stock, all $1.00 par
value per share, and changed its name from PKOH Holding Corp. to Park-Ohio
Holdings Corp. Effective as of the close of business on June 15, 1998, Merger
Corp. was merged with and into Park-Ohio upon the terms and conditions of the
Merger Agreement. At the effective time of the Merger, (i) all of the shares of
Park-Ohio's common stock issued and outstanding immediately prior to the Merger
were converted into an equal number of shares of Holdings' common stock (on a
share-for-share basis), (ii) all of the shares of Merger Corp.'s common stock
issued and outstanding immediately prior to the Merger were converted into 100
shares of Park-Ohio's common stock and (iii) all of the shares of Holdings'
common stock issued and outstanding immediately prior to the Merger were
canceled.
Prior to the Merger, there was no public market for Holdings' common stock,
and Park-Ohio's common stock was listed for trading on the NASDAQ National
Market under the symbol "PKOH". Upon the opening of the market after the
effective time of the Merger: (i) Holdings' common stock was registered under
Section 12 (g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and was listed for trading on the NASDAQ National Market under the symbol
"PKOH"; (ii) Park-Ohio common stock was simultaneously delisted from the NASDAQ
National Market and ceased to be registered under Section 12 (g) of the Exchange
Act; and (iii) Holdings assumed Park-Ohio's reporting obligations under the
Exchange Act.
NOTE E -- ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use". The SOP requires
companies to capitalize qualifying computer software costs incurred during the
application development stage. This statement is applied prospectively and is
effective for financial statements for fiscal years beginning after December 15,
1998. The Company adopted the SOP in the first quarter of 1999. The impact of
this new standard did not have a significant effect on the Company's financial
position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Accounting for the Costs of
Start-up Activities". The SOP requires that costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15, 1998. The Company adopted the SOP in the first quarter of 1999. The
impact of adoption of the SOP on the Company's financial position, results of
operations or cash flows was immaterial.
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998. Statement 133 requires derivatives to be
recorded on the balance sheet at fair value and establishes accounting for three
different types of hedges: hedges of changes in fair value of assets,
liabilities, or firm commitments; hedges of the variable cash flows of
forecasted transactions; and hedges of foreign currency exposures of net
investments in foreign operations. Statement 133 is effective for years
beginning after June 15, 1999 and is not expected to have a significant impact
on the Company's financial position or results of operations.
NOTE F -- SEGMENTS
During the first quarter of 1999 the Company, upon completion of the
acquisition of Metalloy, a full service aluminum casting and machining company,
redefined its operating segments. The Company retained its
F-7
<PAGE> 104
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Integrated Logistics ("ILS") segment and further segregated its former
Manufactured Products segment into an Aluminum Products segment and a
Manufactured Products segment. ILS is a leading national supplier of fasteners
(e.g. nuts, bolts and screws) and other industrial products to original
equipment manufacturers, other manufacturers and distributors. In connection
with the supply of such industrial products, ILS provides a variety of
value-added, cost-effective procurement solutions. Aluminum Products
manufactures cast aluminum critical components primarily for automotive original
equipment manufacturers. In addition, Aluminum Products also provides
value-added services such as design and engineering, machining and assembly.
Manufactured Products is a diverse group of manufacturing businesses that design
and manufacture a broad range of high quality products for specific customer
applications.
Results by Business Segment were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Net sales, including intersegment sales:
ILS....................................................... $ 91,794 $106,412
Aluminum products......................................... 9,904 31,619
Manufactured products..................................... 34,805 33,372
-------- --------
$136,503 $171,403
======== ========
Income before income taxes:
ILS....................................................... $ 7,920 $ 10,965
Aluminum products......................................... 633 2,971
Manufactured products..................................... 2,087 972
-------- --------
10,640 14,908
Amortization of excess purchase price over net assets
acquired.................................................... (381) (814)
Corporate costs........................................... (1,064) (1,079)
Interest expense.......................................... (4,152) (5,378)
-------- --------
$ 5,043 $ 7,637
======== ========
</TABLE>
Identifiable assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ---------
<S> <C> <C>
ILS....................................................... $288,713 $307,369
Aluminum products......................................... 40,063 96,118
Manufactured products..................................... 147,009 155,496
General corporate......................................... 13,769 6,298
-------- --------
$489,554 $565,281
======== ========
</TABLE>
F-8
<PAGE> 105
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholder
Park-Ohio Industries, Inc.
We have audited the accompanying consolidated balance sheets of Park-Ohio
Industries, Inc. and subsidiaries (a wholly-owned subsidiary of Park-Ohio
Holdings Corp.) as of December 31, 1997 and 1998, and the related consolidated
statements of income, shareholder's equity and cash flows for each of the three
years in the period ended December 31, 1998. 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 Park-Ohio
Industries, Inc. and subsidiaries at December 31, 1997 and 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
February 15, 1999
F-9
<PAGE> 106
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 1,814 $ 4,320
Accounts receivable, less allowances for doubtful accounts
of $2,060 in 1997 and $2,803 in 1998................... 86,787 95,718
Inventories............................................... 129,512 150,052
Deferred tax assets....................................... 3,240 2,232
Other current assets...................................... 5,075 5,468
-------- --------
Total Current Assets.............................. 226,428 257,790
Property, Plant and Equipment
Land and land improvements................................ 4,126 4,460
Buildings................................................. 24,782 25,912
Machinery and equipment................................... 103,956 130,253
-------- --------
132,864 160,625
Less accumulated depreciation............................. 59,795 70,468
-------- --------
73,069 90,157
Other Assets
Excess purchase price over net assets acquired, net of
accumulated amortization of $5,749 in 1997 and $8,105
in 1998................................................ 68,996 99,351
Deferred taxes............................................ 12,960 8,900
Other..................................................... 31,656 33,356
-------- --------
$413,109 $489,554
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Trade accounts payable.................................... $ 49,470 $ 46,755
Accrued expenses.......................................... 28,291 32,076
Current portion of long-term liabilities.................. 2,223 2,372
-------- --------
Total Current Liabilities......................... 79,984 81,203
Long-Term Liabilities, less current portion
Long-term debt............................................ 172,283 237,483
Other postretirement benefits............................. 27,537 26,286
Other..................................................... 4,295 3,740
-------- --------
204,115 267,509
Shareholder's Equity
Common stock; par value $1 a share........................ 10,960 -0-
Additional paid-in capital................................ 53,476 64,844
Retained earnings......................................... 67,486 77,580
Treasury stock, at cost................................... (2,087) -0-
Accumulated other comprehensive earnings (loss)........... (825) (1,582)
-------- --------
129,010 140,842
-------- --------
$413,109 $489,554
======== ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 107
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................. $347,679 $441,110 $551,793
Cost of products sold...................................... 289,400 368,734 455,167
-------- -------- --------
Gross profit............................................. 58,279 72,376 96,626
Selling, general and administrative expenses............... 38,131 44,396 56,318
Restructuring charge....................................... 2,652 -0- -0-
-------- -------- --------
Operating income......................................... 17,496 27,980 40,308
Other income............................................... (4,204) (320) -0-
Interest expense........................................... 6,947 9,101 17,488
-------- -------- --------
Income from continuing operations before income taxes.... 14,753 19,199 22,820
Income taxes............................................... 5,060 7,903 9,726
-------- -------- --------
Income from continuing operations before extraordinary
charge................................................ 9,693 11,296 13,094
Extraordinary charge for early retirement of debt, net of
tax benefit of $928...................................... -0- (1,513) -0-
Income from discontinued operations, net of tax............ 11,642 -0- -0-
-------- -------- --------
Net income................................................. $ 21,335 $ 9,783 $ 13,094
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 108
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED TREASURY EARNINGS
STOCK CAPITAL EARNINGS STOCK (LOSS) TOTAL
------- ---------- -------- -------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996............. $10,402 $49,184 $36,368 $ --0- $ (412) $ 95,542
Comprehensive income:
Net income........................... 21,335 21,335
Foreign currency translation
adjustment........................... (217) (217)
Comprehensive income................. 21,118
Exercise of stock options.............. 31 153 184
Purchase of treasury stock............. (1,775) (1,775)
------- ------- ------- ------- ------- --------
Balance at December 31, 1996........... 10,433 49,337 57,703 (1,775) (629) 115,069
Comprehensive income:
Net income........................... 9,783 9,783
Foreign currency translation
adjustment......................... (196) (196)
--------
Comprehensive income................... 9,587
Issuance of General Aluminum Mfg.
Company earn-out shares.............. 375 3,600 3,975
Exercise of stock options.............. 152 539 2,673 3,364
Purchase of treasury stock............. (2,985) (2,985)
------- ------- ------- ------- ------- --------
Balance at December 31, 1997........... 10,960 53,476 67,486 (2,087) (825) 129,010
Comprehensive income:
Net income............................. 13,094 13,094
Foreign currency translation
adjustment........................... (757) (757)
Comprehensive income................... 12,337
Issuance of General Aluminum Mfg.
Company earn-out shares.............. 188 2,306 2,494
Exercise of stock options.............. (18) 257 239
Purchase of treasury stock............. (238) (238)
Corporate reorganization............... (11,148) 9,080 2,068 -0-
Dividends paid......................... (3,000) (3,000)
------- ------- ------- ------- ------- --------
Balance at December 31, 1998........... $ -0- $64,844 $77,580 $ -0- $(1,582) $140,842
======= ======= ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE> 109
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income................................................ $21,335 $ 9,783 $13,094
Adjustments to reconcile net income to net cash provided
(used) by continuing operations:
Extraordinary charge................................. -0- 1,513 -0-
Discontinued operations.............................. (11,642) -0- -0-
Gain on sale of investments.......................... (1,552) (320) -0-
Depreciation and amortization........................ 7,998 10,365 12,753
Deferred income taxes................................ 4,310 5,686 6,659
------- --------- -------
20,449 27,027 32,506
Changes in operating assets and liabilities excluding
acquisitions of businesses:
Accounts receivable.................................. (3,643) (14,008) (2,312)
Inventories.......................................... (3,056) (21,021) (10,404)
Accounts payable and accrued expenses................ (1,214) 5,623 (7,465)
Other................................................ (6,850) (7,660) (8,193)
------- --------- -------
Net Cash Provided (Used) by
Continuing Operations............................. 5,686 (10,039) 4,132
Net Cash Provided by Discontinued Operations......... 2,040 -0- -0-
------- --------- -------
Net Cash Provided (Used) by
Operating Activities.............................. 7,726 (10,039) 4,132
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net........... (15,590) (15,947) (22,681)
Costs of acquisitions, net of cash acquired............... -0- (60,389) (40,175)
Purchase of investments................................... (5,427) (1,432) (101)
Proceeds from sales of investments........................ 6,315 551 -0-
Proceeds from sale of discontinued operations, net of
$4,500 of income taxes................................. 46,313 -0- -0-
------- --------- -------
Net Cash Provided (Used) by
Investing Activities................................. 31,611 (77,217) (62,957)
FINANCING ACTIVITIES
Proceeds from bank arrangements........................... 9,500 106,500 66,000
Payments on long-term debt................................ (45,249) (166,657) (1,670)
Issuance of 9.25% senior notes, net of deferred financing
costs.................................................. -0- 145,604 -0-
Cash paid to retire subordinated debentures............... -0- (1,245) -0-
Dividends paid............................................ -0- -0- (3,000)
Issuance of common stock under stock option plan.......... 184 3,194 239
Purchase of treasury stock................................ (1,775) (2,985) (238)
------- --------- -------
Net Cash Provided (Used) by
Financing Activities.............................. (37,340) 84,411 61,331
Increase (decrease) in Cash and Cash Equivalents..... 1,997 (2,845) 2,506
Cash and Cash Equivalents at Beginning of Year....... 2,662 4,659 1,814
------- --------- -------
Cash and Cash Equivalents at End of Year............. $ 4,659 $ 1,814 $ 4,320
======= ========= =======
Taxes paid................................................ $ 6,925 $ 1,215 $ 2,326
Interest paid............................................. 8,321 7,713 16,272
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE> 110
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: Park-Ohio Industries, Inc. is a wholly-owned subsidiary of
Park-Ohio Holdings Corp. The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. All significant
intercompany accounts and transactions have been eliminated upon consolidation.
Accounting Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (principally the
first-in, first-out method) or market value. If the first-in, first-out method
of inventory accounting had been used exclusively by the Company, inventories
would have been approximately $4,895 and $4,869 higher than reported at December
31, 1997 and 1998, respectively.
MAJOR CLASSES OF INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
---- ----
<S> <C> <C>
In-process and finished goods............................... $100,283 $124,783
Raw materials and supplies.................................. 29,229 25,269
-------- --------
$129,512 $150,052
======== ========
</TABLE>
Property, Plant and Equipment: Property, plant and equipment are carried at
cost. Major additions and associated interest costs are capitalized and
betterments are charged to accumulated depreciation; expenditures for repairs
and maintenance are charged to operations. Depreciation of fixed assets is
computed principally by the straight-line method based on the estimated useful
lives of the assets. Interest capitalized in 1996 and 1997 was immaterial. The
Company capitalized interest of $1.0 million in 1998.
Excess Purchase Price Over Net Assets Acquired: The Company records
amortization of excess purchase price over the fair value of net assets acquired
(see Note C) over periods from twenty-five to forty years using the
straight-line method. Management periodically evaluates for possible impairment
the current value of these intangibles through cash flow and income analyses of
the acquired businesses as required by Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which established accounting standards for determining the impairment of
long-lived assets to be held and used, certain identifiable intangibles, and
goodwill related to those assets and for long-lived assets and certain
identifiable intangibles to be disposed of.
Pensions and Other Postretirement Benefits: The Company and its
subsidiaries have pension plans, principally noncontributory defined benefit or
noncontributory defined contribution plans, covering substantially all
employees. The Company has two non-pension and postretirement benefit plans. For
the defined benefit plans, benefits are based on the employee's years of service
and the Company's policy is to fund that amount recommended by its independent
actuaries. For the defined contribution plans, the costs charged to operations
and the amount funded are based upon a percentage of the covered employees'
compensation.
F-14
<PAGE> 111
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Stock-Based Compensation: The Company has elected to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
Income Taxes: The Company accounts for income taxes under the liability
method whereby deferred tax assets and liabilities are determined based on
temporary differences between the financial reporting and the tax bases of
assets and liabilities and are measured using the current enacted tax rates.
Revenue Recognition: For the majority of its operations, the Company
recognizes revenues upon shipment of its product. Revenues on long-term
contracts are recognized using the percentage of completion method of
accounting, under which the sales value of performance is recognized on the
basis of the percentage each contract's cost to date bears to the total
estimated cost. The recognition of profit, based upon anticipated final costs,
is made only after evaluation of the contract status at critical milestones. The
Company's contracts generally provide for billing to customers at various points
prior to contract completion. Revenues earned on contracts in process in excess
of billings are classified in other current assets in the accompanying balance
sheet.
Environmental: The Company accrues environmental costs related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. Costs which extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized. The Company records a liability when environmental assessments
and/or remedial efforts are probable and can be reasonably estimated. The
estimated liability of the Company is not discounted or reduced for possible
recoveries from insurance carriers.
Concentration of Credit Risk: The Company sells its products to customers
in diversified industries. The Company performs ongoing credit evaluations of
its customers' financial condition but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends and other information. As of December 31, 1998 the Company had
uncollateralized receivables with six customers in the automotive and truck
industry each with several locations approximating $25,995 which represents 27%
of the Company's trade accounts receivable. During 1998, sales to these
customers amounted to approximately $135,241 which represents 25% of the
Company's net sales.
Impact of Recently Issued Accounting Standards: The Company adopted FASB
Statement No. 130 "Reporting Comprehensive Income", at the beginning of 1998.
Statement 130 establishes standards for the reporting and display of
comprehensive earnings and its components in financial statements; however, the
adoption of this statement had no impact on the Company's net earnings.
Statement 130 requires foreign currency translation adjustments, which prior to
adoption were immaterial and included in accrued expenses, to be included in
other comprehensive earnings. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
The FASB has issued two accounting pronouncements which the Company adopted
in the fourth quarter of 1998. FASB Statement No. 131 "Disclosures about
Segments of an Enterprise and Related Information" and FASB Statement No. 132
"Employers' Disclosures about Pensions and Other Post Retirement Benefits -- an
amendment of FASB Statements No. 87, 88 and 106" both expand or modify
disclosures and accordingly, have no impact on the Company's financial position,
results of operations or cash flows.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal
F-15
<PAGE> 112
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Use". The SOP requires companies to capitalize qualifying computer software
costs incurred during the application development stage. The statement will be
applied prospectively and is effective for financial statements for fiscal years
beginning after December 15, 1998. This new standard is not expected to have a
significant effect on the Company's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Accounting for the Costs of
Start-up Activities". The SOP requires that costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15, 1998. The Company expects to adopt the SOP in the first quarter of
1999. The impact of adoption of the SOP on the Company's financial position,
results of operations or cash flows is expected to be immaterial.
FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998. Statement 133 requires derivatives to be
recorded on the balance sheet at fair value and establishes accounting for three
different types of hedges: hedges of changes in fair value of assets,
liabilities, or firm commitments; hedges of the variable cash flows of
forecasted transactions; and hedges of foreign currency exposures of net
investments in foreign operations. Statement 133 is effective for years
beginning after June 15, 1999 and is not expected to have a significant impact
on the Company's financial position or results of operations.
Reclassification: Certain amounts in the prior period's financial
statements have been reclassified to be consistent with the current
presentation.
NOTE B -- CORPORATE REORGANIZATION
At the 1998 Annual Meeting of Shareholders of Park-Ohio Industries, Inc.
("Park-Ohio") held on May 28, 1998, the shareholders of Park-Ohio approved an
agreement of Merger ("Merger Agreement") dated February 20, 1998 by and among
Park-Ohio, PKOH Holdings Corp. ("Holdings") and PKOH Merger Corp. ("Merger
Corp.") providing for a reorganization of Park-Ohio into a holding company form
of ownership with Holdings as its sole parent. On June 10, 1998, Holdings
amended and restated its articles of incorporation to increase its authorized
shares from 100 shares of common stock, $1.00 par value per share, to 40,000,000
shares of common stock and 632,470 shares of preferred stock, all $1.00 par
value per share, and changed its name from PKOH Holding Corp. to Park-Ohio
Holdings Corp. Effective as of the close of business on June 15, 1998, Merger
Corp. was merged with and into Park-Ohio upon the terms and conditions of the
Merger Agreement. At the effective time of the Merger, (i) all of the shares of
Park-Ohio's common stock issued and outstanding immediately prior to the Merger
were converted into an equal number of shares of Holding's common stock (on a
share-for-share basis), (ii) all of the shares of Merger Corp.'s common stock
issued and outstanding immediately prior to the Merger were converted into 100
shares of Park-Ohio's common stock and (iii) all of the shares of Holdings'
common stock issued and outstanding immediately prior to the Merger were
canceled.
Prior to the Merger, there was no public market for Holdings' common stock,
and Park-Ohio's common stock was listed for trading on the NASDAQ National
Market under the symbol "PKOH". Upon the opening of the market after the
effective time of the Merger: (i) Holdings' common stock was registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and was listed for trading on the NASDAQ National Market under the symbol
"PKOH"; (ii) Park-Ohio common stock was simultaneously delisted from the NASDAQ
National Market and ceased to be registered under Section 12(g) of the Exchange
Act; and (iii) Holdings assumed Park-Ohio's reporting obligations under the
Exchange Act.
NOTE C -- ACQUISITIONS
The Company completed two acquisitions for cash of approximately $40.2
million in 1998. In April 1998, the Company acquired all of the shares of Direct
Fasteners Limited ("Direct") a distributor of fasteners located in
F-16
<PAGE> 113
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Ontario, Canada. In October 1998, the Company acquired all of the shares of GIS
Industries, Inc. ("Gateway"), a distributor of fasteners and other industrial
products and a manufacturer of metal products and fasteners. Both Direct and
Gateway are included in the Company's Integrated Logistics ("ILS") segment. Each
of the transactions were accounted for as a purchase. The aggregate purchase
price and the results of operations of both Direct and Gateway prior to the date
of acquisition were not material to the Company.
In January 1999, the Company acquired all of the shares of The Metalloy
Corporation ("Metalloy") for cash. Metalloy is a full service aluminum casting
and machining company and will be included in the Company's Manufactured
Products segment. The transaction will be accounted for as a purchase. The
purchase price and the results of operations of Metalloy prior to the date of
acquisition were not material to the Company.
On August 1, 1997, the Company acquired substantially all of the shares of
Arden Industrial Products, Inc. ("Arden") for cash of approximately $44 million.
The transaction has been accounted for as a purchase. Arden is a national
distributor of specialty and standard fasteners to the industrial market. Arden
is included in the Company's ILS segment.
The following is the estimated value of the net assets of Arden as of
August 1, 1997:
<TABLE>
<S> <C>
Cash........................................................ $ 2,711
Accounts receivable......................................... 11,503
Inventories................................................. 17,764
Property, plant and equipment............................... 4,468
Excess purchase price over net assets acquired.............. 19,599
Other assets................................................ 6,680
Trade accounts payable...................................... (6,437)
Accrued expenses............................................ (5,930)
Long-term liabilities....................................... (6,358)
-------
Total estimated cost of acquisition......................... $44,000
=======
</TABLE>
During the year ended December 31, 1997, the Company acquired four other
businesses for an aggregate purchase price of approximately $18.6 million. Each
of these transactions was accounted for as a purchase, resulting in excess
purchase price over net assets acquired of $8.6 million. The following unaudited
pro forma results of operations assume the acquisitions of Arden and the other
businesses discussed above occurred on January 1, 1996. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have resulted had
the acquisition occurred on the date indicated, or which may result in the
future.
<TABLE>
<CAPTION>
YEAR ENDED
--------------------
1996 1997
---- ----
<S> <C> <C>
Net sales................................................... $476,693 $508,724
Gross profit................................................ 98,190 93,547
Income from continuing operations........................... 8,777 12,454
</TABLE>
On October 15, 1993, the Company acquired General Aluminum Mfg. Company
(GAMCO), by issuing 250,000 shares of its common stock valued at $3,127 in
exchange for the outstanding shares of GAMCO. An additional 187,500 shares of
common stock valued at $1,931, were issued in March, 1995; an additional 375,000
shares of common stock valued at $3,975 were issued in January, 1997; an
additional 187,500 shares of common
F-17
<PAGE> 114
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
stock valued at $2,494, representing the final earn-out shares to be issued
under the GAMCO purchase agreement, were issued in 1998. The additional $8,400
represents purchase price in excess of net assets acquired.
NOTE D -- DISPOSITIONS
On July 31, 1996, the Company completed the sale of substantially all of
the assets of Bennett Industries, Inc. ("Bennett"), a wholly-owned subsidiary
which manufactures plastic containers, to North America Packaging Corporation, a
wholly-owned subsidiary of Southcorp Holdings Limited, an Australian company,
for $50.8 million in cash, resulting in a pre-tax gain of $13.8 million. The
results of operations and changes in cash flows for Bennett have been classified
as discontinued operations for all periods presented in the related consolidated
statements of income and consolidated statements of cash flows, respectively.
Interest expense has been allocated to discontinued operations based on the
ratio of net assets discontinued to the total net assets of the consolidated
entity plus consolidated debt.
Summary operating results of the discontinued operations, excluding the
above gain on sale, for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Sales....................................................... $49,448
Costs and expenses.......................................... 44,502
Income from discontinued operations before income taxes..... 4,946
Income taxes................................................ 1,820
-------
Net income from discontinued operations..................... $ 3,126
=======
</TABLE>
During September, 1998 the Company completed the sale of the assets of
Friendly and Safe Packaging Systems, Inc. to Kerr Group. The transaction had an
immaterial effect on the consolidated results of operations and financial
position of the Company.
NOTE E -- ACCRUED EXPENSES
Accrued expenses include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
---- ----
<S> <C> <C>
Self-insured liabilities.................................... $ 2,827 $ 2,911
Warranty and installation accruals.......................... 3,401 3,156
Accrued payroll and payroll-related items................... 4,820 2,586
State and local taxes....................................... 2,324 2,101
Advance billings............................................ 2,215 2,229
Acquisition liabilities..................................... 1,906 5,930
Interest payable............................................ 1,498 1,695
Sundry...................................................... 9,300 11,468
------- -------
Totals................................................. $28,291 $32,076
======= =======
</TABLE>
F-18
<PAGE> 115
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE F -- FINANCING ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
---- ----
<S> <C> <C>
9.25% Senior Subordinated Notes due 2007.................... $150,000 $150,000
Revolving credit maturing on April 30, 2001................. 20,000 86,000
Other....................................................... 2,755 2,105
-------- --------
172,755 238,105
Less current maturities..................................... 472 622
-------- --------
Total.................................................. $172,283 $237,483
======== ========
</TABLE>
During 1998 Park-Ohio entered a new credit agreement with a group of banks
under which it may borrow up to $150 million on an unsecured basis. Interest is
payable quarterly at the prime lending rate less 1% to .3% (6.75% at December
31, 1998) or at Park-Ohio's election at LIBOR plus .9% to 1.7% (which aggregated
6.5% at December 31, 1998). The interest rate is dependent on the aggregate
amounts borrowed under the agreement. The weighted average rate on borrowings
was 8.2% at December 31, 1998. The credit agreement expires on April 30, 2001.
Provisions of the Senior Subordinated Notes and the revolving credit
agreement contain restrictions on the Company's ability to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments,
investments, loans and guarantees and to sell or otherwise dispose of a
substantial portion of assets to or merge or consolidate with, an unaffiliated
entity. The revolving credit agreement also requires maintenance of specific
financial ratios.
On November 25, 1997, the Company sold $150 million of its 9.25% Senior
Subordinated Notes due 2007 at a price of 97.375% of face value. Interest on the
Senior Subordinated Notes is payable semi-annually on June 1 and December 1 of
each year beginning on June 1, 1998. The fair market value of fixed rate debt
securities at December 31, 1998 was approximately $152,625. The Company used the
net proceeds of the Senior Subordinated Notes along with borrowings under its
new credit facility to (i) redeem its 7 1/4% Convertible Senior Subordinated
Debentures due June 15, 2004 and (ii) to repay substantially all amounts of its
then existing credit facility. The early extinguishment of the 7 1/4%
Convertible Senior Subordinated Debentures and the then existing credit facility
resulted in an extraordinary charge of $1.5 million consisting of the following:
<TABLE>
<S> <C>
Discount on prepayment of 7 1/4% Convertible Senior
Subordinated Debentures................................... $1,245
Write-off related unamortized financing costs............... 1,196
Extraordinary charge before income tax benefit.............. 2,441
Income tax benefit.......................................... 928
------
Net extraordinary charge.................................... $1,513
======
</TABLE>
The Company has agreements on which up to $5 million in standby letters of
credit and commercial letters of credit may be issued. In addition to the bank's
customary letter of credit fees, a 3/4% fee is assessed on standby letters of
credit on an annual basis. As of December 31, 1998, in addition to amounts
borrowed under the revolving credit agreement, there is $2.8 million outstanding
primarily for standby letters of credit. A fee of 1/4% to 3/8% is imposed by the
bank on the unused portion of available borrowings.
F-19
<PAGE> 116
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Maturities of long-term debt during each of the five years following
December 31, 1998 are approximately $622 in 1999, $537 in 2000, $86,278 in 2001,
$427 in 2002 and $123 in 2003.
NOTE G -- INCOME TAXES
Significant components of the Company's net deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation........................... $10,200 $ 9,900
Inventory................................................... 6,500 6,800
Tax net operating loss carryforwards and credits............ 4,100 1,500
Other -- net................................................ 4,100 4,832
------- -------
Total deferred tax assets.............................. 24,900 23,032
Deferred tax liabilities:
Tax over book depreciation.................................. 5,200 6,900
Pension..................................................... 3,500 5,000
------- -------
Total deferred tax liabilities......................... 8,700 11,900
------- -------
Net deferred tax assets..................................... $16,200 $11,132
======= =======
</TABLE>
Income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $ (150) $ 775 $1,023
State.................................................. 500 733 1,037
Foreign................................................ 400 709 1,007
------ ------ ------
750 2,217 3,067
Deferred:
Federal................................................ 4,010 5,175 6,195
State.................................................. 300 511 464
------ ------ ------
4,310 5,686 6,659
------ ------ ------
Income taxes............................................. $5,060 $7,903 $9,726
====== ====== ======
</TABLE>
F-20
<PAGE> 117
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The reasons for the difference between income taxes and the amount computed
by applying the statutory Federal income tax rate to income from continuing
operations before income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed statutory amount................................ $5,000 $6,500 $7,700
Effect of state income taxes payable..................... 600 800 1,000
Other.................................................... (540) 603 1,026
------ ------ ------
Income taxes............................................. $5,060 $7,903 $9,726
====== ====== ======
</TABLE>
At December 31, 1998, subsidiaries of the Company have net operating loss
carryforwards for income tax purposes of approximately $1.1 million subject to
certain limitations, which expire in 2001 to 2007.
NOTE H -- LEGAL PROCEEDINGS
The Company is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of business.
While any litigation involves an element of uncertainty, in the opinion of
management, liabilities, if any, arising from currently pending or threatened
litigation will not have a material adverse effect on the Company's financial
condition, liquidity and results of operations.
F-21
<PAGE> 118
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE I -- PENSIONS AND OTHER POSTRETIREMENT BENEFITS
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------ --------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year........... $45,049 $45,473 $ 19,888 $ 21,673
Service cost...................................... 304 403 118 133
Amendments and other.............................. 158 116 -0- -0-
Interest cost..................................... 3,251 3,136 1,541 1,496
Plan participants' contributions.................. -0- -0- 118 118
Actuarial losses.................................. 995 731 2,207 497
Benefits paid..................................... (4,284) (4,158) (2,199) (2,199)
------- ------- -------- --------
Benefit obligation at end of year................. $45,473 $45,701 $ 21,673 $ 21,718
======= ======= ======== ========
CHANGE IN PLAN ASSETS
Fair Value of plan assets at beginning of year.... $63,139 $80,274 $ -0- $ -0-
Actual return on plan assets...................... 21,204 7,832 -0- -0-
Company contributions............................. 215 12 2,081 2,081
Plan participants' contributions.................. -0- -0- 118 118
Benefits paid..................................... (4,284) (4,158) (2,199) (2,199)
------- ------- -------- --------
Fair value of plan assets at end of year.......... $80,274 $83,960 $ -0- $ -0-
======= ======= ======== ========
Funded status of the plan (underfunded)........... $34,801 $38,259 $(21,673) $(21,718)
Unrecognized net transition obligation............ (279) (329) -0- -0-
Unrecognized net actuarial gain................... (21,654) (21,027) (6,812) (5,595)
Unrecognized prior service cost................... 1,429 1,395 (802) (723)
------- ------- -------- --------
Prepaid benefit cost.............................. $14,297 $18,298 $(29,287) $(28,036)
======= ======= ======== ========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate..................................... 7.25% 7.00% 7.25% 7.00%
Expected return on plan assets.................... 8.50% 8.50% N/A N/A
Rate of compensation increase (decrease).......... 2.50% 2.50% N/A N/A
</TABLE>
For measurement purposes, an 8.0% percent annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1999. The rate
was assumed to decrease gradually to 5.5% for 2004 and remain at that level
thereafter.
F-22
<PAGE> 119
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------- --------------------------
1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT
COST
Service costs...................... $ 296 $ 302 $ 403 $ 106 $ 118 $ 133
Interest costs..................... 3,294 3,252 3,136 1,457 1,541 1,496
Expected return on plan assets..... (4,879) (5,181) (6,642) -0- -0- -0-
Transition obligation.............. -0- 77 77 -0- -0- -0-
Amortization of prior service
cost............................. 156 170 181 (79) (79) (79)
Recognized net actuarial gain...... (26) (332) (1,225) (464) (407) (343)
------- ------- ------- ------ ------ ------
Benefit costs...................... $(1,159) $(1,712) $(4,070) $1,020 $1,173 $1,207
======= ======= ======= ====== ====== ======
</TABLE>
The Company has two non-pension postretirement benefit plans. Health care
benefits are provided on both a contributory and noncontributory basis. The life
insurance plan is primarily noncontributory.
The assumed health care cost trend rate has a significant effect on the
amounts reported. A one-percentage-point change in the assumed health care cost
trend rate would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT POINT
INCREASE DECREASE
------------ ------------
<S> <C> <C>
Effect on total of service and interest cost components in
1998...................................................... $ 124,000 $ 124,000
Effect on post retirement benefit obligation as of December
31, 1998.................................................. $1,373,000 $1,373,000
</TABLE>
The total contribution charged to pension expense for the Company's defined
contribution plans was $876 in 1998, $687 in 1997 and $796 in 1996.
NOTE J -- LEASES
Rental expense for 1996, 1997 and 1998 was $4,751, $6,696 and $7,056,
respectively. Future minimum lease commitments during each of the five years
following December 31, 1998 are as follows: $6,858 in 1999, $5,687 in 2000,
$4,824 in 2001, $3,594 in 2002 $2,322 in 2003 and $4,977 thereafter.
NOTE K -- INDUSTRY SEGMENTS
The Company conducts its business through two segments: Integrated
Logistics ("ILS") and Manufactured Products. ILS is a leading national supplier
of fasteners (e.g., nuts, bolts and screws) and other industrial products to
OEMs, other manufacturers and distributors. In connection with the supply of
such industrial products, ILS provides a variety of value-added, cost-effective
procurement solutions. The principal customers of ILS are in the transportation,
industrial, electrical, lawn and garden equipment industries. Manufactured
Products designs and manufactures a broad range of high quality products
engineered for specific customer applications. The principal customers of
Manufactured Products are OEMs and end-users in the automotive, railroad, truck
and aerospace industries.
The Company's sales are made through its own sales organization,
distributors and representatives. Intersegment sales from the manufactured
products segment to the ILS segment are immaterial and eliminated in
consolidation and are not included in the figures presented. Intersegment sales
are accounted for at values based on market prices. Income allocated to segments
excludes certain corporate expenses, interest expense and
F-23
<PAGE> 120
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
amortization of excess purchase price over net assets acquired. Identifiable
assets by industry segment include assets directly identified with those
operations.
Corporate assets generally consist of cash and cash equivalents, deferred
tax assets, and other assets.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net sales
ILS...................................................... $188,306 $266,292 $364,546
Manufactured products.................................... 159,373 174,818 187,247
-------- -------- --------
$347,679 $441,110 $551,793
======== ======== ========
Income from continuing operations before income taxes
ILS...................................................... $ 15,282 $ 23,310 $ 34,595
Manufactured products.................................... 10,257 10,763 12,004
-------- -------- --------
25,539 34,073 46,599
Amortization of excess purchase price over net assets
acquired................................................. (1,902) (2,211) (2,277)
Corporate costs.......................................... (1,937) (3,562) (4,014)
Interest expense......................................... (6,947) (9,101) (17,488)
-------- -------- --------
$ 14,753 $ 19,199 $ 22,820
======== ======== ========
Identifiable assets
ILS...................................................... $134,107 $252,763 $288,713
Manufactured products.................................... 136,701 140,278 187,095
General corporate........................................ 12,102 20,068 13,746
-------- -------- --------
$282,910 $413,109 $489,554
======== ======== ========
Depreciation and amortization expense
ILS...................................................... $ 2,623 $ 4,352 $ 6,124
Manufactured products.................................... 5,375 6,013 6,629
-------- -------- --------
$ 7,998 $ 10,365 $ 12,753
======== ======== ========
Capital expenditures
ILS...................................................... $ 5,261 $ 3,938 $ 4,274
Manufactured products.................................... 9,163 11,870 18,316
General corporate........................................ 1,166 139 91
-------- -------- --------
$ 15,590 $ 15,947 $ 22,681
======== ======== ========
</TABLE>
The Company had sales of $33,728 in 1996 to Ford Motor Company which
represented 10% of consolidated net sales.
Approximately 89% of the Company's net sales are within the United States.
None of the net sales to any foreign country represented more than 6% of the
Company's total sales. Approximately 96% of the Company's assets are maintained
in the United States.
F-24
<PAGE> 121
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE L -- RESTRUCTURING CHARGES AND OTHER INCOME
During the fourth quarter of 1996, the Company reorganized certain
manufacturing operations which resulted in the realignment of two manufacturing
facilities and the discontinuance of certain products lines. As a result of
these actions, the Company recorded a charge of $2,700 primarily for the
writedown of property and equipment and inventory to estimated net realizable
value.
In December 1996, the Company negotiated full settlement of subordinated
notes receivable, resulting from the sale of two manufacturing facilities, which
were fully reserved at the date of sale. The net proceeds received of $2,700
were recorded in income in the fourth quarter. In the third quarter of 1996, the
Company sold certain securities purchased during 1996 for $6,315 which resulted
in a gain of $1,500.
F-25
<PAGE> 122
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
[PARKOHIO LOGO]
PARK-OHIO INDUSTRIES, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT WERE ORIGINALLY ISSUED ON JUNE 2, 1999 OR NOVEMBER 25, 1997
FOR NEW 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
-------------------
PROSPECTUS
-------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 123
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 34 of the Company's Code of Regulations provides that the Company
will indemnify any director or officer or former director or officer of the
Company or any person who is or has served at the request of the Company as a
director, officer or trustee of another corporation, joint venture, trust or
other enterprise, as well as such person's heirs, executors and administrators,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him by reason of the fact
that he is or was a director or officer or trustee in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent and according to
the procedures and requirements set forth in the Ohio General Corporation Law as
may be in effect. Section 34 of the Company's Code of Regulations further
provides that the indemnification provided for therein will not restrict the
rights of the Company to indemnify employees, agents and others as permitted by
the Ohio General Corporation Law.
Section 1701.13(E) of the Ohio General Corporation Law provides in regard
to indemnification of directors and officers as follows:
Section 1701.13. Authority of Corporation.
(E)(1) A corporation may indemnify or agree to indemnify any person who was
or is a party, or is threatened to be made a party, to any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, member, manager, or
agent of another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or other
enterprise, against expenses, including attorney's fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or 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 he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending, or completed action or suit by or in the right of the corporation
to procure a judgment in its favor, by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged to
be liable for negligence or misconduct in the performance of his duty to
the corporation unless, and only to the extent that, the court of common
pleas or the court in which such action or suit was brought determines,
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 as the court of common pleas or
such other court shall deem proper;
(b) Any action or suit in which the only liability asserted against a
director is pursuant to section 1701.95 of the Revised Code.
II-1
<PAGE> 124
(3) To the extent that a director, trustee, officer, employee, member,
manager, or agent has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to in division (E)(1) or (2) of
this section, or in defense of any claim, issue, or matter therein, he
shall be indemnified against expenses, including attorney's fees, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding.
(4) Any indemnification under division (E)(1) or (2) of this section,
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, trustee, officer, employee, member, manager, or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in division (E)(1) of this section. Such determination
shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or threatened
with the action, suit, or proceeding referred to in division (E)(1) or (2)
of this section;
(b) If the quorum described in division (E)(4)(a) of this section is
not obtainable or if a majority vote of a quorum of disinterested directors
so directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation or any person
to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which the action,
suit, or proceeding referred to in division (E)(1) or (2) of this section
was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or
brought the action or suit by or in the right of the corporation under
division (E)(2) of this section, and, within ten days after receipt of such
notification, such person shall have the right to petition the court of
common pleas or the court in which such action or suit was brought to
review the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit, or proceeding referred to in division (E)(1) or
(2) of this section, the articles or the regulations of a corporation
state, by specific reference to this division, that the provisions of this
division do not apply to the corporation and unless the only liability
asserted against a director in an action, suit, or proceeding referred to
in division (E)(1) or (2) of this section is pursuant to section 1701.95 of
the Revised Code, expenses, including attorney's fees, incurred by a
director in defending the action, suit, or proceeding shall be paid by the
corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding, upon receipt of an undertaking by or on
behalf of the director in which he agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure
to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregard
for the best interest of the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorney's fees, incurred by a director,
trustee, officer, employee, member, manager, or agent in defending any
action, suit, or proceeding referred to in division (E)(1) or (2) of this
section, may be paid by the corporation as they are incurred, in advance of
the final disposition of the action, suit, or proceeding, as authorized by
the directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, trustee, officer, employee, member, manager, or
agent to repay such amount, if it ultimately is determined that he is not
entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be
exclusive of, and shall be in addition to, any other rights granted to
those seeking indemnification under the articles, the regulations, any
agreement, a
II-2
<PAGE> 125
vote of shareholders or disinterested directors, or otherwise, both as to
action in their official capacities and as to action in another capacity
while holding their offices or positions, and shall continue as to a person
who has ceased to be a director, trustee, officer, employee, member,
manager, or agent and shall inure to the benefit of the heirs, executors,
and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish
similar protection, including, but not limited to, trust funds, letters of
credit, or self-insurance, on behalf of or for any person who is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under this section.
Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
division (E)(1) or (2) of this section does not limit the payment of
expenses as they are incurred, indemnification, insurance, or other
protection that may be provided pursuant to divisions (E)(5), (6), and (7)
of this section. Divisions (E)(1) and (2) of this section do not create any
obligation to repay or return payments made by the corporation pursuant to
division (E)(5), (6), or (7).
(9) As used in division (E) of this section, "corporation" includes
all constituent entities in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director,
officer, employee, trustee, member, manager, or agent of such a constituent
entity, or is or was serving at the request of such constituent entity as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited
liability company, or a partnership, joint venture, trust, or other
enterprise, shall stand in the same position under this section with
respect to the new or surviving corporation as he would if he had served
the new or surviving corporation in the same capacity.
The Company has entered into indemnity agreements ("Indemnity Agreement")
with each of its directors and certain officers (each, an "Indemnitee").
Pursuant to the Indemnity Agreement, the Company shall indemnify the Indemnitee
with respect to his activities as a director or officer of the Company and/or as
a person who is serving or has served on behalf of the Company
("representative") as a director, officer, or trustee of another corporation,
joint venture, trust or other enterprise, domestic or foreign, in which the
Company has a direct or indirect ownership interest (an "affiliated entity")
against expenses (including, without limitation, attorneys' fees, judgments,
fines, and amounts paid in settlement) actually and reasonably incurred by him
("Expenses") in connection with any claim against Indemnitee which is the
subject of any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, investigative or otherwise and whether
formal or informal (a "Proceeding"), to which Indemnitee was, is, or is
threatened to be made a party by reason of facts which include Indemnitee's
being or having been such a director, officer or representative, to the extent
of the highest and most advantageous to the Indemnitee, as determined by the
Indemnitee, of one or any combination of the following:
(a) The benefits provided by the Company's Regulations in effect on
the date hereof, a copy of the relevant portions of which are attached
hereto as Exhibit I;
(b) The benefits provided by the Articles of Incorporation,
Regulations, or By-laws or their equivalent of the Company in effect at the
time Expenses are incurred by Indemnitee;
(c) The benefits allowable under Ohio law in effect at the date
hereof;
(d) The benefits allowable under the law of the jurisdiction under
which the Company exists at the time Expenses are incurred by the
Indemnitee;
(e) The benefits available under liability insurance obtained by the
Company;
II-3
<PAGE> 126
(f) The benefits which would have been available to the Indemnitee
under his Executive Liability Insurance Policy; and
(g) Such other benefits as are or may be otherwise available to
Indemnitee.
The Indemnity Agreements provide for the advancement of Expenses to the
Indemnitee if the Indemnitee provides the Company with a written undertaking
that (i) the Indemnitee has notified the Company of any Proceeding; (ii) the
Indemnitee believes he should prevail in the Proceeding and (iii) that the
Indemnitee will reimburse the Company for all expenses if it is determined that
the Indemnitee is not entitled to indemnification.
The Company also maintains directors' and officers' liability insurance,
pursuant to which the directors and officers of the Company are insured against
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Park-Ohio
Industries, Inc. (filed as Exhibit 3.1 to the Form 10-K of
Park-Ohio Industries, Inc. for the year ended December 31,
1998, SEC File No. 000-03134 and incorporated by reference
and made a part hereof).
3.2 Code of Regulations of Park-Ohio Industries, Inc. (filed as
Exhibit 3.2 to the Form 10-K of Park-Ohio Industries, Inc.
for the year ended December 31, 1998, SEC File No. 000-03134
and incorporated by reference and made a part hereof).
4.1 Indenture, dated November 25, 1997 by and among Park-Ohio
Industries, Inc. and Norwest Bank Minnesota, N.A., as
trustee (filed as Exhibit 4.1 of the Company's Registration
Statement on Form S-4, filed December 23, 1997, SEC File No.
333-43005 and incorporated by reference and made a part
hereof).
4.2* Indenture, dated June 3, 1999 by and among Park-Ohio
Industries, Inc. and Norwest Bank Minnesota, N.A., as
trustee.
4.3 Amended and Restated Credit Agreement among Park-Ohio
Industries, Inc., and various financial institutions, dated
April 11, 1995 (filed as Exhibit 4 to the Form 10-Q of
Park-Ohio Holdings Corp. for the period ended September 30,
1998, SEC File No. 000-03134 and incorporated by reference
and made a part hereof).
4.10* Registration Rights Agreement, dated June 3, 1999 by and
among the Company and CIBC World Markets Corp., ING Baring
Furman Selz LLC and Value Investing Partners.
5.1* Opinion of Jones, Day, Reavis & Pogue as to the validity of
the securities offered.
10.1 Form of Indemnification Agreement entered into between
Park-Ohio Industries, Inc. and each of its directors and
executive officers, filed as Exhibit 10.1 to the Form 10-K
of Park-Ohio Industries, Inc. for the year ended December
31, 1998.
12.1* Computation of Ratios.
21.1* List of Subsidiaries of Park-Ohio Industries, Inc.
23.1* Consent of Ernst & Young, LLP.
23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1).
24.1* Power of Attorney.
25.1* Statement of Eligibility of Trustee, Norwest Bank Minnesota,
National Association on Form T-1.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
</TABLE>
II-4
<PAGE> 127
- ---------------
* Filed herewith.
(b) Financial Statement Schedules.
None.
All other financial statement schedules are omitted because they are either
not applicable or the required information is included in the financial
statements or notes thereto appearing elsewhere in this Registration Statement.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Park-Ohio, pursuant to the forgoing provisions or otherwise, Park-Ohio has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Park-Ohio of expenses incurred or
paid by a director, officer or controlling person of Park-Ohio 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,
Park-Ohio will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as a
part of this registration statement in reliance upon Rule 430A and
contained in form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
II-5
<PAGE> 128
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes:
(i) 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.
(ii) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-6
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on July 16, 1999.
PARK-OHIO INDUSTRIES, INC.
By: /s/ RONALD J. COZEAN
------------------------------------
Ronald J. Cozean
General Counsel and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, President, Chief Executive July 16, 1999
- ------------------------------------ Officer (Principal Executive
Edward F. Crawford Officer)
* Vice President and Chief Financial July 16, 1999
- ------------------------------------ Officer (Principal Financial and
James S. Walker Accounting Officer)
* Director July 16, 1999
- ------------------------------------
Lewis E. Hatch, Jr.
* Director July 16, 1999
- ------------------------------------
Thomas E. McGinty
* Director July 16, 1999
- ------------------------------------
Lawrence O. Selhorst
* Director July 16, 1999
- ------------------------------------
James W. Wert
* Director July 16, 1999
- ------------------------------------
Matthew V. Crawford
* Director July 16, 1999
- ------------------------------------
Kevin Greene
</TABLE>
- ---------------
* The undersigned, pursuant to a Power of Attorney executed by each of the
Directors and officers identified above and filed with the Securities and
Exchange Commission, by signing his name hereto, does hereby sign and execute
this Registration Statement on behalf of each of the persons noted above, in
the capacities indicated.
<TABLE>
<S> <C>
July 16, 1999 By /s/ RONALD J. COZEAN
-------------------------------------------
Ronald J. Cozean, Attorney-in-Fact
</TABLE>
II-7
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Park-Ohio
Industries, Inc. (filed as Exhibit 3.1 to the Form 10-K of
Park-Ohio Industries, Inc. for the year ended December 31,
1998, SEC File No. 000-03134 and incorporated by reference
and made a part hereof).
3.2 Code of Regulations of Park-Ohio Industries, Inc. (filed as
Exhibit 3.2 to the Form 10-K of Park-Ohio Industries, Inc.
for the year ended December 31, 1998, SEC File No. 00003134
and incorporated by reference and made a part hereof).
4.1 Indenture, dated November 25, 1997 by and among Park-Ohio
Industries, Inc. and Norwest Bank Minnesota, N.A., as
trustee (filed as Exhibit 4.1 of the Company's Registration
Statement on Form S-4, filed December 23, 1997, SEC File No.
333-43005 and incorporated by reference and made a part
hereof).
4.2* Indenture, dated June 3, 1999 by and among Park-Ohio
Industries, Inc. and Norwest Bank Minnesota, N.A., as
trustee.
4.3 Amended and Restated Credit Agreement among Park-Ohio
Industries, Inc., and various financial institutions, dated
April 11, 1995 (filed as Exhibit 4 to the Form 10-Q of
Park-Ohio Holdings Corp. for the period ended September 30,
1998, SEC File No. 000-03134 and incorporated by reference
and made a part hereof).
4.10* Registration Rights Agreement, dated June 3, 1999 by and
among the Company and CIBC World Markets Corp., ING Baring
Furman Selz LLC and Value Investing Partners.
5.1* Opinion of Jones, Day, Reavis & Pogue as to the validity of
the securities offered.
10.1 Form of Indemnification Agreement entered into between
Park-Ohio Industries, Inc. and each of its directors and
executive officers, filed as Exhibit 10.1 to the Form 10-K
of Park-Ohio Industries, Inc. for the year ended December
31, 1998.
12.1* Computation of Ratios.
21.1* List of Subsidiaries of Park-Ohio Industries, Inc.
23.1* Consent of Ernst & Young, LLP.
23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1).
24.1* Power of Attorney.
25.1* Statement of Eligibility of Trustee, Norwest Bank Minnesota,
National Association on Form T-1.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
</TABLE>
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* Filed herewith.
II-8
<PAGE> 1
Exhibit 4.2
-----------
================================================================================
PARK-OHIO INDUSTRIES, INC., as Issuer,
and
NORWEST BANK MINNESOTA, National Association, as Trustee
--------------------
INDENTURE
Dated as of June 2, 1999
--------------------
$50,000,000
9 1/4% Senior Subordinated Notes due 2007, Series C
$150,000,000
9 1/4% Senior Subordinated Notes due 2007, Series D
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1)...............................................................7.10
(a)(2)...............................................................7.10
(a)(3)...............................................................N.A.
(a)(4)...............................................................N.A.
(b)..................................................................7.08; 7.10; 11.02
(b)(1)...............................................................7.10
(b)(9)...............................................................7.10
(c)..................................................................N.A.
311(a)..................................................................7.11
(b)..................................................................7.11
(c)..................................................................N.A.
312(a)..................................................................2.05
(b)..................................................................11.03
(c)..................................................................11.03
313(a)..................................................................7.06
(b)(1)...............................................................7.06
(b)(2)...............................................................7.06
(c)..................................................................11.02; 7.06
(d)..................................................................7.06
314(a)..................................................................4.02; 4.04; 11.02
(b)..................................................................N.A.
(c)(1)...............................................................11.04; 11.05
(c)(2)...............................................................11.04; 11.05
(c)(3)...............................................................N.A.
(d)..................................................................N.A.
(e)..................................................................11.05
(f)..................................................................N.A.
315(a)..................................................................7.01; 7.02
(b)..................................................................7.05; 11.02
(c)..................................................................7.01
(d)..................................................................6.05; 7.01;7.02
(e)..................................................................6.11
316(a) (last sentence)..................................................11.06
(a)(1)(A)............................................................6.05
(a)(1)(B)............................................................6.04
(a)(2)...............................................................8.02
(b)..................................................................6.07
(c)..................................................................8.04
317(a)(1)...............................................................6.08
(a)(2)...............................................................6.09
(b)..................................................................7.12
318(a)..................................................................11.01
</TABLE>
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
Section 1.01. Definitions......................................................................1
Section 1.02. Other Definitions...............................................................24
Section 1.03. Incorporation by Reference of Trust Indenture Act...............................24
Section 1.04. Rules of Construction...........................................................25
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture......................................26
Section 2.02. Execution and Authentication....................................................26
Section 2.03. Registrar and Paying Agent......................................................27
Section 2.04. Paying Agent to Hold Money in Trust.............................................28
Section 2.05. Noteholder Lists................................................................28
Section 2.06. Transfer and Exchange...........................................................28
Section 2.07. Replacement Notes...............................................................29
Section 2.08. Outstanding Notes...............................................................30
Section 2.09. Temporary Notes.................................................................30
Section 2.10. Cancellation....................................................................30
Section 2.11. Defaulted Interest..............................................................31
Section 2.12. Deposit of Moneys...............................................................31
Section 2.13. CUSIP Number....................................................................31
Section 2.14. Book-Entry Provisions for Global Notes..........................................32
Section 2.15. Special Transfer Provisions.....................................................34
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee..............................................................37
Section 3.02. Selection by Trustee of Notes to Be Redeemed....................................37
</TABLE>
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Note: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-i-
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<TABLE>
<S> <C>
Section 3.03. Notice of Redemption............................................................37
Section 3.04. Effect of Notice of Redemption..................................................38
Section 3.05. Deposit of Redemption Price.....................................................39
Section 3.06. Notes Redeemed in Part..........................................................39
Section 3.07. Optional Redemption.............................................................39
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes................................................................40
Section 4.02. SEC Reports.....................................................................40
Section 4.03. Waiver of Stay, Extension or Usury Laws.........................................41
Section 4.04. Compliance Certificate..........................................................42
Section 4.05. Taxes...........................................................................43
Section 4.06. Limitation on Additional Indebtedness...........................................43
Section 4.07. Limitation on Preferred Stock of Subsidiaries...................................43
Section 4.08. Limitation on Capital Stock of Subsidiaries.....................................44
Section 4.09. Limitation on Restricted Payments...............................................44
Section 4.10. Limitation on Certain Asset Sales...............................................46
Section 4.11. Limitation on Transactions with Affiliates......................................48
Section 4.12. Limitations on Liens............................................................49
Section 4.13. Limitation on Other Senior Subordinated Indebtedness............................49
Section 4.14. Limitation on Sale and Lease-Back Transactions..................................49
Section 4.15. Payments for Consent............................................................50
Section 4.16. Corporate Existence.............................................................50
Section 4.17. Change of Control...............................................................50
Section 4.18. Maintenance of Office or Agency.................................................53
Section 4.19. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.......................................................54
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets..........................55
Section 5.02. Successor Person Substituted....................................................56
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...............................................................56
Section 6.02. Acceleration....................................................................59
Section 6.03. Other Remedies..................................................................60
Section 6.04. Waiver of Past Defaults and Events of Default...................................61
Section 6.05. Control by Majority.............................................................61
Section 6.06. Limitation on Suits.............................................................61
Section 6.07. Rights of Holders to Receive Payment............................................62
Section 6.08. Collection Suit by Trustee......................................................62
Section 6.09. Trustee May File Proofs of Claim................................................62
Section 6.10. Priorities......................................................................63
Section 6.11. Undertaking for Costs...........................................................64
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee...............................................................64
Section 7.02. Rights of Trustee...............................................................65
Section 7.03. Individual Rights of Trustee....................................................66
Section 7.04. Trustee's Disclaimer............................................................66
Section 7.05. Notice of Defaults..............................................................66
Section 7.06. Reports by Trustee to Holders...................................................67
Section 7.07. Compensation and Indemnity......................................................67
Section 7.08. Replacement of Trustee..........................................................68
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion........................69
Section 7.10. Eligibility; Disqualification...................................................70
Section 7.11. Preferential Collection of Claims Against Company...............................70
Section 7.12. Paying Agents...................................................................70
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders......................................................71
Section 8.02. With Consent of Holders.........................................................71
Section 8.03. Compliance with Trust Indenture Act.............................................73
Section 8.04. Revocation and Effect of Consents...............................................73
Section 8.05. Notation on or Exchange of Notes................................................74
Section 8.06. Trustee to Sign Amendments, etc.................................................74
</TABLE>
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ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture..........................................................74
Section 9.02. Legal Defeasance................................................................75
Section 9.03. Covenant Defeasance.............................................................75
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance...........................76
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.....................................78
Section 9.06. Reinstatement...................................................................79
Section 9.07. Moneys Held by Paying Agent.....................................................79
Section 9.08. Moneys Held by Trustee..........................................................79
ARTICLE 10
SUBORDINATION OF NOTES
Section 10.01. Notes Subordinate to Senior Indebtedness........................................80
Section 10.02. Payment Over of Proceeds upon Dissolution, etc..................................81
Section 10.03. Suspension of Payment When Senior Indebtedness in Default.......................82
Section 10.04. Trustee's Relation to Senior Indebtedness.......................................84
Section 10.05. Subrogation to Rights of Holders of Senior Indebtedness.........................85
Section 10.06. Provisions Solely to Define Relative Rights.....................................85
Section 10.07. Trustee to Effectuate Subordination.............................................86
Section 10.08. No Waiver of Subordination Provisions...........................................86
Section 10.09. Notice to Trustee...............................................................87
Section 10.10. Reliance on Judicial Order or Certificate of Liquidating
Agent........................................................................88
Section 10.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.............................................89
Section 10.12. Article Applicable to Paying Agents.............................................89
Section 10.13. No Suspension of Remedies.......................................................89
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ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls....................................................90
Section 11.02. Notices.........................................................................90
Section 11.03. Communications by Holders with Other Holders....................................91
Section 11.04. Certificate and Opinion as to Conditions Precedent..............................91
Section 11.05. Statements Required in Certificate and Opinion..................................92
Section 11.06. When Treasury Notes Disregarded.................................................92
Section 11.07. Rules by Trustee and Agents.....................................................92
Section 11.08. Business Days; Legal Holidays...................................................93
Section 11.09. Governing Law...................................................................93
Section 11.10. No Adverse Interpretation of Other Agreements...................................93
Section 11.11. No Recourse Against Others......................................................93
Section 11.12. Successors......................................................................93
Section 11.13. Multiple Counterparts...........................................................94
Section 11.14. Table of Contents, Headings, etc................................................94
Section 11.15. Separability....................................................................94
EXHIBITS
- --------
Exhibit A Form of Initial Note.................................................................A-1
Exhibit B Form of Legend for Global Notes......................................................B-1
Exhibit C Form of Assignment...................................................................C-1
Exhibit D Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Accredited Investors......................................................D-1
Exhibit E Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S..........................................................E-1
</TABLE>
-v-
<PAGE> 8
INDENTURE, dated as of June 2, 1999, between PARK-OHIO
INDUSTRIES, INC., an Ohio corporation, as Issuer (the "Company"), and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as Trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the holders of the Company's 9
1/4% Senior Subordinated Notes due 2007, Series C (the "Initial Notes") and the
Company's 9 1/4% Senior Subordinated Notes due 2007, Series D to be issued in
exchange for the Initial Notes and Series A/B Notes (as defined herein) pursuant
to the Registration Rights Agreement (as defined herein):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or is merged into or
consolidated with any other Person or which is assumed in connection with the
acquisition of assets from such Person and, in each case, not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Subsidiary or such merger, consolidation or acquisition.
"Additional Interest" means additional interest on the Notes
which the Company agrees to pay to the holders pursuant to Section 4 of the
Registration Rights Agreement.
"Additional Series D Notes" means any Exchange Notes issued in
exchange for Series A/B Notes pursuant to the Registration Rights Agreement.
"Affiliate" means, with respect to any specific Person, any
other Person that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. For the 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, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies
<PAGE> 9
-2-
of such Person, whether through the ownership of voting securities, by agreement
or otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Subsidiary of the Company or (b)
the acquisition by the Company or any Subsidiary of the Company of the assets of
any Person (other than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, assignment, transfer, lease or other disposition (including any Sale
and Lease-Back Transaction), other than to the Company or any of its Wholly
Owned Subsidiaries, in any single transaction or series of related transactions
of (a) any Capital Stock of or other equity interest in any Subsidiary of the
Company or (b) any other property or assets of the Company or of any Subsidiary
thereof; provided that Asset Sales shall not include (i) a transaction or series
of related transactions for which the Company or its Subsidiaries receive
aggregate consideration of less than $2 million; (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Section 5.01; (iii) a disposition of
inventory in the ordinary course of business; or (iv) an exchange of property
for other similar property structured on a tax-free, like-kind basis; or (v) the
issuance of shares of a wholly owned Subsidiary of the Company solely to the
shareholders of the Company in a transaction pursuant to which the Company
becomes a wholly owned direct or indirect subsidiary of such Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale:
(i) cash received by the Company or any Subsidiary of the Company from such
Asset Sale (including cash received as consideration for the assumption of
liabilities incurred in connection with or in anticipation of such Asset Sale),
after (a) provision for all income or other taxes measured by or resulting from
such Asset Sale; (b) payment of all brokerage commissions, underwriting and
other fees and expenses related to
<PAGE> 10
-3-
such Asset Sale; (c) provision for minority interest holders in any Subsidiary
as a result of such Asset Sale; (d) repayment of Indebtedness that is required
to be repaid in connection with such Asset Sale; and (e) deduction of
appropriate amounts to be provided by the Company or a Subsidiary of the Company
as a reserve, in accordance with GAAP, against any liabilities associated with
the assets sold or disposed of in such Asset Sale and retained by the Company or
a Subsidiary after such Asset Sale, including, without limitation, pension and
other postemployment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale; and (ii) promissory notes and
other noncash consideration received by the Company or any Subsidiary of the
Company from such Asset Sale or other disposition upon the liquidation or
conversion of such notes or noncash consideration into cash.
"Attributable Indebtedness" in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the Property subject to such arrangement; and (ii) the
present value (discounted at the rate of 10%, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any
Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not
been applied in accordance with clause (iii)(a) or (iii)(b) of Section 4.10(a)
and which have not yet been the basis for a Series A/B Asset Sale Offer or an
Excess Proceeds Offer in accordance with clause (iii)(c) of such Section
4.10(a).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
"Board of Directors" means the board of directors of the
Company or any committee authorized to act therefor.
"Board Resolution" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect, and delivered to
the Trustee.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated and
whether or not voting) of corpo-
<PAGE> 11
-4-
rate stock, partnership interests or any other participation, right or other
interest in the nature of an equity interest in such Person including, without
limitation, Common Stock and Preferred Stock of such Person, or any option,
warrant or other security convertible into any of the foregoing.
"Capitalized Lease Obligations" means with respect to any
Person, Indebtedness represented by obligations under a lease that is required
to be capitalized for financial reporting purposes in accordance with GAAP, and
the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; and (v)
shares of any mutual funds or other pooled investment vehicles, in each case
having assets of $500,000,000, investing solely in investments of the types
described in (i) through (iv) above.
"Change of Control" of the Company will be deemed to have
occurred at such time as (i) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner (as
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of 50% or more of the total voting or economic power of the
Company's Common Stock; (ii) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner of more
than 33 1/3% of
<PAGE> 12
-5-
the total voting power of the Company's Common Stock, and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Common Stock of the Company than such other Person and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Company;
(iii) there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which the Common Stock of the Company would be converted into cash, securities
or other property, other than (x) a merger or consolidation of the Company in
which the holders of the Common Stock of the Company outstanding immediately
prior to the consolidation or merger hold, directly or indirectly, at least a
majority of the Common Stock of the surviving corporation immediately after such
consolidation or merger or (y) a merger of the Company with an Affiliate of the
Company (or a shell corporation with no shareholders formed solely for the
purpose of creating a holding company) for the sole purpose of creating a
holding company whose sole asset, directly or indirectly, will be all of the
outstanding capital stock of the Company; or (iv) during any period of two
consecutive 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 such Board of Directors or whose nomination for election by the
shareholders of the Company has been approved by 66 2/3% of the directors then
still in office who either were directors at the beginning of such period or
whose election or recommendation for election was previously so approved) cease
to constitute a majority of the Board of Directors of the Company.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor and any other obligor on the
Notes.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of EBITDA of such Person during the four full fiscal
quarters (the "Four Quarter Period") ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ra-
<PAGE> 13
-6-
tio (the "Transaction Date") to Consolidated Fixed Charges of such Person for
the Four Quarter Period. In addition to and without limitation of the foregoing,
for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to (i) the incurrence (and the application of the
proceeds thereof) or repayment of any Indebtedness of such Person or any of its
Subsidiaries giving rise to the need to make such calculation and any incurrence
(and the application of the proceeds thereof) or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence (and the application of the proceeds
thereof) or repayment, as the case may be, occurred on the first day of the Four
Quarter Period; and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any EBITDA (provided that such EBITDA shall be included only to the extent
includable pursuant to the definition of "Consolidated Net Income") attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period. If such Person or any of
its Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an in-
<PAGE> 14
-7-
terest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four Quarter
Period; and (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by one
or more Interest Rate Agreements, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any
Person, for any period, the sum, without duplication, of (i) Consolidated
Interest Expense, plus (ii) the product of (x) the amount of all dividend
payments on any series of Preferred Stock of such Person (other than dividends
paid in Capital Stock (other the Disqualified Capital Stock)) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on a
consolidated basis (including, but not limited to (i) Redeemable Dividends,
whether paid or accrued; (ii) imputed interest included in Capitalized Lease
Obligations; (iii) all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing; (iv) the
net costs associated with Interest Rate Agreements and other hedging
obligations; (v) the interest portion of any deferred payment obligation; (vi)
amortization of discount or premium, if any; and (vii) all other non-cash
interest expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of the Company) minus
amortization of deferred financing costs and expenses.
"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, however,
<PAGE> 15
-8-
that (a) the Net Income of any Person (the "other Person") in which the Person
in question or any of its Subsidiaries has less than a 100% interest (which
interest does not cause the net income of such other Person to be consolidated
into the Net Income of the Person in question in accordance with GAAP) shall be
included only to the extent of the amount of dividends or distributions paid to
the Person in question or the Subsidiary; (b) the Net Income of any Subsidiary
of the Person in question that is subject to any restriction or limitation on
the payment of dividends or the making of other distributions shall be excluded
to the extent of such restriction or limitation; (c)(i) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition; and (ii) any net gain (but not loss) resulting
from an Asset Sale by the Person in question or any of its Subsidiaries other
than in the ordinary course of business shall be excluded; (d) extraordinary,
unusual and non-recurring gains and losses shall be excluded; (e) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) shall be excluded; and (f) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets shall be excluded.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069.
"Default" means any event that is, or with the passing of time
or giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness" means (a) any Senior
Indebtedness under the Revolving Credit Facility and (b) any other Senior
Indebtedness which at the time of determination exceeds $25 million in aggregate
principal amount (or accreted value in the case of Indebtedness issued at a
discount) outstanding or available under a committed facility, which is
spe-
<PAGE> 16
-9-
cifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by such Person and as to which the Trustee has
been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of a
Person or a Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, 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, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of a Person or Subsidiary of such
Person, with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Person or Subsidiary is obligated to pay
current dividends or distributions in cash during the period prior to the
maturity date of the Notes; provided, however, that Preferred Stock of a Person
or any Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of control of such Person or Subsidiary, which provisions have
substantially the same effect as the provisions described in Section 4.16, shall
not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"EBITDA" means, with respect to any Person and its
Subsidiaries, for any period, an amount equal to (a) the sum of (i) Consolidated
Net Income for such period, plus (ii) the provision for taxes for such period
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (i) hereof, plus (iii) Consolidated Interest
Expense for such period (but only including Redeemable Dividends in the
calculation of such Consolidated Interest Expense to the extent that such
Redeemable Dividends have not been excluded in the calculation of Consolidated
Net Income), plus (iv) depreciation for such period on a consolidated basis,
plus (v) amortization of intangibles for such period on a consolidated basis,
plus (vi) any other non-cash items reducing Consolidated Net Income for such
period, minus (b) all non-cash items increasing Consolidated Net Income for such
period, all for such Person and its Subsidiaries determined on a consolidated
basis in accordance with GAAP; and provided, however, that, for purposes of
calculating EBITDA
<PAGE> 17
-10-
during any fiscal quarter, cash income from a particular Investment of such
Person shall be included only (x) if cash income has been received by such
Person with respect to such Investment during each of the previous four fiscal
quarters, or (y) if the cash income derived from such Investment is attributable
to Cash Equivalents.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Notes" means the Company's 9 1/4% Senior
Subordinated Notes due 2007, Series D issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement and shall also include any
Additional Series D Notes.
"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time, except
that with respect to changes in generally accepted accounting principles that
become effective following the Issue Date with respect to non-cash items, such
changes shall not be given effect if the Company and its lenders under the
Revolving Credit Facility agree not to give effect to such changes for the
purpose of evaluating the Company and its Subsidiaries' financial condition or
performance under the Revolving Credit Facility.
"holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative
<PAGE> 18
-11-
to the foregoing); provided that a change in GAAP that results in an obligation
of such Person that exists at such time becoming Indebtedness shall not be
deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations of such Person;
(ii) obligations secured by a Lien to which the Property or assets owned or held
by such Person is subject, whether or not the obligation or obligations secured
thereby shall have been assumed; (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor); (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) Disqualified Capital
Stock of such Person or any Subsidiary thereof; and (vi) obligations of any such
Person under any currency agreement or any Interest Rate Agreement applicable to
any of the foregoing (if and to the extent such currency agreement or Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation; provided (i) that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP; and (ii) Indebtedness shall not include any liability for Federal, state,
local or other taxes and (iii) Indebtedness shall not include interest on, and
any and all other fees, expense reim-
<PAGE> 19
-12-
bursement obligations and other amounts due pursuant to any Indebtedness.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Independent Financial Advisor" means an investment banking
firm of national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company; and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Notes" means the Company's 9 1/4% Senior Subordinated
Notes due 2007, Series C issued pursuant to this Indenture.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1); (2); (3)
or (7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" means, with respect to any Person,
any interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement or other similar agreement designed to protect the party
indicated therein against fluctuations in interest rates.
"Investments" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business of such Person), loan or capital
contribution to (by means of transfers of Property to others, payments for
Property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices of such Person; and (ii) the repurchase of securities of any Person by
such Person. For the purposes of the "Limitation on Restricted Payments"
<PAGE> 20
-13-
covenant, the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any of
its Subsidiaries, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment, reduced
by the payment of dividends or distributions in connection with such Investment
or any other amounts received in respect of such Investment; provided that no
such payment of dividends or distributions or receipt of any such other amounts
shall reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, greater than 50% of the outstanding Common
Stock of such Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Common Stock of such Subsidiary, not sold or disposed of.
"Issue Date" means the date the Initial Notes are first issued
by the Company and authenticated by the Trustee under this Indenture.
"Lien" means, with respect to any Property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity Date" means December 1, 2007.
"Moody's" means Moody's Investors Service and its successors.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means in the case of any sale of Capital Stock
by or equity contribution to any Person, the aggregate net cash proceeds
received by such Person, after payment
<PAGE> 21
-14-
of expenses, commissions and the like incurred in connection therewith.
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the Initial Notes and the Exchange Notes
(including any Additional Series D Notes) treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms hereof, pursuant to this Indenture.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated May
27, 1999 pursuant to which the Notes were offered.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary or any
Vice-President of the Company or any Subsidiary, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer, Treasurer or any Corporate Controller
of such Person that shall comply with applicable provisions of the Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel which counsel is reasonably acceptable to the Trustee.
"Original Issue Date" means November 25, 1997.
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or
<PAGE> 22
-15-
both, or any other condition to such default becoming an Event of Default has
occurred, in the payment of principal of or premium, if any, or interest on or
any other amount payable in connection with Designated Senior Indebtedness.
"Permitted Holders" means (i) a holding company formed for the
sole purpose of owning, directly or indirectly all of the outstanding capital
stock of the Company; (ii) Edward F. Crawford, his children or other lineal
descendants, probate estate of any such individual, and any trust, so long as
one or more of the foregoing individuals is the beneficiary thereunder, and any
other corporation, partnership or other entity all of the shareholders,
partners, members or owners of which are any of the foregoing; or (iii) any
employee stock ownership plan, or any "group" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) in which employees of the Company or its
subsidiaries beneficially own at least 33 1/3% of the Common Stock of the
Company or of a holding company that directly or indirectly owns all of the
outstanding Capital Stock of the Company.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Subsidiary solely for
working capital purposes and not for acquisitions arising under or in
connection with the Revolving Credit Facility in an aggregate principal
amount not to exceed the greater of (x) $50 million or (y) the sum of
(A) 45% of the book value of the accounts receivable of the Company and
its Subsidiaries on a consolidated basis; and (B) 25% of the book value
of the inventory of the Company and its Subsidiaries on a consolidated
basis outstanding at any time, less any mandatory prepayment actually
made thereunder (to the extent, in the case of payments of revolving
credit borrowings, that the corresponding commitments have been
permanently reduced below $50 million) or scheduled payments actually
made thereunder;
(ii) Indebtedness under the Series A/B Notes and the Notes;
(iii) Indebtedness not covered by any other clause of this
definition which was outstanding on the Original Issue Date or is
outstanding on the Issue Date and was incurred subsequent to the
Original Issue Date in compliance with the Series A/B Indenture;
<PAGE> 23
-16-
(iv) Indebtedness of the Company to any Wholly Owned
Subsidiary and Indebtedness of any Wholly Owned Subsidiary to the
Company or another Wholly Owned Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred to acquire property in the ordinary course of
business which Purchase Money Indebtedness and Capitalized Lease
Obligations do not in the aggregate exceed 5% of the Company's tangible
consolidated total assets;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness; and
(viii) additional Indebtedness of the Company and its
Subsidiaries not to exceed $10 million in aggregate principal amount at
any one time outstanding at any time.
"Permitted Investments" means Investments made on or after the
Original Issue Date consisting of:
(i) Investments by the Company, or by a Subsidiary thereof, in
the Company or a Wholly Owned Subsidiary;
(ii) Investments by the Company, or by a Subsidiary thereof,
in a Person, if as a result of such Investment (a) such Person becomes
a Wholly Owned Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in
connection with their relocation not to exceed $1 million in the
aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary
thereof in the form of any Capital Stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Company or such Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted by Section 4.09;
<PAGE> 24
-17-
(vi) Interest Rate Agreement entered into in the ordinary
course of the Company's or its Subsidiaries business; and
(vii) additional Investments not to exceed $10 million in the
aggregate at any one time outstanding.
"Permitted Liens" means (i) Liens on property or assets of, or
any shares of Capital Stock of or secured indebtedness of, any corporation
existing at the time such corporation becomes a Subsidiary of the Company or at
the time such corporation is merged into the Company or any of its Subsidiaries;
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Subsidiary of the Company or
merging into the Company or any of its Subsidiaries; (ii) Liens securing
Refinancing Indebtedness; provided that any such Lien does not extend to or
cover any Property, Capital Stock or Indebtedness other than the Property,
shares or debt securing the Indebtedness so refunded, refinanced or extended;
(iii) Liens in favor of the Company or any of its Subsidiaries; (iv) Liens
securing industrial revenue bonds; (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture; provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item; (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (vii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $3 million in the aggregate
at any one time outstanding; (viii) Liens for taxes, assessments or governmental
charges that are being contested in good faith by appropriate proceedings; (ix)
Liens securing Capitalized Lease Obligations permitted to be incurred under
clause (v) of the definition of "Permitted Indebtedness"; provided that such
Lien does not extend to any property other than that subject to the
<PAGE> 25
-18-
underlying lease; (x) Liens to secure the Revolving Credit Facility; (xi) Liens
securing Interest Rate Agreements; (xii) easements or other minor defect or
irregularities in title and other charges and encumbrances on property not
interfering in any material respect with the use of such property in the
business of the Company or the applicable Subsidiary; (xiii) Liens that arose
subsequent to the Original Issue Date in compliance with the Series A/B
Indenture; and (xiv) any extensions, substitutions, replacements or renewals of
the foregoing.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Public Equity Offering" means a public offering by the
Company or by a holding company which owns, directly or indirectly, all of the
outstanding capital stock of the Company of shares of its Common Stock (however
designated and whether voting or non-voting) and any and all rights, warrants or
options to acquire such Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost; and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
<PAGE> 26
-19-
"Redeemable Dividend" means, for any dividend or distribution
with regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the
Original Issue Date or which is outstanding on the Issue Date and was incurred
subsequent to the Original Issue Date in compliance with the Series A/B
Indenture or other Indebtedness permitted to be incurred by the Company or its
Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all; (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes; (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes; (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced or extended, and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness; and (v) such Refinancing Indebtedness is incurred
by the same Person that initially incurred the Indebtedness being refunded,
refinanced or extended.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of June 2, 1999 among the Company and CIBC World Markets
Corp., ING Baring Furman Selz LLC and Value Investing Partners, Inc. as Initial
Purchasers.
<PAGE> 27
-20-
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Company or any Subsidiary of the Company or any payment
made to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company or any Subsidiary of the Company (other than (x) dividends
or distributions payable solely in Capital Stock (other than Disqualified
Capital Stock) or in options, warrants or other rights to purchase such Capital
Stock (other than Disqualified Capital Stock), and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Wholly Owned Subsidiary of the Company); (ii) the purchase, redemption
or other acquisition or retirement for value of any Capital Stock of the Company
or any of its Subsidiaries (other than Capital Stock owned by the Company or a
Wholly Owned Subsidiary of the Company, excluding Disqualified Capital Stock) or
any option, warrants or rights to purchase such Capital Stock; (iii) the making
of any principal payment on, or the purchase, defeasance, repurchase, redemption
or other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Indebtedness which
is subordinated in right of payment to the Notes other than subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity (in each case due within one
year of the date of acquisition); (iv) the making of any Investment or guarantee
of any Investment in any Person other than a Permitted Investment; and (v)
forgiveness of any Indebtedness of an Affiliate of the Company to the Company or
a Subsidiary of the Company. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value.
<PAGE> 28
-21-
"Restricted Security" has the meaning set forth in Rule
144(a)(3) promulgated under the Securities Act; provided that the Trustee shall
be entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Revolving Credit Facility" means the Amended and Restated
Credit Agreement dated as of November 2, 1998, between the Company, the lenders
party thereto in their capacities as lenders thereunder and Key Bank, National
Association, as agent, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be or have been amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
"Limitation on Additional Indebtedness" covenant) or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Sale and Lease-Back Transaction" means any arrangement with
any person providing for the leasing by the Company or any Subsidiary of the
Company of any real or tangible personal property, which property has been or is
to be sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"S&P" means Standard & Poor's Ratings Service, a division of
McGraw Hill, Inc., and its successors.
"SEC" means the United States Securities and Exchange
Commission as constituted from time to time or any successor performing
substantially the same functions.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.
"Senior Indebtedness" means the principal of and premium, if
any, and interest on, and any and all other fees, expense reimbursement
obligations and other amounts due pursuant
<PAGE> 29
-22-
to the terms of all agreements, documents and instruments providing for,
creating, securing or evidencing or otherwise entered into in connection with
(a) all Indebtedness of the Company owed to lenders under the Revolving Credit
Facility; (b) all obligations of the Company with respect to any Interest Rate
Agreement; (c) all obligations of the Company to reimburse any bank or other
person in respect of amounts paid under letters of credit, acceptances or other
similar instruments; (d) all other Indebtedness of the Company which does not
provide that it is to rank pari passu with or subordinate to the Notes; and (e)
all deferrals, renewals, extensions and refundings of, and amendments,
modifications and supplements to, any of the Senior Indebtedness described
above. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (i) Indebtedness of the Company to any of its
Subsidiaries, or to any Affiliate of the Company or any of such Affiliate's
Subsidiaries; (ii) Indebtedness represented by the Series A/B Notes or the
Notes; (iii) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or subordinate
in right of payment to any item of Senior Indebtedness; (iv) any trade payable
arising from the purchase of goods or materials or for services obtained in the
ordinary course of business; (v) Indebtedness incurred in violation of the
Indenture; (vi) Indebtedness represented by Disqualified Capital Stock; and
(vii) any Indebtedness to or guaranteed on behalf of, any shareholders,
director, officer or employee of the Company or any Subsidiary of the Company.
"Series A/B Indenture" means the indenture, dated as of
November 25, 1997, between the Company and the Trustee relating to the 9 1/4%
Senior Subordinated Notes due 2007 of the Company.
"Series A/B Notes" means the $150.0 million aggregate
principal amount of 9 1/4% Senior Subordinated Notes due 2007 and the 9 1/4%
Senior Subordinated Notes due 2007, Series B issued under the Series A/B
Indenture.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired; (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association
<PAGE> 30
-23-
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Subsidiary Indebtedness" means any Indebtedness other than
(i) Indebtedness in the form of, or represented by, bonds or other securities or
any guarantee thereof; and (ii) Indebtedness which is, or may be, quoted, listed
or ordinarily purchased and sold on any stock exchange, automated trading system
or over-the counter or other securities market (including, without prejudice to
the generality of the foregoing, the market for securities eligible for resale
pursuant to Rule 144A under the Securities Act).
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S. Code Section Section 77aaa-77bbbb), as in effect on the date of this
Indenture (except as provided in Section 8.03 hereof).
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer trust accounts.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"U.S. Government Obligations" means (a) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S.
<PAGE> 31
-24-
Government Obligation or a specific payment of principal or interest on any such
U.S. Government Obligation held by such custodian for the account of the holder
of such depository receipt.
"Wholly Owned Subsidiary" means any Subsidiary all of the
outstanding Voting Securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
Section 1.02. Other Definitions.
-----------------
The definitions of the following terms may be found in the
sections indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction"...................................................... 4.11
"Agent Members".............................................................. 2.14
"Business Day"............................................................... 11.08
"Change of Control Offer".................................................... 4.17
"Change of Control Payment Date"............................................. 4.17
"Covenant Defeasance"........................................................ 9.03
"Event of Default"........................................................... 6.01
"Excess Proceeds Offer"...................................................... 4.10
"Global Notes"............................................................... 2.14
"Initial Blockage Period".................................................... 10.03
"Legal Defeasance"........................................................... 9.02
"Legal Holiday".............................................................. 11.08
"Other Notes................................................................. 2.01
"Paying Agent"............................................................... 2.03
"Payment Blockage Period".................................................... 10.03
"Physical Notes"............................................................. 2.01
"Registrar".................................................................. 2.03
"Regulation S Notes"......................................................... 2.01
"Reinvestment Date".......................................................... 4.10
"Restricted Global Note"..................................................... 2.14
"Rule 144A Notes"............................................................ 2.01
"Series A/B Asset Sale Offer"................................................ 4.10(a)
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this In-
<PAGE> 32
-25-
denture. The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on the indenture securities" means the Company or any
other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(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; and
(5) words used herein implying any gender shall apply to every
gender.
<PAGE> 33
-26-
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
------------------------------------------
The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A which is
incorporated in and made part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company may use "CUSIP" numbers in issuing the Notes. The Company shall approve
the form of the Notes.
Without limiting the generality of the foregoing, Notes
offered and sold to Qualified Institutional Buyers in reliance on Rule 144A
("Rule 144A Notes") shall bear the Private Placement Legend and include the form
of assignment set forth in EXHIBIT C-1, Notes offered and sold in offshore
transactions in reliance on Regulation S ("Regulation S Notes") shall bear the
Private Placement Legend and include the form of assignment set forth in EXHIBIT
C-2, and Notes offered and sold to Institutional Accredited Investors in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S ("Other Notes") may be represented by the
Restricted Global Note or, if such an investor may not hold an interest in the
Restricted Global Note, a physical note ("Physical Note") in each case bearing
the Private Placement Legend. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.02. Execution and Authentication.
----------------------------
The Notes shall be executed on behalf of the Company by two
Officers of the Company or an Officer and an Assistant Secretary of the Company.
Such signature may be either manual or facsimile. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile
form.
<PAGE> 34
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If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate
Initial Notes for original issue in the aggregate principal amount of
$50,000,000 upon a Company Request and upon receipt of the Company Request, the
Trustee shall authenticate an additional series of Notes in an aggregate
principal amount not to exceed $200,000,000; provided, however, that (i) no more
than $50,000,000 in aggregate principal amount of Exchange Notes may be
authenticated in exchange for the cancellation of up to $50,000,000 of the
Initial Notes and (ii) no more than $150,000,000 in Exchange Notes shall be
reserved and may be authenticated for the Series A/B Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof. The Notes shall be issuable only in
registered form without coupons and only in denominations of $1,000 and integral
multiples thereof.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same right as an Agent to deal with the Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency located in the Borough of Manhattan, City of New York, State of
New York where Notes may be presented for payment ("Paying Agent") and an office
or agency where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. Neither the Company nor
any Affiliate may act as Paying Agent. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Noteholder.
<PAGE> 35
-28-
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
-----------------------------------
On or before each due date of the principal of and interest on
any Notes, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal and interest so becoming due. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and the
Trustee, may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay to
the Trustee all sums so held in trust by such Paying Agent together with a
complete accounting of such sums. Upon doing so, the Paying Agent shall have no
further liability for the money.
Section 2.05. Noteholder 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 Noteholders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee on or
before each May 15 and November 15 in each year, 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 Noteholders.
Section 2.06. Transfer and Exchange.
---------------------
Subject to Sections 2.14 and 2.15, when a Note is presented to
the Registrar with a request to register the transfer thereof, the Registrar
shall register the transfer as requested if the requirements of applicable law
are met and, when Notes are presented to the Registrar with a request to
exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall make the exchange as requested provided that
every Note presented or surrendered
<PAGE> 36
-29-
for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by the holder thereof or his attorney
duly authorized in writing. To permit transfers and exchanges, upon surrender of
any Note for registration of transfer at the office or agency maintained
pursuant to Section 2.03 hereof, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. Any exchange or transfer shall be
without charge, except that the Company may require payment by the holder of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation to a transfer or exchange, but this provision shall not apply to any
exchange pursuant to Sections 2.09, 3.06 or 8.05 hereof. The Trustee shall not
be required to register transfers of Notes or to exchange Notes for a period of
15 days before selection of any Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Notes called or being called
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
Any holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial interests in such Global
Note may be effected only through a book entry system maintained by the holder
of such Global Note (or its agent), and that ownership of a beneficial interest
in the Global Note shall be required to be reflected in a book entry.
Section 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the
holder of a Note presents evidence to the satisfaction of the Company and the
Trustee that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. An indemnity bond may be required by the Company
or the Trustee that is sufficient in the judgment of the Company and the Trustee
to protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. In every case of destruction, loss or theft,
the applicant shall also furnish to the Company and to the Trustee evidence to
their satisfaction of the destruction, loss or the theft of such Note and the
ownership thereof. The Company and the Trustee may charge for its expenses in
replacing a Note. Every replacement Note is an additional obligation of the
Company.
<PAGE> 37
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Section 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding until the Company and the Trustee receive proof satisfactory to
each of them that the replaced Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date
money sufficient to pay the principal of, premium, if any, and accrued interest
on Notes payable on that date, then on and after that date such Notes cease to
be outstanding and interest on them ceases to accrue.
Subject to Section 11.06, a Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, of definitive
Notes but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes
presented to it.
Section 2.10. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and destroy or return to the Company in accordance with its normal
practice, all Notes surrendered for transfer, exchange, payment or cancellation
unless the Company instructs the Trustee in writing to deliver the Notes to the
Company. Subject to Section 2.07 hereof, the Company may not issue new Notes to
replace Notes in respect of which it has previously paid all principal, premium
and interest accrued thereon, or delivered to the Trustee for cancellation.
<PAGE> 38
-31-
Section 2.11. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted amounts, plus any interest payable on defaulted
amounts pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Company shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the Trustee
at least 20 days notice of the proposed amount of default interest to be paid
and the special payment date. At least 15 days before the special record date,
the Company shall mail or cause to be mailed to each Noteholder at his address
as it appears on the Notes register maintained by the Registrar a notice that
states the special record date, the payment date (which shall be not less than
five nor more than ten days after the special record date), and the amount to be
paid. In lieu of the foregoing procedures, the Company may pay defaulted
interest in any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
-----------------
Prior to 11:00 a.m., New York City time, on each Interest
Payment Date and Maturity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Maturity Date, as the case may be, in
a timely manner which permits the Trustee to remit payment to the holders on
such Interest Payment Date or Maturity Date, as the case may be. The principal
and interest on Global Notes shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Notes represented thereby. The principal and interest on Notes in
certificated form shall be payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the appropriate CUSIP number(s) in
notices of redemption or exchange as a convenience to holders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes.
<PAGE> 39
-32-
Section 2.14. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) Rule 144A Notes and Other Notes which may be held in
global form, other than Regulation S Notes, initially shall be represented by
one or more notes in registered, global form without interest coupons
(collectively, the "Restricted Global Note"). Regulation S Notes initially shall
be represented by one global note in registered form without interest coupons
(collectively, the "Regulation S Global Note," and, together with the Restricted
Global Note, the "Global Notes"). The Global Notes initially shall (i) be
registered in the name of The Depository Trust Company (the "Depository") or the
nominee of the Depository, in each case for credit to an account of an Agent
Member (as defined below); (ii) be delivered to the Trustee as custodian for the
Depository; and (iii) bear legends as set forth in EXHIBIT B.
Members of, or direct or indirect participants in, the
Depository ("Agent Members") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Notes, and the Depository may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Note.
(b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes upon receipt by the Trustee of written
instructions from the Depository or its nominee on behalf of any beneficial
owner and in accordance with the rules and procedures of the Depository and the
provisions of Section 2.15. In addition, a Global Note shall be exchangeable for
Physical Notes if (i) the Depository (x) notifies the Company that it is
unwilling or unable to continue as depository for such Global Note and the
Company thereupon fails to appoint a successor depository or (y) has ceased to
be a clearing agency registered under the Exchange Act; (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
such Physical Notes or (iii) there shall have occurred and be con-
<PAGE> 40
-33-
tinuing a Default or an Event of Default with respect to the Notes. In all
cases, Physical Notes delivered in exchange for any Global Note or beneficial
interests therein shall be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depository (in accordance with
its customary procedures).
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph
(b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x); and
(c) of Section 2.15, bear the legend regarding transfer restrictions applicable
to the Physical Notes set forth in Exhibit A.
(f) On or prior to the 40th-day after the later of the
commencement of the offering of the Notes represented by the Regulation S Global
Note and the issue date of such Notes (such period through and including such
40th day, the "Restricted Period"), a beneficial interest in a Regulation S
Global Note may be transferred to a Person who takes delivery in the form of an
interest in the corresponding Restricted Global Note only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being made (i)(a) to a Person whom the transferor reasonably
believes is a Qualified Institutional Buyer in a transaction meeting the
requirements of Rule 144A or (b) pursuant to another exemption from the
registration requirements under the
<PAGE> 41
-34-
Securities Act which is accompanied by an opinion of counsel regarding the
availability of such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(i) The holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a holder is
entitled to take under this Indenture or the Notes.
Section 2.15. Special Transfer Provisions.
---------------------------
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
AND NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after June
2, 2001 or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons),
the proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto or
<PAGE> 42
-35-
(2) in the case of a transfer to a Non-U.S. Person (including a QIB),
the proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit E hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above; and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date; and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred;
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical
<PAGE> 43
-36-
Notes which after transfer are to be evidenced by an interest in the
Global Note, upon receipt by the Registrar of instructions given in
accordance with the Depository's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Note in an amount equal
to the principal amount of the Physical Notes to be transferred, and
the Trustee shall cancel the Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private Placement
Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this
Section 2.15 exist; (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act or
(iii) such Note has been sold pursuant to an effective registration statement
under the Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the
Private Placement Legend, each holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.14 or this Section
2.15. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable notice to the Registrar.
<PAGE> 44
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ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Section 3.07
hereof; (i) at least 60 days prior to the Redemption Date in the case of a
partial redemption; (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to, the Company shall notify the Trustee in writing of the Redemption
Date, the principal amount of Notes to be redeemed and the redemption price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in Section 3.07 hereof, as
appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
In the event that fewer than all of the Notes are to be
redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Notes are not so listed, on either a pro rata basis or by
lot, or such other method as it shall deem fair and equitable; provided,
however, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portion thereof for redemption shall
be made by the Trustee on a pro rata basis, unless such a method is prohibited.
The Trustee shall promptly notify the Company of the Notes selected for
redemption and, in the case of any Notes selected for partial redemption, the
principal amount thereof to be redeemed. The Trustee may select for redemption
portions of the principal of the Notes that have denominations larger than
$1,000. Notes and portions thereof the Trustee selects shall be redeemed in
amounts of $1,000 or whole multiples of $1,000. For all purposes of this
Indenture unless the context otherwise requires, provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
Section 3.03. Notice of Redemption.
--------------------
At least 30 days, and no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each holder of
<PAGE> 45
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Notes to be redeemed at his or her last address as the same appears on the
registry books maintained by the Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date;
(7) the paragraph of Section 3.07 hereof pursuant to which the
Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being
redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
------------------------------
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest accrued
to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price, including any premium, plus interest accrued to
the Redemption Date, provided that if the Redemption Date is after a regular
interest payment record date and on or prior to the Interest Payment Date, the
accrued in-
<PAGE> 46
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terest shall be payable to the holder of the redeemed Notes registered on the
relevant record date, and provided, further, that if a Redemption Date is a
Legal Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of and accrued interest on Notes called for redemption
shall have been made available in accordance with the preceding paragraph, the
Notes called for redemption will cease to accrue interest and the only right of
the holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. If any Note called for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
Section 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
-------------------
(a) The Company may redeem the Notes, in whole or in part, at
any time on or after December 1, 2002 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the Redemption Date, if redeemed during the
twelve-month period beginning on December 1 of each year listed below:
<PAGE> 47
-40-
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002............................................ 104.625%
2003............................................ 103.083%
2004............................................ 101.542%
2005 and thereafter............................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, the Company may redeem in
the aggregate up to 35% of the original principal amount of Notes (including any
Exchange Notes) at any time and from time to time prior to December 1, 2000 at a
redemption price equal to 109.25% of the aggregate principal amount so redeemed
plus accrued and unpaid interest, if any, to the Redemption Date out of the Net
Proceeds of one or more Public Equity Offerings; provided that at least 65% of
the principal amount of Notes (including any Exchange Notes) originally issued
remains outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 60 days following the closing of any such
Public Equity Offering.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
----------------
The Company shall pay the principal of and interest (including
all Additional Interest as provided in the Registration Rights Agreement) on the
Notes on the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or interest shall be considered paid on the date it
is due if the Trustee or Paying Agent holds on that date money designated for
and sufficient to pay such installment.
The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
-----------
(a) The Company shall file with the SEC all information,
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the
<PAGE> 48
-41-
SEC will accept such filings. The Company (at its own expense) shall file with
the Trustee within 15 days after it files them with the SEC, copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company files with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act. Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA Section 314(a). Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
(b) At the Company's expense, regardless of whether the
Company is required to furnish such reports and other information referred to in
paragraph (a) above to its stockholders pursuant to the Exchange Act, the
Company shall cause such reports and other information to be mailed to the
holders at their addresses appearing in the register of Notes maintained by the
Registrar within 15 days after it files them with the SEC.
(c) The Company shall, upon request, provide to any holder of
Notes or any prospective transferee of any such holder any information
concerning the Company (including financial statements) necessary in order to
permit such holder to sell or transfer Notes in compliance with Rule 144A under
the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trus-
<PAGE> 49
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tee, but will suffer and permit the execution of every such power as though no
such law had been enacted.
Section 4.04. Compliance Certificate.
----------------------
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year and on or before 60 days after the end of the
first, second and third quarters of each fiscal year, an Officers' Certificate
(one of the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company) stating that a
review of the activities of the Company and its Subsidiaries during such fiscal
year or fiscal quarter, as the case may be, has been made under the supervision
of the signing Officers with a view to determining whether each has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge each has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all or
such Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto) and that to
the best of his or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or interest, if any,
on the Notes is prohibited or if such event has occurred, a description of the
event and what action each is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.02 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company has violated any provisions of this Article 4 or Article 5 hereof or, if
any such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly for any failure to obtain knowledge of any such violation.
<PAGE> 50
-43-
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
-----
The Company shall, and shall cause each of its Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
-------------------------------------
The Company shall not, directly or indirectly, incur (as
defined) any Indebtedness (including Acquired Indebtedness); provided that if no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness, the Company may incur
Indebtedness (including Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Consolidated Fixed Charge Coverage Ratio is at least 2.25
to 1. In addition, none of the Subsidiaries of the Company will, directly or
indirectly, incur any Subsidiary Indebtedness; provided that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Subsidiary Indebtedness, any of the
Company's Subsidiaries may incur Subsidiary Indebtedness if, after giving effect
to the incurrence of such Subsidiary Indebtedness and the receipt and
application of the proceeds thereof, such Subsidiary's Consolidated Fixed Charge
Coverage Ratio is at least 2.5 to 1.
Notwithstanding the foregoing, the Company and its
Subsidiaries may incur Permitted Indebtedness; provided that the Company shall
not incur any Permitted Indebtedness that ranks junior in right of payment to
the Notes that has a maturity or mandatory sinking fund payment prior to the
maturity of the Notes.
Section 4.07. Limitation on Preferred Stock of Subsidiaries.
---------------------------------------------
The Company shall not permit any of its Subsidiaries to issue
any Preferred Stock (except Preferred Stock issued to
<PAGE> 51
-44-
the Company or a Wholly Owned Subsidiary of the Company) or permit any Person
(other than the Company or a Wholly Owned Subsidiary of the Company) to hold any
such Preferred Stock unless the Company or such Subsidiary would be entitled to
incur or assume Indebtedness under Section 4.06 above (other than Permitted
Indebtedness) in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Section 4.08. Limitation on Capital Stock of Subsidiaries.
-------------------------------------------
The Company shall not (i) sell, pledge, hypothecate or
otherwise convey or dispose of any Capital Stock of a Subsidiary of the Company
or (ii) permit any of its Subsidiaries to issue any Capital Stock, other than to
the Company or a Wholly Owned Subsidiary of the Company. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with Sections
4.07 and 4.10 hereof.
Section 4.09. Limitation on Restricted Payments.
---------------------------------
The Company shall not make, and shall not permit any of its
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.06
above; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Original Issue Date does not exceed the sum of (1) 50% of the
Company's cumulative Consolidated Net Income subsequent to the Original
Issue Date (or minus 100% of any cumulative deficit in Consolidated Net
Income during such period) plus (2) 100% of the aggregate Net Proceeds
received by the Company from the issue or sale after the Original Issue
Date of Capital Stock (other than Disqualified Capital Stock or Capital
Stock of the Company issued to any Subsidiary of the Company) of the
Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable
<PAGE> 52
-45-
for Capital Stock (other than Disqualified Capital Stock) of the
Company which has been so converted, exercised or exchanged, as the
case may be plus (3) without duplication of any amounts included in
clause (c)(2) above, 100% of the aggregate Net Proceeds received by the
Company of any equity contribution from a holder of the Company's
Capital Stock, plus (4) $5,000,000, excluding in the case of clauses
(c)(2) and (3), any Net Proceeds from a Public Equity Offering to the
extent used to redeem the Notes. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property
other than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of the Indenture; (ii) the repurchase, redemption or other
acquisition or retirement of any shares of Capital Stock of the Company or
Indebtedness subordinated to the Notes by conversion into, or by or in exchange
for, shares of Capital Stock of the Company (other than Disqualified Capital
Stock); or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Capital Stock of the
Company (other than Disqualified Capital Stock); (iii) the redemption or
retirement of Indebtedness of the Company subordinated to the Notes in exchange
for, by conversion into, or out of the Net Proceeds of, a substantially
concurrent sale or incurrence of Indebtedness of the Company (other than any
Indebtedness owed to a Subsidiary) that is contractually subordinated in right
of payment to the Notes to at least the same extent as the Indebtedness being
redeemed or retired; (iv) the retirement of any shares of Disqualified Capital
Stock of the Company by conversion into, or by exchange for, shares of
Disqualified Capital Stock of the Company, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock of the Company; (v) so long as no
Default or Event of Default shall have occurred and be continuing, payments made
with respect to extinguishment of fractional shares or odd-lot shares not to
exceed $250,000 in the aggregate; (vi) payments to a holding company that,
directly or indirectly, owns all of the outstanding Capital Stock of the
Company, in amounts sufficient to pay: (w) franchise taxes and other fees
required to maintain its corporate existence, (x) costs associated with
preparation of required documents for filing with the Securities and Exchange
Commission and with any exchange on which such com-
<PAGE> 53
-46-
pany's securities are traded, (y) federal, state, foreign and local taxes to the
extent that such taxes are attributable to the ownership of the Company and its
Subsidiaries, and (z) other operating or administrative costs of up to $200,000
per year; or (vii) payments, directly or indirectly, to employees to repurchase
Capital Stock or other securities of the Company or of a holding company that,
directly or indirectly, owns all of the outstanding Capital Stock of the Company
upon the death, disability or termination of employment of such employees, in
amounts not to exceed, in the aggregate, $1,500,000 per year; provided that in
calculating the aggregate amount of Restricted Payments made subsequent to the
Original Issue Date for purposes of clause (c) of the immediately preceding
paragraph, amounts expended pursuant to clauses (i), (v) and (vii) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant described above were computed, which
calculations may be based upon the Company's latest available financial
statements, and that no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur immediately after
giving effect to any such Restricted Payments.
Section 4.10. Limitation on Certain Asset Sales.
---------------------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
applicable Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the Board
of Directors of the Company, and evidenced by a board resolution); (ii) not less
than 80% of the consideration received by the Company or such applicable
Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and
(iii) the Asset Sale Proceeds received by the Company or such Subsidiary are
applied (a) first, to the extent the Company or any such Subsidiary, as the case
may be, elects, or is required, to prepay, repay or purchase indebtedness under
any then existing Senior Indebtedness of the Company or any such Subsidiary
within 12 months days following the receipt of the Asset Sale Proceeds from any
Asset Sale; provided that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the principal
amount so
<PAGE> 54
-47-
repaid; (b) second, to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company elects, to an
investment in assets (including Capital Stock or other securities purchased in
connection with the acquisition of Capital Stock or property of another Person)
used or useful in businesses similar or ancillary to the business of the Company
or any such Subsidiary as conducted on the Original Issue Date; provided that
such investment occurs on or prior to the 365th day following receipt of such
Asset Sale Proceeds (the "Reinvestment Date"); and (c) third, if on the
Reinvestment Date the Available Asset Sale Proceeds exceed $10 million, the
Company shall apply an amount equal to such Available Asset Sale Proceeds,
first, to an offer to repurchase the Series A/B Notes, if any are outstanding,
in accordance with the terms of the Series A/B Indenture (as in effect on the
Issue Date) (the "Series A/B Asset Sale Offer") and second, in the event that
any Available Asset Sale Proceeds are not applied to a Series A/B Asset Sale
Offer, to an offer to repurchase the Notes, at a purchase price in cash equal to
100% of the principal amount thereof plus accrued and unpaid interest, if any,
to the purchase date (an "Excess Proceeds Offer"). If an Excess Proceeds Offer
is not fully subscribed, the Company may retain the portion of the Available
Asset Sale Proceeds not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer,
the Company shall mail, within 30 days following the Reinvestment Date, a notice
to the holders stating, among other things: (1) that such holders have the right
to require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date; (2) the
purchase date, which shall be no earlier than 30 days and not later than 45 days
from the date such notice is mailed; (3) the instructions that each holder must
follow in order to have such Notes purchased; and (4) the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
purchase of such Notes.
In the event of the transfer of substantially all of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01 below, the successor Person
shall be deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale.
<PAGE> 55
-48-
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Excess Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of this Indenture by virtue
thereof.
Section 4.11. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (each an "Affiliate Transaction") or extend, renew, waive or otherwise
modify the terms of any Affiliate Transaction entered into prior to the Original
Issue Date unless (i) such Affiliate Transaction is between or among the Company
and its Wholly Owned Subsidiaries; or (ii) the terms of such Affiliate
Transaction are fair and reasonable to the Company or such Subsidiary, as the
case may be, and the terms of such Affiliate Transaction are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate Transaction
(or any series of related Affiliate Transactions which are similar or part of a
common plan) involving an amount or having a fair market value in excess of $2
million which is not permitted under clause (i) above, the Company must obtain a
resolution of the Board of Directors of the Company certifying that such
Affiliate Transaction complies with clause (ii) above. In any Affiliate
Transaction (or any series of related Affiliate Transactions which are similar
or part of a common plan) involving an amount or having a fair market value in
excess of $10 million which is not permitted under clause (i) above, the Company
must obtain a favorable written opinion as to the fairness of such transaction
or transactions, as the case may be, from an Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted
Payment that is not prohibited by the provisions described under Section 4.09
above or (ii) reasonable fees and compensation paid to and indemnity provided on
behalf of, offi-
<PAGE> 56
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cers, directors or employees of the Company or any Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management.
Section 4.12. Limitations on Liens.
--------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any of its Subsidiaries or any shares of Capital
Stock or Indebtedness of any Subsidiary of the Company which owns property or
assets, now owned or hereafter acquired, unless (i) if such Lien secures
Indebtedness which is pari passu with the Notes, then the Notes are secured on
an equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien or (ii) if such Lien secures
Indebtedness which is subordinated to the Notes, any such Lien shall be
subordinated to the Lien granted to the holders of the Notes to the same extent
as such Indebtedness is subordinated to the Notes.
Section 4.13. Limitation on Other Senior Subordinated
Indebtedness.
---------------------------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness that is both (i) subordinated in right of payment to any Senior
Indebtedness of the Company or any of its Subsidiaries, as the case may be and
(ii) senior in right of payment to the Notes. For purposes of this covenant,
Indebtedness is deemed to be senior in right of payment to the Notes, if it is
not explicitly subordinated in right of payment to Senior Indebtedness at least
to the same extent as the Notes are subordinated to such Senior Indebtedness.
Section 4.14. Limitation on Sale and Lease-Back Transactions.
----------------------------------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market value of the property sold, as determined in good faith by
the Board of Directors of the Company and evidenced by a board resolution; and
(ii) the Company could incur the Attributable
<PAGE> 57
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Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with Section 4.06 above.
Section 4.15. Payments for Consent.
--------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or agreed to be paid to all holders of the Notes which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
Section 4.16. Corporate Existence.
-------------------
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each Subsidiary, in accordance with the respective organizational documents (as
the same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the holders.
Section 4.17. Change of Control.
-----------------
Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (the "Change of Control Offer") each
holder's outstanding Notes at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date (as defined) in
accordance with the procedures set forth in this Section 4.17.
Within 20 days of the occurrence of a Change of Control, the
Company shall (i) cause a notice of the Change of Control Offer to be sent at
least once to the Dow Jones News
<PAGE> 58
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Service or similar business news service in the United States; and (ii) send by
first-class mail, postage prepaid, to the Trustee and to each holder of the
Notes, at the address appearing in the register maintained by the Registrar of
the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to
this covenant and that all Notes tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days nor later than
45 days from the date such notice is mailed (the "Change of Control
Payment Date"));
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(6) that holders will be entitled to withdraw their acceptance
if the Paying Agent receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Notes delivered for
purchase, and a statement that such holder is withdrawing his election
to have such Notes purchased;
(7) that holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered;
(8) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
<PAGE> 59
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(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to
the extent lawful; (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered; and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
If the Revolving Credit Facility is in effect, or any amounts
are owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, prior to the mailing of the notice to holders described in
this Section 4.17 but in any event within 20 days following any Change of
Control, the Company covenants to (i) repay in full all obligations and
terminate all commitments under or in respect of the Revolving Credit Facility
and all other Senior Indebtedness the terms of which require repayment upon a
Change of Control or offer to repay in full all obligations and terminate all
commitments under or in respect of the Revolving Credit Facility and all such
Senior Indebtedness and repay the Indebtedness owed to each such lender who has
accepted such offer or (ii) obtain the requisite consents under the Revolving
Credit Facility and all such other Senior Indebtedness to permit the repurchase
of the Notes as described above. The Company must first comply with the covenant
described in the preceding sentence before it shall be required to purchase
Notes in the event of a Change of Control; provided that the Company's failure
to comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (iii) under Section 6.01 below if not cured
within 30 days after the notice required by such clause. As a result of the
foregoing, a holder of the Notes may not be able to compel the Company to
purchase the Notes unless the Company is able at the time to refinance all of
the obligations under or in respect of the Revolving Credit Facility and all
such other Senior Indebtedness or obtain requisite consents under the Revolving
Credit Facility and all such other Senior Indebtedness.
<PAGE> 60
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(i) If the Company or any Subsidiary thereof has issued any
outstanding (A) indebtedness that is subordinated in right of payment to the
Notes or (B) Preferred Stock, and the Company or such Subsidiary is required to
make a Change of Control Offer or to make a distribution with respect to such
subordinated indebtedness or Preferred Stock in the event of a Change of
Control, the Company shall not consummate any such offer or distribution with
respect to such subordinated indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to holders of
the Notes; and (ii) the Company will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under this
Indenture.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.17, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this section by virtue thereof.
Section 4.18. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain an office or agency where Notes may
be surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from
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time to time rescind such designations. The Company shall give prompt written
notice to the Trustee of such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee set forth in Section 11.02 as such office of the Company.
Section 4.19. 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 encumbrance or restriction on the ability of any
Subsidiary of the Company to (a)(i) pay dividends or make any other
distributions to the Company or any Subsidiary of the Company (A) on its Capital
Stock or (B) with respect to any other interest or participation in, or measured
by, its profits or (ii) repay any Indebtedness or any other obligation owed to
the Company or any Subsidiary of the Company; (b) make loans or advances or
capital contributions to the Company or any of its Subsidiaries; or (c) 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: (i)
encumbrances or restrictions existing on the Original Issue Date to the extent
and in the manner such encumbrances and restrictions are in effect on the
Original Issue Date or encumbrances or restrictions existing on the Issue Date
in compliance with the Series A/B Indenture, (ii) applicable law, (iii) any
instrument governing Acquired Indebtedness, 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 (including any
Subsidiary of the Person), so acquired, (iv) customary non-assignment provisions
in leases or other agreements entered in the ordinary course of business and
consistent with past practices, (v) Refinancing Indebtedness; provided that such
restrictions are no more restrictive than those contained in the agreements
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded, or (vi) customary restrictions in security agreements or
mortgages securing Indebtedness of the Company or a Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements and mortgages.
<PAGE> 62
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ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of
Assets.
-----------------------------------------------
The Company will not and will not permit any of its
Subsidiaries to consolidate with, merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless: (i) the Company or
such Subsidiary, as the case may be, shall be the continuing Person, or the
Person (if other than the Company or such Subsidiary) formed by such
consolidation or into which the Company or such Subsidiary, as the case may be,
is merged or to which the properties and assets of the Company or such
Subsidiary, as the case may be, are sold, assigned, transferred, leased,
conveyed or otherwise disposed of shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company or such Subsidiary, as the case may be, under the
Indenture, the Notes and the obligations thereunder shall remain in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis the Company or such Person could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under Section 4.06
above provided, however that this provision will not prevent the Company from
merging into an Affiliate of the Company for the sole purpose of creating a
holding company whose sole asset will be all of the outstanding capital stock of
the Company or shares of a shell corporation whose only assets are all of the
outstanding capital stock of the Company.
In connection with any consolidation, merger or transfer of
assets contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and
<PAGE> 63
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that all conditions precedent herein provided for relating to such transaction
or transactions have been complied with.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
Section 5.02. Successor Person Substituted.
----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Subsidiary in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Subsidiary under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Subsidiary
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
-----------------
The following events are defined as "Events of Default":
(i) a default in payment of any principal of, or premium, if
any, on the Notes whether at maturity, upon redemption or otherwise
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(ii) a default for 30 days in payment of any interest on the
Notes;
(iii) default by the Company or any Subsidiary in the
observance or performance of any other covenant in the
<PAGE> 64
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Notes or this Indenture for 30 days after written notice from the
Trustee or the holders of not less than 25% in aggregate principal
amount of the Notes then outstanding (except in the case of a default
with respect to the "Change of Control" or "Merger, Consolidation or
Sale of Assets" covenant which shall constitute an Event of Default
with such notice requirement but without such passage of time
requirement);
(iv) failure to pay when due principal, interest or premium
in an aggregate amount of $5 million or more with respect to any
Indebtedness of the Company or any Subsidiary thereof, or the
acceleration of any such Indebtedness aggregating $3 million or more
which default shall not be cured, waived or postponed pursuant to an
agreement with the holders of such Indebtedness within 60 days after
written notice as provided in this Indenture, or such acceleration
shall not be rescinded or annulled within 20 days after written notice
as provided in this Indenture;
(v) any final judgment or judgments which can no longer be
appealed for the payment of money in excess of $5 million shall be
rendered against the Company or any Subsidiary thereof, and shall not
be discharged for any period of 60 consecutive days during which a stay
of enforcement shall not be in effect;
(vi) the Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become
due;
(vii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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(A) is for relief against the Company or any
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of the property of
the Company or any Subsidiary, or
(C) orders the liquidation of the Company or any
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
The Trustee may withhold notice to the holders of the Notes of
any default (except in payment of principal or premium, if any, or interest on
the Notes) if the Trustee considers it to be in the best interest of the holders
of the Notes to do so.
If an Event of Default (other than an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization) shall
have occurred and be continuing, then the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may declare
to be immediately due and payable the entire principal amount of all the Notes
then outstanding plus accrued interest to the date of acceleration; and (i) such
amounts shall become immediately due and payable or (ii) if there are any
amounts outstanding under the Revolving Credit Facility, such amounts shall
become immediately due and payable upon the first to occur of an acceleration
under the Revolving Credit Facility or five business days after receipt by the
Company and the representative under the Revolving Credit Facility of a notice
of acceleration; provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the holders
of a majority in aggregate principal amount of outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if (i) all Events of
Default, other than nonpayment of principal, premium, if any, or interest that
has become due solely because of the acceleration, have been cured or waived as
provided in this Indenture; (ii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such dec-
<PAGE> 66
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laration of acceleration, has been paid; and (iii) in the event of the cure or
waiver of an Event of Default of the type described in clause (vii) of the above
Events of Default, the Trustee shall have received an officers' certificate and
an opinion of counsel that such Event of Default has been cured or waived. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the principal, premium and
interest amount with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Notes.
The holders of a majority in principal amount of the Notes
then outstanding shall have the right to waive any existing default or
compliance with any provision of this Indenture or the Notes and to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, subject to certain limitations provided for in this Indenture and
under this Trust Indenture Act.
No holder of any Note will have any right to institute any
proceeding with respect to this Indenture or for any remedy thereunder, unless
such holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as
Trustee, and unless the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. Notwithstanding the foregoing, such limitations do
not apply to a suit instituted on such Note on or after the respective due dates
expressed in such Note.
Section 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default arising
under Section 6.01(vi) or (vii) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may by
written notice to the Company and the Trustee declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued but unpaid interest to the date of acceleration and (i) such amounts
shall become immediately
<PAGE> 67
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due and payable or (ii) if there are any amounts outstanding under or in respect
of the Revolving Credit Facility, such amounts shall become due and payable upon
the first to occur of an acceleration of amounts under or in respect of the
Revolving Credit Facility or five Business Days after receipt by the Company and
the Representative of notice of the acceleration of the Notes; provided,
however, that after such acceleration but before a judgment or decree based on
such acceleration is obtained by the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of accelerated principal,
premium or interest that has become due solely because of the acceleration, have
been cured or waived and if the rescission would not conflict with any judgment
or decree. No such rescission shall affect any subsequent Default or impair any
right consequent thereto. In case an Event of Default specified in Section
6.01(vi) or 6.01(vii) with respect to the Company occurs, such principal,
premium, if any, and interest amount with respect to all of the Notes shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the holders of the Notes.
Section 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder 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. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
<PAGE> 68
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Section 6.04. Waiver of Past Defaults and Events of Default.
---------------------------------------------
Subject to Sections 6.02, 6.07 and 8.02 hereof, the holders of
a majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. 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 Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
-------------------
The holders of a majority in principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another
Noteholder not taking part in such direction, and the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, determines that the action so directed may not lawfully be taken or if
the Trustee in good faith shall, by a Trust Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
-------------------
Subject to Section 6.07 below, a Noteholder may not institute
any proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the holders of at least 25% in aggregate principal
amount of the Notes then outstanding make a written request to the
Trustee to pursue the remedy;
<PAGE> 69
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(3) such holder or holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the
right of any holder of a Note to receive payment of principal of, or premium, if
any, and interest of the Note on or after the respective due dates expressed in
the Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, is absolute and unconditional and shall not be impaired
or affected without the consent of the holder.
Section 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company (or any other obligor on the Notes) for the whole
amount of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate then borne by the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the
<PAGE> 70
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and the Noteholders allowed in any judicial proceedings
relative to the Company (or any other obligor upon the Notes), its creditors or
its property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same after deduction of its charges and expenses to the extent
that any such charges and expenses are not paid out of the estate in any such
proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder 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 Noteholders, 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.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceedings.
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07
hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest as to each, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Notes; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10.
<PAGE> 71
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Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
holder pursuant to Section 6.07 hereof or a suit by holders of more than 10% in
principal amount of the Notes then outstanding.
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 their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture but, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
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(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 6.02 and 6.05 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured to
it.
(e) Whether or not therein expressly so provided, paragraphs
(a), (b), (c), and (d) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(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 the law.
Section 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably 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.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of
<PAGE> 73
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Sections 11.04 and 11.05 hereof. The Trustee shall be protected and
shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed by
it with due care.
(4) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its selection,
and the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
Section 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company, or any Affiliates
thereof, with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, shall be subject to
Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the sale of Notes or any money paid to the
Company pursuant to the terms of this Indenture and it shall not be responsible
for any statement in the Notes other than its certificate of authentication.
Section 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to
the Trustee, the Trustee shall mail to each Noteholder notice of the Default
within 90 days after it occurs. Except in the case of a Default in payment of
the principal of, or
<PAGE> 74
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premium, if any, or interest on any Note the Trustee may withhold the notice if
and so long as the board of directors of the Trustee, the executive committee or
any trust committee of such board and/or its Trust Officers in good faith
determine(s) that withholding the notice is in the interest of the Noteholders.
Section 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA Section 313(a), within 60 days after
May 15 of any year, commencing the May 15 following the date of this Indenture,
the Trustee shall mail to each Noteholder a brief report dated as of such May 15
that complies with TIA Section 313(a). The Trustee shall also comply with TIA
Section 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c) and TIA Section 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by
mail:
(1) to all registered holders of Notes, as the names and
addresses of such holders appear on the Registrar's books; and
(2) to such holder of Notes as have, within the two years
preceding such transmission, filed their names and addresses with the
Trustee for that purpose.
A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange, if any, on
which the Notes are listed. The Company shall promptly notify the Trustee when
the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time
reasonable compensation for its services rendered hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust). The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it in
connection with its duties under this Indenture, including the reasonable fees
and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee and any
predecessor Trustee for, and hold it harmless against, any and all loss, damage,
claim, liability or reasonable expense,
<PAGE> 75
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incurred by it in connection with the acceptance or performance of its duties
under this Indenture including the reasonable costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder (including, without
limitation, settlement costs). The Trustee shall notify the Company in writing
promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder except to the extent the
Company is prejudiced thereby.
Notwithstanding the foregoing, the Company need not reimburse
the Trustee for any expense or indemnify it against any loss or liability
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the payment obligations of the Company in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The obligations of the Company
under this Section 7.07 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vi) or (vii) hereof occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing.
The holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Company's written consent which consent shall not be
unreasonably withheld. The Company may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
<PAGE> 76
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(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
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 at least 10% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder 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. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, 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. A successor Trustee shall mail
notice of its succession to each Noteholder. 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 Consolidation, Merger or
Conversion.
---------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
<PAGE> 77
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Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1).
Section 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311 (b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
Section 7.12. Paying Agents.
-------------
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
7.12:
(A) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Company or by any
obligor on the Notes) in trust for the benefit of holders of the Notes
or the Trustee;
(B) that it will at any time during the continuance of any
Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(C) that it will give the Trustee written notice within three
(3) Business Days of any failure of the Company (or by any obligor on
the Notes) in the payment of any installment of the principal of,
premium, if any, or interest on, the Notes when the same shall be due
and payable.
<PAGE> 78
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ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
--------------------------
From time to time, the Company and the Trustee may, without
the consent of holders of the Notes amend or supplement this Indenture for
certain specified purposes, including:
(1) to provide for uncertificated Notes in addition to
certificated Notes;
(2) to cure any ambiguity, defect or inconsistency; or
(3) to make any other change that does not materially and
adversely affect the rights of any Noteholders hereunder.
The Trustee is hereby authorized to join with the Company in
the execution of any supplemental indenture authorized or permitted by the terms
of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture which adversely affects
its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
-----------------------
The Company and the Trustee may modify or supplement this
Indenture with the consent of the holders of at least a majority in principal
amount of the outstanding Notes. The holders of not less than a majority in
aggregate principal amount of the outstanding Notes may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes without notice to any Noteholder. Subject to Section 8.04, without the
consent of each Noteholder affected, however, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose holders must consent to
an amendment, supplement or waiver to this Indenture or the Notes;
<PAGE> 79
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(2) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Note;
(3) reduce the principal of or premium on or change the
stated maturity of any Note or change the date on which any Notes may
be subject to redemption or repurchase or reduce the redemption or
repurchase price therefor;
(4) make any Note payable in money other than that stated in
the Note or change the place of payment from New York, New York;
(5) waive a default on the payment of the principal of,
interest on, or redemption payment with respect to any Note;
(6) make any change in provisions of this Indenture
protecting the right of each holder of Notes to receive payment of
principal of and interest on such Note on or after the due date thereof
or to bring suit to enforce such payment, or permitting holders of a
majority in principal amount of Notes to waive Defaults or Events of
Default;
(7) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control or make and consummate an
Asset Sale Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect
thereto; or
(8) modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes
in a manner which adversely affects the holders of Notes.
After an amendment, supplement or waiver under this Section
8.02 becomes effective, the Company shall mail to the holders a notice briefly
describing the amendment, supplement or waiver.
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of
<PAGE> 80
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the documents described in Section 8.06 hereof, the Trustee shall join with the
Company in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a holder of a Note is a continuing consent
conclusive and binding upon such holder and every subsequent holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such holder or subsequent holder, however, may revoke
the consent as to his Note or portion of a Note, if the Trustee receives the
notice of revocation before the date the amendment, supplement, waiver or other
action becomes effective.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the holders entitled to consent to any
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date unless the consent of the requisite number
of holders has been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (8)
<PAGE> 81
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of Section 8.02 hereof. In that case the amendment, supplement, waiver or other
action shall bind each holder of a Note who has consented to it and every
subsequent holder of a Note or portion of a Note that evidences the same debt as
the consenting holder's Note.
Section 8.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement, or waiver changes the terms of a
Note, the Trustee may request the holder of the Note to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue and the Trustee shall authenticate a new security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
-------------------------------
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article 8 if the amendment, supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver the Trustee shall be
entitled to receive and, subject to Section 7.01 hereof, shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that such amendment, supplement or waiver is authorized or permitted by
this Indenture. The Company may not sign an amendment or supplement until the
Board of Directors of the Company approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
----------------------
The Company may terminate its obligations under the Notes and
this Indenture, except the obligations referred to in the last paragraph of this
Section 9.01, if there shall have been cancelled by the Trustee or delivered to
the Trustee for cancellation all Notes theretofore authenticated and delivered
(other than any Notes that are asserted to have been destroyed,
<PAGE> 82
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lost or stolen and that shall have been replaced as provided in Section 2.07
hereof) and the Company has paid all sums payable by it hereunder or deposited
all required sums with the Trustee.
After such delivery the Trustee upon request shall acknowledge
in writing the discharge of the Company's obligations under the Notes and this
Indenture except for those surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 7.07, 9.05 and 9.06 hereof
shall survive.
Section 9.02. Legal Defeasance.
----------------
The Company may elect to be discharged from its obligations
with respect to the Notes on the date the conditions set forth in Section 9.04
below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall, subject to Section 9.06 hereof, execute proper instruments acknowledging
the same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (A) the rights of holders of outstanding
Notes to receive solely from the trust funds described in Section 9.04 hereof
and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due; (B) the Company's obligations with respect to such Notes under Sections
2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 4.18 hereof; (C) the rights, powers,
trusts, duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof); and (D) this
Article 9. Subject to compliance with this Article 9, the Company may exercise
its option under this Section 9.02 with respect to the Notes notwithstanding the
prior exercise of its option under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
-------------------
At the option of the Company, pursuant to a Board Resolution,
the Company shall be released from its obligations under Sections 4.02 through
4.17 hereof, inclusive, Section
<PAGE> 83
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4.19, and Section 5.01 hereof with respect to the outstanding Notes on and after
the date the conditions set forth in Section 9.04 hereof are satisfied
(hereinafter, "Covenant Defeasance"). For this purpose, such Covenant Defeasance
means that 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 specified
Section or portion thereof, whether directly or indirectly by reason of any
reference elsewhere herein to any such specified Section or portion thereof or
by reason of any reference in any such specified Section or portion thereof to
any other provision herein or in any other document, but the remainder of this
Indenture and the Notes shall be unaffected thereby.
Section 9.04. Conditions to Legal Defeasance or Covenant
Defeasance.
------------------------------------------
The following shall be the conditions to application of
Section 9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused
to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of
the Notes, (A) money in an amount; (B) U.S. Government Obligations
which through the payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than the due
date of any payment, money in an amount; or (C) a combination thereof,
sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and accrued interest on
the outstanding Notes at the maturity date of such principal, premium,
if any, or interest, or on dates for payment and redemption of such
principal, premium, if any, and interest selected in accordance with
the terms of this Indenture and of the Notes;
(2) no Event of Default or Default shall have occurred and
be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy, insolvency
<PAGE> 84
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or reorganization events are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(3) such Legal Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest for purposes of the
TIA with respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(5) the Company shall have delivered to the Trustee an
Opinion of Counsel stating that, as a result of such Legal Defeasance
or Covenant Defeasance, neither the trust nor the Trustee will be
required to register as an investment company under the Investment
Company Act of 1940, as amended;
(6) in the case of an election under Section 9.02 above, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that the Company has received from, or there has been published
by, the Internal Revenue Service a ruling to the effect that the
holders of the Notes or persons in their positions will not recognize
income, gain or loss for Federal income tax purposes as a result of
such deposit, Legal Defeasance and discharge and will be subject to
federal income tax on the same amount and in the same manner, and at
the same times, as would have been the case if such deposit, Legal
Defeasance and discharge had not occurred;
(7) in the case of an election under Section 9.03 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
deposit, Covenant Defeasance and discharge and will be subject to
federal income tax on the same amount, and in the same manner and at
the same times, as would have been the case if such deposit, Covenant
Defeasance and discharge had not occurred;
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or re-
<PAGE> 85
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lating to either the Legal Defeasance under Section 9.02 above or the
Covenant Defeasance under Section 9.03 hereof (as the case may be) have
been complied with;
(9) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit under clause (1) was not
made by the Company with the intent of defeating, hindering, delaying
or defrauding any other creditors of the Company or others;
(10) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that (i) the trust funds will not be
subject to any rights of holders of Senior Indebtedness, including,
without limitation, those arising under this Indenture and (ii) after
the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally;
(11) the Company shall have paid or duly provided for payment
under terms mutually satisfactory to the Company and the Trustee all
amounts then due to the Trustee pursuant to Section 7.07 hereof; and
(12) certain other customary conditions precedent are
satisfied.
Section 9.05. Deposited Money and U.S. Government Obligations to
Be Held in Trust; Other Miscellaneous Provisions.
--------------------------------------------------
All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the holders of such Notes, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued 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 U.S. Government
Obligations deposited pursuant to Section 9.04 hereof or the principal, premium,
if any, and interest received in respect thereof other than any such tax, fee
<PAGE> 86
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or other charge which by law is for the account of the holders of the
outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 9 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
9.01 hereof; provided, however, that if the Company has made any payment of
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of their obligations, the Company shall be subrogated to the
rights of the holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
---------------------------
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Company, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
----------------------
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company in trust for the payment of the principal of, or
premium, if any, or interest on any Note
<PAGE> 87
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that are not applied but remain unclaimed by the holder of such Note for two
years after the date upon which the principal of, or premium, if any, or
interest on such Note shall have respectively become due and payable shall be
repaid to the Company upon Company Request, or if such moneys are then held by
the Company in trust, such moneys shall be released from such trust; and the
holder of such Note entitled to receive such payment shall thereafter, as an
unsecured general creditor, look only to the Company for the payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that the Trustee or any such
Paying Agent, before being required to make any such repayment, may, at the
expense of the Company, either mail to each Noteholder affected, at the address
shown in the register of the Notes maintained by the Registrar pursuant to
Section 2.03 hereof, or cause to be published once a week for two successive
weeks, in a newspaper published in the English language, customarily published
each Business Day and of general circulation in the City of New York, New York,
a 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 mailing or
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Company. After payment to the Company or the release of any money held in
trust by the Company, Noteholders entitled to the money must look only to the
Company for payment as general creditors unless applicable abandoned property
law designates another person.
ARTICLE 10
SUBORDINATION OF NOTES
Section 10.01. Notes Subordinate to Senior Indebtedness.
----------------------------------------
The Company covenants and agrees, and each holder of Notes, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article 10, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 10 to the prior payment in full in
cash of all existing and future Senior Indebtedness of the Company.
<PAGE> 88
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This Article 10 shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of or continue to
hold Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder and
they or each of them may enforce such provisions.
Section 10.02. Payment Over of Proceeds upon Dissolution, etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, arrangement, liquidation, reorganization,
dissolution or other winding up or other similar case or proceeding in
connection therewith, whether or not involving insolvency or bankruptcy,
relative to the Company or to its creditors, as such, or to the Company's
assets, whether voluntary or involuntary or (b) any general assignment for the
benefit of creditors or other marshalling of assets or liabilities of the
Company (except in connection with the merger or consolidation of the Company or
its liquidation or dissolution following the transfer of all or substantially
all of its assets, upon the terms and conditions permitted by Section 5.01),
then and in any such event:
(1) the holders of Senior Indebtedness of the Company will
be entitled to receive payment and satisfaction in full in cash of all
amounts due on or in respect of all Senior Indebtedness of the Company
before the holders of the Notes are entitled to receive or retain any
payment or distribution of any kind or character on account of the
Notes;
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities,
including without limitation, by set-off or otherwise to which the
holders or the Trustee would be entitled but for the provisions of this
Article 10 shall be paid by the liquidating trustee or agent or other
Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to
the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by
each, to the extent necessary to make payment in full in cash of all
Senior Indebt-
<PAGE> 89
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edness remaining unpaid, after giving effect to any concurrent payment
or distribution, or provision therefor, to the holders of such Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 10.02, the Trustee or the holder of any Note
shall have received any payment or distribution of assets of the
Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in
respect of the Notes before all Senior Indebtedness of the Company is
paid and satisfied in full in cash, then such payment or distribution
will be held by the recipient in trust for the benefit of holders of
Senior Indebtedness and will be immediately paid over or delivered to
the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for
the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article 10 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 10.03. Suspension of Payment When Senior Indebtedness in
Default.
-------------------------------------------------
(a) Unless Section 10.02 hereof shall be applicable, after the
occurrence of a Payment Default on Designated Senior Indebtedness, no payment or
distribution of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Notes by the Company)
<PAGE> 90
-83-
may be made by or on behalf of the Company or any Subsidiary of the Company,
including, without limitation, by way of set-off or otherwise, for or on account
of the Notes, or for or on account of the purchase, redemption or other
acquisition of any Notes, and neither the Trustee nor any holder or owner of any
Notes shall take or receive from the Company or any Subsidiary of the Company,
directly or indirectly in any manner, payment in respect of all or any portion
of Notes commencing on the date of receipt by the Trustee of written notice from
the representative of the holders of Designated Senior Indebtedness (the
"Representative") of the occurrence of such Payment Default, and in any such
event, such prohibition shall continue until such Payment Default is cured,
waived in writing or otherwise ceases to exist. At such time as the prohibition
set forth in the preceding sentence shall no longer be in effect, subject to the
provisions of the following paragraph (b), the Company shall resume making any
and all required payments in respect of the Notes, including any missed
payments.
(b) Unless Section 10.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets of the Company of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the Notes by
the Company) may be made by the Company or any Subsidiary of the Company,
including, without limitation, by way of set-off or otherwise, for or on account
of the Notes, or for or on account of the purchase, redemption or other
acquisition of any Notes, and neither the Trustee nor any holder or owner of any
Notes shall take or receive from the Company or any Subsidiary of the Company,
directly or indirectly in any manner, payment in respect of all or any portion
of the Notes for a period (a "Payment Blockage Period") commencing on the date
of receipt by the Trustee of written notice from the Representative of such
Non-Payment Event of Default unless and until (subject to any blockage of
payments that may then be in effect under the preceding paragraph) the earliest
of (x) more than 179 days shall have elapsed since receipt of such written
notice by the Trustee, (y) such Non-Payment Event of Default shall have been
cured or waived in writing or otherwise shall have ceased to exist or such
Designated Senior Indebtedness shall have been paid in full or (z) such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from such Representative, after which, in the case of clause (x),
(y) or (z), the Company shall resume making any and all required pay-
<PAGE> 91
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ments in respect of the Notes, including any missed payments. Notwithstanding
any other provision of this Indenture, in no event shall a Payment Blockage
Period commenced in accordance with the provisions of this Indenture described
in this paragraph extend beyond 179 days from the date of the receipt by the
Trustee of the notice referred to above (the "Initial Blockage Period"). Any
number of additional Payment Blockage Periods may be commenced during the
Initial Blockage Period; provided, however, that no such additional Payment
Blockage Period shall extend beyond the Initial Blockage Period. After the
expiration of the Initial Blockage Period, no Payment Blockage Period may be
commenced until at least 180 consecutive days have elapsed from the last day of
the Initial Blockage Period. Notwithstanding any other provision of this
Indenture, no Non-Payment Event of Default with respect to Designated Senior
Indebtedness which existed or was continuing on the date of the commencement of
any Payment Blockage Period initiated by the Representative shall be, or be
made, the basis for the commencement of a second Payment Blockage Period
initiated by the Representative, whether or not within the Initial Blockage
Period, unless such Non-Payment Event of Default shall have been cured or waived
for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, the
Trustee or the holder of any Note shall have received any payment prohibited by
the foregoing provisions of this Section 10.03, then and in such event such
payment shall be paid over and delivered forthwith to the authorized Person
initiating the Payment Blockage Period, in trust for distribution to the holders
of Senior Indebtedness or, if no amounts are then due in respect of Senior
Indebtedness, promptly returned to the Company, or otherwise as a court of
competent jurisdiction shall direct.
Section 10.04. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the
Trustee shall not be liable to any holder of Senior Indebtedness if it shall
mistakenly pay over or deliver to holders, the Company or any other Person
moneys or as-
<PAGE> 92
-85-
sets to which any holder of Senior Indebtedness shall be entitled by virtue of
this Article 10 or otherwise.
Section 10.05. Subrogation to Rights of Holders of Senior
Indebtedness.
------------------------------------------
Upon the payment in full of all Senior Indebtedness, the
holders of the Notes shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any and interest on the Notes shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
10, and no payments over pursuant to the provisions of this Article 10 to the
holders of Senior Indebtedness by holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the holders would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article 10, to the payment
of all amounts payable under the Senior Indebtedness of the Company, then and in
such case the holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of such Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full in cash.
Section 10.06. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article 10 are and are intended solely
for the purpose of defining the relative rights of the holders of the Notes on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the holders of the
Notes the principal of, premium, if any, and interest on the Notes as
<PAGE> 93
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and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against the Company of the holders of the
Notes and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon a Default or
an Event of Default under this Indenture, subject to the rights, if any, under
this Article 10 of the holders of Senior Indebtedness (1) in any case,
proceeding, dissolution, liquidation or other winding-up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of the
Company referred to in Section 10.02 hereof, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Trustee or such holder, or (2) under the conditions specified
in Section 10.03, to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 10.03(c) hereof.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Notes by reason of any provision of this
Article 10 shall not be construed as preventing the occurrence of a Default or
an Event of Default hereunder.
Section 10.07. Trustee to Effectuate Subordination.
-----------------------------------
Each holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness, or any authorized Person,
may file such a claim on behalf of holders of the Notes.
Section 10.08. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act
<PAGE> 94
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or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the holders of the
Notes, without incurring responsibility to the holders of the Notes and without
impairing or releasing the subordination provided in this Article 10 or the
obligations hereunder of the holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
event shall any such actions limit the right of the holders of the Notes to take
any action to accelerate the maturity of the Notes pursuant to Article 6 hereof
or to pursue any rights or remedies hereunder or under applicable laws if the
taking of such action does not otherwise violate the terms of this Indenture.
Section 10.09. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee at its Corporate Trust Office in respect of the
Notes. Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
this Section 10.09, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 10.09 at least five Business Days prior to
the date upon which by the terms hereof any money may become
<PAGE> 95
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payable for any purpose under this Indenture (including, without limitation, the
payment of the principal of, premium, if any, or interest on any Note), then,
anything herein contained to the contrary notwithstanding but without limiting
the rights and remedies of the holders of Senior Indebtedness or any trustee,
fiduciary or agent therefor, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within five Business Days prior to such date; nor shall the
Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and until
the Trustee shall have received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the
Trustee shall be entitled to rely on the delivery to it of a written notice to
the Trustee and the Company by a Person representing itself to be a holder of
Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish
that such notice has been given by a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor); provided, however, that failure to give
such notice to the Company shall not affect in any way the ability of the
Trustee to rely on such notice. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 10, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 10.10. Reliance on Judicial Order or Certificate of
Liquidating Agent.
--------------------------------------------
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee, subject to the provisions of
Section 7.01 hereof, and the holders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certifi-
<PAGE> 96
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cate of the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee for the benefit of creditors, agent or other Person making such payment
or distribution, delivered to the Trustee or to the holders, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10;
provided that the foregoing shall apply only if such court has been fully
apprised of the provisions of this Article 10.
Section 10.11. Rights of Trustee as a Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
-----------------------------------------------
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article 10 with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall deprive
the Trustee of any of its rights as such holder. Nothing in this Article 10
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
Section 10.12. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 10 shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 10 in addition to or in place of the Trustee.
Section 10.13. No Suspension of Remedies.
-------------------------
Nothing contained in this Article 10 shall limit the right of
the Trustee or the holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article 6 or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article 10 of the holders, from time to time, of Senior Indebtedness.
<PAGE> 97
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ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 11.02. Notices.
-------
Any notice or communication shall be given in writing and
delivered in person, sent by facsimile, delivered by commercial courier service
or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
Park-Ohio Industries, Inc.
23000 Euclid Avenue
Cleveland, Ohio 44117
Attention: Ronald J. Cozean, Esq.
Copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: David P. Porter, Esq.
If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Fax Number: (612) 667-9825
Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.
<PAGE> 98
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The Company or the Trustee by written notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication to a Noteholder is mailed in the
manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 11.03. Communications by Holders with Other Holders.
--------------------------------------------
Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05 below) stating that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 11.05 below) stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
<PAGE> 99
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Section 11.05. Statements Required in Certificate and Opinion.
----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or
he has made such examination or investigation as is necessary to enable
it or him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 11.06. When Treasury Notes Disregarded.
-------------------------------
In determining whether the holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company or any other obligor on the Notes or by any Affiliate
of any of them shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which the Trustee actually knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith shall not be
disregarded if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to the Notes and that the pledgee is not
the Company or any other obligor upon the Notes or any Affiliate of any of them.
Section 11.07. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or
meetings of Noteholders. The Registrar and Paying Agent may make reasonable
rules for their functions.
<PAGE> 100
-93-
Section 11.08. Business Days; Legal Holidays.
-----------------------------
A "Business Day" is a day that is not a Legal Holiday. A
"Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day
on which banking institutions are not required to be open in the State of New
York. If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 11.09. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 11.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Company or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 11.11. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or incorporator, as
such, of the Company shall not have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creations. Each Noteholder by
accepting a Note waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Notes.
Section 11.12. Successors.
----------
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee, any additional trustee
and any Paying Agents in this Indenture shall bind its successor.
<PAGE> 101
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Section 11.13. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 11.14. Table of Contents, Headings, etc.
--------------------------------
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.15. Separability.
------------
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 102
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IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed, and the Company's corporate seal to be hereunto affixed and
attested, all as of the date and year first written above.
PARK-OHIO INDUSTRIES, INC.
By: /s/ James S. Walker
----------------------------------
Name: James S. Walker
Title: Vice President and
Chief Financial Officer
ATTEST:
/s/ Ronald J. Cozean
- -----------------------------
Name: Ronald J. Cozean
Title: Secretary
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Timothy P. Mowdy
----------------------------------
Name: Timothy P. Mowdy
Title: Corporate Trust Officer
<PAGE> 103
EXHIBIT A
---------
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL
NOT PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS NOTE AND THE LAST DATE
ON WHICH THE COMPANY, OR ANY AFFILIATE OF THE COMPANY, WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE COMPANY AND TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT; AND (2) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION
TERMINATION DATE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
A-1
<PAGE> 104
CUSIP
Number
PARK-OHIO INDUSTRIES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2007
Park-Ohio Industries, Inc., an Ohio corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to CEDE & CO. or registered assigns the principal sum of $
Dollars, on December 1, 2007.
Interest Payment Dates: June 1 and December 1, commencing
December 1, 1999
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-2
<PAGE> 105
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
PARK-OHIO INDUSTRIES, INC.
By:
-----------------------
By:
-----------------------
[SEAL]
Certificate of Authentication:
This is one of the 9 1/4% Senior
Subordinated Notes due 2007 referred
to in the within-mentioned Indenture
Dated:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
--------------------------------
Authorized Signatory
A-3
<PAGE> 106
(REVERSE SIDE)
PARK-OHIO INDUSTRIES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2007
1. INTEREST.
PARK-OHIO INDUSTRIES, Inc., an Ohio corporation (the
"Company"), promises to pay interest on the principal amount of this Note
semiannually on June 1 and December 1 of each year (each an "Interest Payment
Date"), commencing on December 1, 1999, at the rate of 9 1/4% per annum.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from June 2, 1999.
The Company shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to 1% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered holder of this Note at the close of business on the May 15 or
November 15 preceding the Interest Payment Date (whether or not such day is a
Business Day). The holder must surrender this Note to a Paying Agent to collect
principal payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts; provided, however, that the
Company may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to the holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Norwest Bank Minnesota, National Association, a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to the holders of the Notes. Neither the Company nor any of its Subsidiaries or
Af-
A-4
<PAGE> 107
filiates may act as Paying Agent but may act as registrar or co-registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Note under an Indenture dated as of
June 2, 1999 (the "Indenture") between the Company and the Trustee. The terms of
this Note 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 Section Section 77aaa-77bbbb) as in effect on the date of the Indenture.
This Note is subject to all such terms, and the holder of this Note is referred
to the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured obligations of the Company
limited to $200,000,000 aggregate principal amount; provided, however, that (i)
no more than $50,000,000 in aggregate principal amount of Exchange Notes may be
authenticated in exchange for the cancellation of up to $50,000,000 of the
Initial Notes and (ii) no more than $150,000,000 in Exchange Notes shall be
reserved and may be authenticated for the Series A/B Notes. The Indenture
imposes certain restrictions on, among other things, the incurrence of
indebtedness, the incurrence of liens and the issuance of preferred stock by the
Company and its subsidiaries, mergers and sale of assets, the payments of
dividends on, or the repurchase of, capital stock of the Company and its
subsidiaries, certain other restricted payments by the Company and its
subsidiaries, certain transactions with, and investments in, its affiliates,
certain sale and lease-back transactions and a provision regarding
change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provisions. Each holder
of this Note, by accepting the same; (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee, on behalf of such holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture; and (c) appoints the Trustee
at-
A-5
<PAGE> 108
torney-in-fact of such holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
6. OPTIONAL REDEMPTION.
The Company may redeem the Notes, in whole or in part, at any
time on or after December 1, 2002 at the redemption prices set forth in Section
3.07 of the Indenture, together, in each case, with accrued and unpaid interest
to the redemption date.
In addition, the Company may redeem Notes out of the Net
Proceeds of one or more Public Equity Offerings at the redemption price, in the
amount and under the terms set forth in the Indenture.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at
least 30 days but not more than 60 days prior to the redemption date to each
holder of Notes to be redeemed at its registered address as it shall appear on
the register of the Notes maintained by the Registrar. On and after any
Redemption Date, interest will cease to accrue on the Notes or portions thereof
called for redemption unless the Company shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales
be used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Company is also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the
Company and CIBC World Markets Corp., ING Baring Furman Selz LLC and Value
Investing Partners, Inc. as Initial Purchaser of the Notes, the Company will be
obligated to consummate an exchange offer pursuant to which the holder of this
Note shall have the right to exchange this Note for Notes of a
A-6
<PAGE> 109
separate series issued under the Indenture (or a trust indenture substantially
identical to the Indenture in accordance with the terms of the Registration
Rights Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A holder may register
the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Note selected for redemption or register the transfer of or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered holder of this Note may be treated as the owner
of it for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on
any Note remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its request. After that, holders entitled to
money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be modified, amended or supplemented by the Company and the Trustee with the
consent of the holders of at least a majority in principal amount of the Notes
then outstanding and any existing default or compliance with any provision may
be
A-7
<PAGE> 110
waived in a particular instance with the consent of the holders of a majority in
principal amount of the Notes then outstanding. Without the consent of holders,
the Company and the Trustee may amend the Indenture or the Notes or supplement
the Indenture for certain specified purposes including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of
its predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event
of Default (other than an Event of Default pursuant to Section 6.01(vi) or
6.01(vii) of the Indenture with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding, may
declare to be immediately due and payable the entire principal amount of all the
Notes then outstanding plus accrued but unpaid interest to the date of
acceleration; provided, however, that after such acceleration but before
judgment or decree based on such acceleration is obtained by the Trustee, the
holders of a majority in aggregate principal amount of the outstanding Notes
may, under certain circumstances, rescind and annul such acceleration and its
consequences if all existing Events of Default, other than the nonpayment of
principal, premium or interest that has become due solely because of the
acceleration, have been cured or waived and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any subsequent
Default or impair any right consequent thereto. In case an Event of Default
specified in Section 6.01(vi) or 6.01(vii) of the Indenture with respect to the
Company occurs, such principal amount, together with premium, if any, and
interest with respect to all of the Notes, shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the holders
of the Notes.
A-8
<PAGE> 111
16. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company and may otherwise deal with the Company as if it were not
Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect or by reason of, such obligations or their creation.
The holder of this Note by accepting this Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a holder of
a Note 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).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP Numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
A-9
<PAGE> 112
21. GOVERNING LAW.
THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE INDENTURE OR THE NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
Park-Ohio Industries, Inc., 23000 Euclid Avenue, Cleveland, Ohio 44117,
Attention: Secretary.
A-10
<PAGE> 113
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.10 or Section 4.17 of the
Indenture, check the appropriate box:
|_| Section 4.10 |_| Section 4.17
If you want to have only part of the Note purchased by the Company pursuant to
Section 4.09 or Section 4.16 of the Indenture, state the amount you elect to
have purchased:
$
---------------------------
Date:
-----------------------
Your Signature:
--------------------------------------
(Sign exactly as your name appears on the face
of this Note)
- --------------------------------------
Signature Guaranteed
<PAGE> 114
EXHIBIT B
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE
OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION)
(THE "DEPOSITORY") 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 IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), 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.
B-1
<PAGE> 115
EXHIBIT C-1
-----------
[FORM OF ASSIGNMENT FOR 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[_] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act
provided by Rule 144A thereunder.
or
[_] (b) this Note is being transferred other than in
accordance with (a) above and documents are being
furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date:__________________ Your Signature:______________________
--------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ________________________________
C-1-1
<PAGE> 116
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
C-1-2
<PAGE> 117
EXHIBIT C-2
-----------
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[_] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act
provided by Rule 144A thereunder.
or
[_] (b) this Note is being transferred other than in
accordance with (a) above and documents are being
furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: __________________ Your Signature: ________________
----------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ______________________________
C-2-1
<PAGE> 118
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ __________________________
NOTICE: To be executed by
an executive officer
C-2-2
<PAGE> 119
EXHIBIT D
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
-----------, ----
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Park-Ohio Industries, Inc.
(the "Company") 9 1/4% Senior
Subordinated Notes due 2007,
Series C (the "Notes")
-----------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture dated as of May [ ], 1999 relating to the Notes and the
undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that the Notes have not been registered under
the Securities Act, and that the Notes 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 any Notes within two years
after the original issuance of the Notes, we will do so only (A) to the
Company or any subsidiary thereof; (B) inside the United States in
compliance with Rule 144A under the Securities Act, to a "qualified
institutional buyer" (as defined in Rule 144A); (C) inside the United
States to an "accredited investor" (as defined below) that, prior to
such transfer, furnishes to you a signed letter substantially in the
form of this letter; (D) outside the United States to a foreign person
in compliance with Rule 904 of Regulation S under the Securities
D-1
<PAGE> 120
Act; (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Notes from
us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications,
legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Notes 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.
6. We are not acquiring the Notes with a view toward the
distribution thereof in a transaction that would violate the Securities
Act or the securities laws of any state of the United States or any
other applicable jurisdiction.
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.
Very truly yours,
[Name of Transferee]
By:
-----------------------------
Authorized Signature
D-2
<PAGE> 121
EXHIBIT E
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
--------------, ----
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Park-Ohio Industries, Inc.
(the "Company") 9 1/4% Senior
Subordinated Notes due 2007,
Series C (the "Notes")
-----------------------------
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
E-1
<PAGE> 122
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
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. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------
Authorized Signature
E-2
<PAGE> 1
Exhibit 4.10
------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 2, 1999
by and among
PARK-OHIO INDUSTRIES, INC.
and
THE INITIAL PURCHASERS
named herein
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions.......................................................................................1
2. Exchange Offer....................................................................................5
3. Shelf Registration................................................................................9
4. Additional Interest..............................................................................10
5. Registration Procedures..........................................................................12
6. Registration Expenses............................................................................23
7. Indemnification..................................................................................24
8. Rules 144 and 144A...............................................................................28
9. Underwritten Registrations.......................................................................28
10. Miscellaneous...................................................................................29
(a) Remedies..............................................................................29
(b) Enforcement...........................................................................29
(c) No Inconsistent Agreements............................................................29
(d) Adjustments Affecting Registrable Notes or Series A/B Notes...........................30
(e) Amendments and Waivers................................................................30
(f) Notices...............................................................................30
(g) Successors and Assigns................................................................31
(h) Counterparts..........................................................................31
(i) Headings..............................................................................31
(j) Governing Law.........................................................................31
(k) Severability..........................................................................31
(l) Entire Agreement......................................................................32
(m) Notes Held by the Company or its Affiliates...........................................32
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
June 2, 1999, by and among Park-Ohio Industries, Inc., an Ohio corporation (the
"Company"), and CIBC World Markets Corp., ING Baring Furman Selz LLC and Value
Investing Partners, Inc., as initial purchasers (collectively, the "Initial
Purchasers").
This Agreement is entered into in connection with the
Securities Purchase Agreement, dated as of May 27, 1999 among the Company and
the Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchasers of $50,000,000 aggregate principal amount of
the Company's 9 1/4% Senior Subordinated Notes due 2007, Series C (the "Notes").
In order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement to the Initial Purchasers and their direct and indirect transferees
and assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a).
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2(b).
CLOSING: See the Purchase Agreement.
COMPANY: See the introductory paragraph to this Agreement.
EFFECTIVENESS DATE: The 130th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(c).
<PAGE> 4
-2-
EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 45th day after the Issue Date.
HOLDER: As the context requires, any holder of a Registrable
Note or Registrable Notes or any holder of a Series A/B Note or Series A/B
Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of June 2, 1999, among the
Company and Norwest Bank Minnesota, National Association, as trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraph to this
Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to
the Initial Purchasers pursuant to the Purchase Agreement.
LIEN: See the Indenture.
NASD: See Section 5(t).
NOTES: See the introductory paragraphs to this Agreement.
PARTICIPANT: See Section 7(a).
<PAGE> 5
-3-
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this
Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the
Notes and at all times subsequent thereto and, if issued, the Private Exchange
Notes, until in the case of any such Notes or any such Private Exchange Notes,
as the case may be, (i) a Registration Statement covering such Notes or such
Private Exchange Notes has been declared effective by the SEC and such Notes or
such Private Exchange Notes, as the case may be, have been disposed of in
accordance with such effective Registration Statement, (ii) such Notes or such
Private Exchange Notes, as the case may be, are sold in compliance with Rule
144, (iii) in the case of any Note, such Note has been exchanged for an Exchange
Note or Exchange Notes pursuant to an Exchange Offer or (iv) such Notes or such
Private Exchange Notes, as the case may be, cease to be outstanding.
<PAGE> 6
-4-
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the
Company, including, but not limited to, the Exchange Registration Statement,
which covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
SERIES A/B NOTES: The Company's 9 1/4% Senior Subordinated
Notes due 2007 in the aggregate principal amount of $150,000,000 issued pursuant
to the indenture dated as of November 25, 1997 among the Company and the
Trustee.
<PAGE> 7
-5-
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent,
the trustee under any indenture governing the Exchange Notes and Private
Exchange Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter(s)
for reoffering to the public.
2. EXCHANGE OFFER
--------------
(a) The Company agrees to use its best efforts to file with the SEC as soon as
practicable after the Closing, but in no event later than the Filing Date, an
offer to exchange (the "Exchange Offer") any and all of the Registrable Notes
and the Series A/B Notes (other than the Private Exchange Notes, if any) for a
like aggregate principal amount of debt securities of the Company, which are
identical to the Notes (the "Exchange Notes") (and which are entitled to the
benefits of the Indenture or a trust indenture which is substantially identical
to the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA), except that the Exchange Notes (other
than the Private Exchange Notes, if any) shall have been registered pursuant to
an effective registration statement under the Securities Act and will not
contain terms with respect to transfer restrictions. The Exchange Offer will be
registered under the Securities Act on the appropriate form (the "Exchange
Registration Statement") and will comply with all applicable tender offer rules
and regulations under the Exchange Act. The Company agrees to use its best
efforts to (x) cause the Exchange Registration Statement to become effective
under the Securities Act on or before the Effectiveness Date; (y) keep the
Exchange Offer open for at least 30 days (or longer if required by applicable
law) after the date that notice of the
<PAGE> 8
-6-
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 60th day following the date on which the Exchange Registration
Statement is declared effective. Each Holder who participates in the Exchange
Offer will be required to represent that any Exchange Notes received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, that such Holder is
not an affiliate of the Company within the meaning of Rule 405 promulgated under
the Securities Act or if it is such an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable and that is not acting on behalf of any Person who could not
truthfully make the foregoing representations. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable Notes
that are Private Exchange Notes and Exchange Notes held by Participating
Broker-Dealers, and the Company shall have no further obligation to register
Registrable Notes or Series A/B Notes (other than Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers) pursuant to Section 3 of
this Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of the staff of the SEC. Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement
<PAGE> 9
-7-
describing the means by which Participating Broker-Dealers may resell the
Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such Persons must comply with such requirements
in order to resell the Exchange Notes, PROVIDED that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Company, upon the request of the Initial Purchasers
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchasers, a like principal amount
of debt securities of the Company that are identical in all material respects to
the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant
to the same indenture as the Exchange Notes) except for the placement of a
restrictive legend on the Private Exchange Notes. If possible, the Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest
on the Exchange Notes and Private Exchange Notes will accrue from the last
interest payment date on which interest was paid on the Notes surrendered in
exchange therefor or, if no interest has been paid on the Notes, from the Issue
Date.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Registration Statement, together with an appropriate
letter of transmittal and related documents;
<PAGE> 10
-8-
(ii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes and all Series A/B Notes
tendered and not validly withdrawn pursuant to the Exchange Offer or
the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes and all
Series A/B Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount to the Notes, or the Series
A/B Notes, of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical to
the Indenture, which in either event will provide that (1) the Exchange Notes
will not be subject to the transfer restrictions set forth in the Indenture and
(2) the Private Exchange Notes will be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes, the Series A/B Notes and the Notes
will vote and consent together on all matters as one class and that neither the
Exchange Notes, the Private Exchange Notes, the Series A/B Notes nor the Notes
will have the right to vote or consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer,
the Company or Holders of at least a majority in aggregate principal amount of
the Registrable Notes reasonably de-
<PAGE> 11
-9-
termine in good faith that (i) the Exchange Notes would not, upon receipt, be
tradable by such Holders which are not affiliates (within the meaning of the
Securities Act) of the Company without restriction under the Securities Act and
without restrictions under applicable state securities laws, (ii) the interests
of the Holders under this Agreement would be adversely affected by the
consummation of the Exchange Offer or (iii) after conferring with counsel, the
SEC is unlikely to permit the commencement of the Exchange Offer prior to the
Effectiveness Date, (2) subsequent to the consummation of the Private Exchange,
any holder of the Private Exchange Notes so requests or (3) the Exchange Offer
is commenced and not consummated within 60 days of the date on which the
Exchange Registration Statement is declared effective, then the Company shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") and shall file an Initial Shelf Registration pursuant to Section
3. Following the delivery of a Shelf Notice to the Holders of Registrable Notes
(in the circumstances contemplated by clauses (1) and (3) of the preceding
sentence), the Company shall not have any further obligation to conduct the
Exchange Offer or the Private Exchange under this Section 2.
(d) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder represents and warrants to
the Company that, (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange
Notes to be issued in the Exchange Offer, and (C) it is acquiring the Exchange
Notes in its ordinary course of business. Each Holder hereby acknowledges and
agrees that any Participating Broker-Dealer and any Holder using the Exchange
Offer to participate in a distribution of Exchange Notes (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available
June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988),
as interpreted in the Commission's letter to Shearman & Sterling dated July 2,
1993, and similar no-action letters, 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
<PAGE> 12
-10-
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Notes obtained by such Holder in exchange
for Notes acquired by such Holder directly from the Company or an affiliate
thereof.
3. SHELF REGISTRATION
------------------
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company shall prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the
"Initial Shelf Registration"). If the Company shall have not yet filed an
Exchange Registration Statement, the Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing Date. In
any other instance, the Company shall use its best efforts to file with the SEC
the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration. The Company shall use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act, if an Exchange Registration Statement has
not yet been declared effective, on or prior to the Effectiveness Date, or, in
any other instance, as soon as practicable thereafter and in no event later than
45 days after filing of the Initial Shelf Registration, and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date which is 24 months from the date on which such Initial Shelf Registration
is declared effective (subject to extension pursuant to the last paragraph of
Section 5 hereof), or such shorter period ending when (i) all Registrable Notes
covered by the Initial Shelf Registration have been sold in the manner set forth
and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Regis-
<PAGE> 13
-11-
tration covering all of the Registrable Notes has been declared effective under
the Securities Act (the "Effectiveness Period").
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period, the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously effective
for a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if requested by the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. ADDITIONAL INTEREST
-------------------
(a) The Company and the Initial Purchasers agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest ("Additional Inter-
<PAGE> 14
-12-
est") on the Notes (but not the Series A/B Notes) under the circumstances and to
the extent set forth below:
(i) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing
Date;
(ii) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been declared effective on or prior to
the Effectiveness Date;
(iii) if an Initial Shelf Registration required by Section
2(c)(2) has not been filed on or prior to the date required by Section
3(a);
(iv) if an Initial Shelf Registration required by Section
2(c)(2) has not been declared effective on or prior to the date
required by Section 3(a); and/or
(v) if (A) the Company has not exchanged the Exchange Notes
for all Notes and Series A/B Notes validly tendered in accordance with
the terms of the Exchange Offer on or prior to 60 days after the
Exchange Registration Statement was declared effective or (B) the
Exchange Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated or (C) if
applicable, the Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period;
(each such event referred to in clauses (i) through (v) above is a "Registration
Default"), the sole remedy available to Holders of the Notes will be the
immediate accrual of Additional Interest as follows: the per annum interest rate
on the Notes will increase by 50 basis points during the first 90-day period
following the occurrence of a Registration Default and until it is waived or
cured; and the per annum interest rate will increase by an additional 25 basis
points for each subsequent 90-day period during which the Registration Default
remains uncured, up to a maximum additional interest rate of 200 basis points
per annum, PROVIDED, HOWEVER, that only Holders of Private Exchange Notes shall
be entitled to receive Additional Interest as a result of a Registration Default
pursuant to
<PAGE> 15
-13-
clause (iii) or (iv), PROVIDED, FURTHER, that (1) upon the filing of the
Exchange Registration Statement or the Initial Shelf Registration (in the case
of (i) above), (2) upon the effectiveness of the Exchange Registration Statement
or a Shelf Registration (in the case of (ii) above), (3) upon the filing of the
Shelf Registration (in the case of (iii) above), (4) upon the effectiveness of
the Shelf Registration (in the case of (iv) above), or (5) upon the exchange of
Exchange Notes for all Notes tendered (in the case of (v)(A) above), or upon the
effectiveness of the Exchange Registration Statement which had ceased to remain
effective (in the case of (v)(B) above), or upon the effectiveness of the Shelf
Registration which had ceased to remain effective (in the case of (v)(C) above),
Additional Interest on the Notes as a result of such clause (i), (ii), (iii),
(iv) or (v) (or the relevant subclause thereof), as the case may be, shall cease
to accrue and the interest rate on the Notes will revert to the interest rate
originally borne by the Notes.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each June 1 and December 1 (to the Holders of
record of such Notes or Private Exchange Notes on the May 15 and November 15
immediately preceding such dates), commencing with the first such date occurring
after any such Additional Interest commences to accrue and until such
Registration Default is cured, by depositing with the Trustee, in trust for the
benefit of such Holders, immediately available funds in sums sufficient to pay
such Additional Interest. The amount of Additional Interest will be determined
by multiplying the applicable Additional Interest rate by the principal amount
of the Registrable Notes, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.
<PAGE> 16
-14-
5. REGISTRATION PROCEDURES
-----------------------
In connection with the filing of any Registration Statement
pursuant to Section 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and use their respective best efforts to cause each
such Registration Statement to become effective and remain effective as
provided herein, PROVIDED that, if (1) such filing is pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement
and each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriter(s), if any, a reasonable
opportunity to review copies of all such documents (including copies of
any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed (at least 5 business days prior to such
filing). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which
the Holders of Registrable Notes must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a
majority in aggregate principal amount of the Registrable Notes covered
by such Registration Statement, or such Participating Broker-Dealer, as
the case may be, their counsel, or the managing underwriter(s), if any,
shall reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as
<PAGE> 17
-15-
may be necessary to keep such Registration Statement continuously
effective for the Effectiveness Period or the Applicable Period, as the
case may be; cause the related Prospectus to be supplemented by any
prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to
them with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any
such Prospectus; the Company shall be deemed not to have used its best
efforts to keep a Registration Statement effective during the
Applicable Period if any of them voluntarily takes any action that
would result in selling Holders of the Registrable Notes covered
thereby or Participating Broker-Dealers seeking to sell Exchange Notes
not being able to sell such Registrable Notes or such Exchange Notes
during that period unless such action is required by applicable law or
unless the Company complies with this Agreement, including without
limitation, the provisions of clause 5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any,
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment
<PAGE> 18
-16-
thereto, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment thereto including
financial statements and schedules, documents incorporated or deemed to
be incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event or any information
becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in, or amendments or
supplements to, such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it 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 not misleading, and that in the case of the Prospectus, it 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 light of the circumstances under which they
were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is re-
<PAGE> 19
-17-
quired to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, use their best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use their best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter(s), if any, or the Holders of
a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriter(s), if any, or such Holders
reasonably request to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes who so requests and to each such
Participating Broker-Dealer who so requests and to counsel and the
managing underwriter(s), if any, without charge, one conformed copy of
the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
<PAGE> 20
-18-
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer,
as the case may be, their counsel, and the managing underwriter or
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary Prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the managing
underwriter or underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered
by, or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use their best efforts to
register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification
of (or exemption from such registration or qualification), such
Registrable Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters, if any, reasonably request in writing, PROVIDED that
where Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an underwritten
offering, the
<PAGE> 21
-19-
Company agrees to cause its counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed pursuant
to this Section 5(h); keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED that the Company shall not
be required to (A) qualify generally to do business in any jurisdiction
where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where
it is not then so subject or (C) subject itself to taxation in excess
of a nominal dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
<PAGE> 22
-20-
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi), as promptly as
reasonably practicable prepare and (subject to Section 5(a)) file with
the SEC, at the joint and several expense of the Company, a supplement
or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(l) Use its best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes, as the case
may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the
Exchange Notes, as the case may be, or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes or Exchange Notes, as the
case may be, in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes or
Exchange Notes, as the case may be.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in under-
<PAGE> 23
-21-
written offerings of debt securities similar to the Notes and take all
such other actions as are reasonably requested by the managing
underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) make such representations and warranties to the
managing underwriter or underwriters on behalf of any underwriters,
with respect to the business of the Company and its subsidiaries and
the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Notes, and
confirm the same if and when requested; (ii) obtain opinions of counsel
to the Company and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to
the managing underwriter or underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of
debt securities similar to the Notes and such other matters as may be
reasonably requested by the managing underwriter(s); (iii) obtain "cold
comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of any of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to
the managing underwriter or underwriters on behalf of any underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as may be reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement and the managing under-
<PAGE> 24
-22-
writer or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each
closing under such underwriting agreement, or as and to the extent
required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold,
or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and its
subsidiaries to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement. Records which the Company determines, in good faith, to be
confidential and any Records which it must notify the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in such Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer or underwriter will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it
<PAGE> 25
-23-
as the basis for any market transactions in the securities of the
Company or for any purpose other than in connection with such
Registration Statement unless and until such is made generally
available to the public. Each selling Holder of such Registrable Notes
and each such Participating Broker-Dealer will be required to further
agree that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give prompt notice to the
Company and allow the Company to undertake appropriate action to
prevent disclosure of the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the
Exchange Registration Statement or the first Registration Statement
relating to the Registrable Notes; and in connection therewith,
cooperate with the trustee under any such indenture and the Holders of
the Registrable Notes, to effect such changes to such 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
such trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of
<PAGE> 26
-24-
a Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i)
the Company has duly authorized, executed and delivered the Exchange
Notes and Private Exchange Notes and the related indenture and (ii)
each of the Exchange Notes or the Private Exchange Notes, as the case
may be, and related indenture constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its respective terms (with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes or the Series A/B
Notes by Holders to the Company (or to such other Person as directed by
the Company) in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be, the Company shall mark, or cause to be
marked, on such Registrable Notes or such Series A/B Notes, that such
Registrable Notes or such Series A/B Notes are being canceled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; and, in no event shall such Registrable Notes or such
Series A/B Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their respective best efforts to take all other
reasonable steps necessary to effect the registra-
<PAGE> 27
-25-
tion of the Registrable Notes covered by a Registration Statement
contemplated hereby.
The Company may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller or Participating
Broker-Dealer who unreasonably fails to furnish such information within a
reasonable time after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k), or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. In the event the Company shall give any such notice, each
of the Effectiveness Period and the Applicable Period shall be extended by the
number of days during such periods from and including the date of the giving of
such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Holder or Participating Broker-Dealer, as the case may be, shall have received
(x) the copies of the supplemented
<PAGE> 28
-26-
or amended Prospectus contemplated by Section 5(k) or (y) the Advice.
6. REGISTRATION EXPENSES
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions in the United States (x) where the Holders
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h), in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount of the Registrable Notes
included in any Registration Statement or of such Exchange Notes, as the case
may be), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Company desires such insurance, (viii) fees and expenses of
the
<PAGE> 29
-27-
Trustee, (ix) fees and expenses of all other Persons retained by the Company,
(x) internal expenses of the Company (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties), (xi) the expense of any annual audit, (xii) the fees and
expenses incurred in connection with any listing of the securities to be
registered on any securities exchange, (xiii) the fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities (but
not including any underwriting discounts or commissions or transfer taxes, if
any, attributable to the sale of the Registrable Notes or the Series A/B Notes
which discounts, commissions or taxes shall be paid by Holders) and (xiv) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Company
shall reimburse the Holders of the Registrable Notes being registered in such
registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket expenses of
the Holders of Registrable Notes incurred in connection with the registration of
the Registrable Notes. The Company shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
7. INDEMNIFICATION
---------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers and directors of each such Person,
and each Person, if any, who controls any such Person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "Participant"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses actually incurred in connection with any suit, action or proceeding
<PAGE> 30
-28-
or any claim asserted) caused by, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
Prospectus, or caused by, arising out of or based upon 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 or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Company in writing by
such Participant expressly for use therein; PROVIDED that the foregoing
indemnity with respect to any preliminary Prospectus shall not inure to the
benefit of any Participant (or to the benefit of an officer or director of such
Participant or any Person controlling such Participant) from whom the Person
asserting any such losses, claims, damages or liabilities purchased Registrable
Notes or Exchange Notes if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary Prospectus is eliminated or
remedied in the related Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) and a copy of the
related Prospectus (as so amended or supplemented) shall have been furnished to
such Participant at or prior to the sale of such Registrable or Exchange Notes,
as the case may be, to such Person.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors and officers
and each Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes giving rise to such obligations.
<PAGE> 31
-29-
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such Person (the "Indemnified Person")
shall promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and such Indemnified Person
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to any
such Indemnifying Person. It is understood that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold by all such Participants and any
such separate firm for the Company, it directors, its officers and such control
Persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent, but if settled with such consent or
if there be a final judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
<PAGE> 32
-30-
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses incurred by counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; PROVIDED, HOWEVER, that the Indemnifying Person shall
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Party is contesting, in good faith, the request for
reimbursement. No Indemnifying Person shall, without the prior written consent
of the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Participants on the other 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 sup-
<PAGE> 33
-31-
plied by the Company or by the Participants and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant 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 Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section
7 will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
------------------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available other information of a
like nature so long as necessary to permit sales pursuant to Rule 144 or Rule
144A. The Company fur-
<PAGE> 34
-32-
ther covenants that so long as any Registrable Notes remain outstanding to make
available to any Holder of Registrable Notes in connection with any sale
thereof, the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Registrable Notes pursuant to (a) such Rule
144A, or (b) any similar rule or regulation hereafter adopted by the SEC.
9. UNDERWRITTEN REGISTRATIONS
--------------------------
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. MISCELLANEOUS
-------------
(a) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, other than the occurrence of an event
which requires payment of Additional Interest, each Holder of Registrable Notes,
in addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees, jointly and severally, that, in the event of any action for specific
performance in
<PAGE> 35
-33-
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) ENFORCEMENT. The Trustee shall be authorized to enforce
the provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Company has not, as of the
date hereof, and shall not, after the date of this Agreement, enter into any
agreement with respect to any of its securities that is inconsistent with the
rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
will not enter into any agreement with respect to any of its securities which
will grant to any Person piggy-back rights with respect to a Registration
Statement required to be filed under this Agreement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES OR SERIES A/B
NOTES. The Company shall not, directly or indirectly, take any action with
respect to the Registrable Notes or the Series A/B Notes as a class that would
adversely affect the ability of the Holders to include such Registrable Notes or
the Series A/B Notes in a registration undertaken pursuant to this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being sold by such Holders pursuant to such
Registration Statement, PROVIDED that the provisions of this sentence may not be
amended, modified or supplemented except in
<PAGE> 36
-34-
accordance with the provisions of the immediately preceding sentence.
(f) NOTICES. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder or any Participating Broker-Dealer, at the
most current address given by the Trustee to the Company; and
(ii) if to the Company, with a copy to Jones, Day, Reavis &
Pogue, 901 Lakeside Avenue, Cleveland, Ohio 44114 Attention: David P.
Porter, Esq., Park-Ohio Industries, Inc., 23000 Euclid Avenue,
Cleveland, Ohio 44117, Attention: Ronald J. Cozean, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(g) 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.
(h) 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.
<PAGE> 37
-35-
(i) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is 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 and therein.
(m) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
PARK-OHIO INDUSTRIES, INC.
(an Ohio corporation)
By: /s/ Ronald J. Cozean
-------------------------------
Name: Ronald J. Cozean
Title: General Counsel and
Secretary
<PAGE> 39
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
CIBC WORLD MARKETS CORP.
ING BARING FURMAN SELZ LLC
VALUE INVESTING PARTNERS, INC.
By: CIBC World Markets Corp.
By: /s/ Mark Dalton
--------------------------------
Name: Mark Dalton
Title: Managing Director
<PAGE> 1
Exhibit 5.1
JONES, DAY, REAVIS & POGUE
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
July 16, 1999
Park-Ohio Industries, Inc.
23000 Euclid Avenue
Cleveland, Ohio 44117
Re: $200,000,000 aggregate principal amount of 9 1/4% Senior
Subordinated Notes due 2007 of Park-Ohio Industries, Inc.
---------------------------------------------------------
Gentlemen:
We are acting as counsel for Park-Ohio Industries, Inc., an Ohio
corporation (the "Company"), in connection with the issuance and sale of
$200,000,000 aggregate principal amount of 9-1/4% Senior Subordinated Notes due
2007, which have been registered under the Securities Act of 1933 (the "Exchange
Notes") pursuant to the Indenture (the "Indenture"), dated as of June 2, 1999,
by and between the Company and Norwest Bank Minnesota, National Association, as
trustee (the "Trustee") and a Registration Rights Agreement (the "Registration
Rights Agreement"), dated as of June 2, 1999, by and between the Company and
CIBC World Markets Corp., ING Baring Furman Selz LLC and Value Investing
Partners, Inc., as initial purchasers. Terms used herein have the same meaning
as in the Indenture and Registration Rights Agreement.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereupon we are of
the opinion that:
The Exchange Notes have been duly authorized, and when duly executed by
the authorized officers of the Company, authenticated by the Trustee and issued
in accordance with the Indenture and the Registration Rights Agreement, will be
binding obligations of the Company and will be entitled to the benefits of
the Indenture.
<PAGE> 2
Park-Ohio Industries, Inc.
Page 2
July 16, 1999
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement on Form S-4 filed by the Company to effect the
registration of the Exchange Notes under the Securities Act of 1933 and to the
reference to us under the caption "Legal Matters" in the Prospectus
constituting a part of such Registration Statement.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE> 1
Exhibit 12.1
Park-Ohio Industries Inc.
Computation of Ratio of Earnings to Fixed Charges
(In thousands except ratio data)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income taxes $ 7,637 $ 5,043 $22,820 $19,199 $14,753 $12,913 $ 6,652
Fixed Charges 6,290 4,757 20,840 11,495 8,787 7,192 2,370
Less Capitalized Interest -- -- (1,000)
------- ------- ------- ------- ------- ------- -------
Earnings Available for Fixed Charges $13,927 $ 9,800 $42,660 $30,694 $23,540 $20,105 $ 9,022
======= ======= ======= ======= ======= ======= =======
Fixed Charges:
Interest Component of Rent Expense $ 912 $ 605 $ 2,352 $ 2,232 $ 1,584 $ 1,176 $ 783
Interest Expense 5,378 4,152 17,488 9,101 6,947 5,911 1,501
Interest Capitalized -- -- 1,000
Amortization of Deferred Financing Costs --(1) --(1) --(1) 162 256 105 86
------- ------- ------- ------- ------- ------- -------
Total Fixed Charges $ 6,290 $ 4,757 $20,840 $11,495 $ 8,787 $ 7,192 $ 2,370
======= ======= ======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges 2.2x 2.0x 2.1x 2.7x 2.7x 2.8x 3.8x
(1) Included in interest expense
</TABLE>
<PAGE> 1
Exhibit 21.1
<TABLE>
<CAPTION>
Name State of Incorporation
- ---- ----------------------
<S> <C>
Blue Falcon Forge, Inc. Pennsylvania
Castle Rubber Company Pennsylvania
Cicero Flexible Products, Inc. Ohio
Columbia Nut & Bolt Corp. New Jersey
General Aluminum Manufacturing Company II Ohio
General Aluminum Mfg. Company Ohio
Geneva Rubber Company Ohio
GIS Industries, Inc.(1) Pennsylvania
IEW, Inc. Illinois
Industrial Fastener Corp.(2) New York
Integrated Holding Company Ohio
Integrated Logistics Company of Canada Nova Scotia
Integrated Logistics Holding Company Ohio
Integrated Logistics Solutions, Inc. Ohio
Integrated Logistics Solutions LLC(3) Ohio
Kay Home Products, Inc. Ohio
Park-Ohio Industries, Inc.(4) Ohio
Pharmaceutical Logistics, Inc. Ohio
Precision Machining Connection LLC(5) Ohio
RB&W Corporation of Canada Ontario
RB&W Manufacturing LLC(6) Ohio
The Ajax Manufacturing Company(7) Ohio
The Metalloy Corporation Michigan
Tocco, Inc.(8) Alabama
Park-Ohio Structural Hardware LLC(9) Ohio
Pharmacy Wholesale Logistics, Inc. Ohio
</TABLE>
(1) Doing business as Gateway Industrial Supply, Sabina Mfg., Free Gate, and
American Fasteners
(2) Doing business as Industrial Fastener Corp. and Georgia Industrial
Fasteners
(3) Doing business as RB&W Logistics and Arden Fasteners
(4) Doing business as Cleveland City Forge, Park Drop Forge, and Ohio Crankshaft
(5) Doing business as PMC Industries
(6) Doing business as Delo Screw Products, Green Bearing, and RB&W
Manufacturing
(7) Doing business as Ajax Technologies and Forging Development
(8) Doing business as FECO
(9) Doing business as St. Louis Screw and Bolt
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 15, 1999, in the Registration Statement of
Park-Ohio Industries, Inc. for the registration of $200,000,000 of its 9 1/4%
senior subordinated notes due 2007.
/s/ Ernst & Young LLP
Cleveland, Ohio
July 16, 1999
<PAGE> 1
Exhibit 24.1
PARK-OHIO INDUSTRIES, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Park-Ohio Industries, Inc., an Ohio corporation (the
"Corporation"), hereby constitutes and appoints, James S. Walker, Ronald J.
Cozean, and Matthew V. Crawford, and each of them, with full power of
substitution and resubstitution, as attorneys-in-fact or attorney-in-fact of the
Corporation, for it and in its name, place and stead, to execute and file with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933 one or more Registration Statement(s) on Form S-4 relating to the
registration for sale of the Corporation's 9 1/4% Senior Subordinated Notes due
2007 (the "Securities"), with any and all amendments, supplements and exhibits
thereto (including pre-effective and post-effective amendments or supplements),
to execute and file any and all other applications or other documents to be
filed with the Commission and all documents required to be filed with any state
securities regulating board or commission pertaining to such Securities
registered pursuant to the Registration Statement(s) on Form S-4, with any and
all amendments, supplements and exhibits thereto each such attorney to have full
power to act with or without the others, and to have full power and authority to
do and perform, in the name and on behalf of the Corporation, every act
whatsoever necessary, advisable or appropriate to be done in the premises,
hereby ratifying and approving the act of said attorneys and any of them and any
such substitute.
EXECUTED as of July 16, 1999.
PARK-OHIO INDUSTRIES, INC.
By: /s/ Ronald J. Cozean
--------------------------------------
Name: Ronald J. Cozean
Title: Secretary and General Counsel
<PAGE> 2
DIRECTORS AND OFFICERS OF
PARK-OHIO INDUSTRIES, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
The undersigned directors and officers of Park-Ohio
Industries, Inc., an Ohio corporation (the "Corporation"), do hereby constitute
and appoint, James S. Walker, Ronald J. Cozean, and Matthew V. Crawford, and
each of them, with full power of substitution and resubstitution, as
attorneys-in-fact or attorney-in-fact of the undersigned, for him/her and in
his/her name, place and stead, to execute and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration for sale
of Corporation's 9 1/4% Senior Subordinated Notes due 2007 (the "Securities"),
with any and all amendments, supplements and exhibits thereto (including
pre-effective and post-effective amendments or supplements), to execute and file
any and all other applications or other documents to be filed with the
Commission and all documents required to be filed with any state securities
regulating board or commission pertaining to such Securities registered pursuant
to the Registration Statement(s) on Form S-4, with any and all amendments,
supplements and exhibits thereto each such attorney to have full power to act
with or without the others, and to have full power and authority to do and
perform, in the name and on behalf of the undersigned, every act whatsoever
necessary, advisable or appropriate to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of July 16, 1999.
<TABLE>
<S> <C>
/s/ Edward F. Crawford /s/ James S. Walker
- -------------------------------------- ------------------------------------------
Edward F. Crawford James S. Walker
President, Chief Executive Officer, Vice President and Chief Financial Officer
Chairman of the Board and Director
/s/ Felix J. Tarorick /s/ Ronald J. Cozean
- -------------------------------------- ------------------------------------------
Felix J. Tarorick Ronald J. Cozean
Vice Chairman of the Board, Secretary and General Counsel
Vice President of Operations
and Director
/s/ Matthew V. Crawford /s/ Patrick W. Fogarty
- -------------------------------------- ------------------------------------------
Matthew V. Crawford Patrick W. Fogarty
Assistant Secretary, Corporate Counsel Director of Corporate Development
and Director
/s/ Lewis E. Hatch /s/ Thomas E. McGinty
- -------------------------------------- ------------------------------------------
Lewis E. Hatch, Jr. Thomas E. McGinty
Director Director
/s/ Lawrence O. Selhorst /s/ James W. Wert
- -------------------------------------- ------------------------------------------
Lawrence O. Selhorst James W. Wert
Director Director
/s/ Kevin R. Greene
- --------------------------------------
Kevin R. Greene
Director
</TABLE>
<PAGE> 1
Exhibit 25.1
================================================================================
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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
PARK-OHIO INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
OHIO 34-6520107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23000 EUCLID AVENUE
CLEVELAND, OHIO 44117
(Address of principal executive offices) (Zip code)
-----------------------------
9.25% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
===============================================================================
<PAGE> 2
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The 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.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued June
28, 1872, by the Comptroller of the Currency
to The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
<PAGE> 3
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 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. Filed in
paper format pursuant to Form SE.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
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
Minneapolis and State of Minnesota on the 25th day of June, 1999.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
-----------------------------
Timothy P. Mowdy
Corporate Trust Officer
<PAGE> 5
EXHIBIT 6
June 25, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
----------------------------
Timothy P. Mowdy
Corporate Trust Officer
<PAGE> 1
EXHIBIT 99.1
PARK-OHIO INDUSTRIES, INC.
LETTER OF TRANSMITTAL
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
CUSIPS 700677AC1; 700677AF4
TO: NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, THE EXCHANGE AGENT
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF
OUTSTANDING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE
EXPIRATION DATE.
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55402 (612) 667-9764
</TABLE>
------------------------
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR
OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT
WITHDRAW) THEIR OUTSTANDING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE.
The undersigned acknowledges receipt of the prospectus dated
, 1999 of Park-Ohio Industries, Inc. (the "Company") and this
Letter of Transmittal, which together constitute the Company's offer to exchange
$1,000 principal amount of its new 9 1/4% Senior Subordinated Notes due 2007,
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, pursuant to a Registration Statement of which the prospectus is a part,
for each $1,000 principal amount of its outstanding 9 1/4% Senior Subordinated
Notes due 2007 (the "Outstanding Notes"), of which $200,000,000 principal amount
is outstanding, upon the terms and conditions set forth in the prospectus. Other
capitalized terms used but not defined herein have the meaning given to them in
the prospectus.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Outstanding Notes surrendered in exchange therefor or, if no interest has been
paid on the Outstanding Notes, from the date of original issue of the
Outstanding Notes. Holders of Outstanding Notes accepted for exchange will be
deemed to have waived the right to receive any other payments or accrued
interest on the Outstanding Notes. The Company reserves the right, at any time
or from time to time, to extend this exchange offer at its discretion, in which
event the term "Expiration Date" shall mean the latest time and date to which
the exchange offer is extended. The Company shall notify the Exchange Agent of
any extension by oral (promptly confirmed in writing) or written notice and will
make a public announcement thereof, each prior to 9:00 A.M., New York City time,
on the next business day after the previously scheduled Expiration Date.
<PAGE> 2
This Letter of Transmittal is to be used by holders if:
This Letter of Transmittal is to be used by holders if:
- certificates representing Outstanding Notes are to be physically
delivered to the Exchange Agent herewith by holders;
- tender of Outstanding Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("DTC"),
pursuant to the procedures set forth in the prospectus under "The
Exchange Offer -- Procedures for Tendering" by any financial institution
that is a participant in DTC and whose name appears on a security
position listing as the owner of Outstanding Notes; or
- tender of Outstanding Notes is to be made according to the guaranteed
delivery procedures set forth in the prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures."
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The term "holder" with respect to the Exchange Offer means any person:
- in whose name Outstanding Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond
power from the registered holder, or
- whose Outstanding Notes are held of record by DTC who desires to deliver
such Outstanding Notes by book-entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the exchange offer.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OUTSTANDING
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<CAPTION>
DESCRIPTION OF 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 (OUTSTANDING NOTES)
AGGREGATE PRINCIPAL
PRINCIPAL AMOUNT
AMOUNT TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED (IF LESS
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) THAN ALL)**
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed by holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering holder of Outstanding Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)," If the space
provided above is inadequate, list the certificate numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
The minimum permitted tender is $1,000 in principal amount of Outstanding
Notes. All other tenders must be integral multiples of $1,000.
<PAGE> 3
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Outstanding Notes in a principal
amount not tendered or not accepted for exchange, or Exchange Notes issued in
exchange for Outstanding Notes accepted for exchange, are to be issued in the
name of someone other than the undersigned, or if the Outstanding Notes tendered
by book-entry transfer that are not accepted for exchange are to be credited to
an account maintained by DTC.
Issue certificate(s) to:
Name: ..........................................................................
(Please Print)
Address: .......................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Outstanding Notes in a principal
amount not tendered or not accepted for exchange, or Exchange Notes issued in
exchange for Outstanding Notes accepted for exchange, are to be sent to someone
other than the undersigned, or to the undersigned at an address other than that
shown above.
Mail to:
Name: ..........................................................................
(Please Print)
Address: .......................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security No.)
<PAGE> 4
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
- --------------------------------------------------------------------------------
DTC Book-Entry Account Number:
- -----------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
- -------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- -----------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
<PAGE> 5
Ladies and Gentlemen:
Subject to the terms and conditions of the exchange offer, the undersigned
hereby tenders to the Company the principal amount of Outstanding Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Outstanding Notes tendered in accordance with this
Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to the
Outstanding Notes tendered hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with
full knowledge that the Exchange Agent also acts as the agent of the Company and
as Trustee under the Indenture for the Outstanding Notes and Exchange Notes)
with respect to the tendered Outstanding Notes with full power of substitution
to
- deliver certificates for such Outstanding Notes to the Company, or
transfer ownership of such Outstanding Notes on the account books
maintained by DTC and deliver all accompanying evidence of transfer and
authenticity to, or upon the order of, the Company and
- present such Outstanding Notes for transfer on the books of the Company
and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Outstanding Notes, all in accordance with the terms and
subject to the conditions of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are acquired by
the Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Outstanding Notes tendered hereby will have been
acquired in the ordinary course of business of the holder receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company or any of its subsidiaries.
The undersigned also acknowledges that this exchange offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission that the Exchange Notes issued in exchange for the Outstanding Notes
in the exchange offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangements with any person to participate in the distribution of such Exchange
Notes. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned hereby acknowledges and agrees that any broker-dealer and
any holder using the exchange offer to participate in a distribution of Exchange
Notes could not rely on the SEC staff's position set forth in certain no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
if the resales are of Exchange Notes obtained by such Holder in exchange for
Outstanding Notes acquired by such holder directly from the Company or an
affiliate of the Company.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Outstanding
Notes tendered hereby. All authority conferred or agreed to be conferred by this
Letter of
<PAGE> 6
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in "The Exchange Offer -- Withdrawal of
Tenders" section of the prospectus.
For purposes of the exchange offer, the Company shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Company has
given oral or written notice thereof to the Exchange Agent.
If any tendered Outstanding Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted
Outstanding Notes will be returned (except as noted below with respect to
tenders through DTC), without expense, to the undersigned at the address shown
below or at a different address as may be indicated under "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Outstanding Notes pursuant to
the procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the exchange offer.
Unless otherwise indicated under "Special Payment and Delivery
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Outstanding Notes accepted for exchange and return
any Outstanding Notes not tendered or not exchanged in the name(s) of the
undersigned (or in either such event in the case of the Outstanding Notes
tendered by DTC, by credit to the undersigned's account, at DTC). Similarly,
unless otherwise indicated under "Special Payment and Delivery Instructions,"
please send the certificates representing the Exchange Notes issued in exchange
for the Outstanding Notes accepted for exchange and any certificates for
Outstanding Notes not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s), unless, in either event, tender is being made through DTC. In the
event that both "Special Payment Instructions" and "Special Payment and Delivery
Instructions" are completed, please issue the certificates representing the
Exchange Notes issued in exchange for the Outstanding Notes accepted for
exchange and return any Outstanding Notes not tendered or not exchanged in the
name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Outstanding Notes from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the Outstanding Notes so tendered.
Holders of Outstanding Notes who wish to tender their Outstanding Notes and
- whose Outstanding Notes are not immediately available, or
- who cannot deliver their Outstanding Notes, this Letter of Transmittal or
any other documents required hereby to the Exchange Agent, or
- cannot complete the procedure for book-entry transfer, prior to the
Expiration Date,
- may tender their Outstanding Notes according to the guaranteed delivery
procedures set forth in the prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
<PAGE> 7
PLEASE SIGN HERE WHETHER OR NOT
OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X .......................................................... ...............................
Date
X .......................................................... ...............................
Signature(s) of Registered Holder(s) or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number: ................................................
The above lines must be signed by the registered holder(s) of Outstanding Notes
as their name(s) appear(s) on the Outstanding Notes or, if the Outstanding Notes
are tendered by a participant in DTC, as such participant's name appears on a
security position listing as the owner of Outstanding Notes, or by person(s)
authorized to become registered holder(s) by a properly completed bond power
from the registered holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Outstanding Notes to which this Letter of Transmittal
relates are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must (i)
set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
Name(s): .......................................................................
................................................................................
(Please Print)
Capacity: ......................................................................
Address: .......................................................................
(Include Zip Code)
SIGNATURE GUARANTEE BY AN ELIGIBLE INSTITUTION
(If Required by Instruction 4)
Certain signatures must be Guaranteed by an Eligible Institution.
................................................................................
(Authorized Signature)
................................................................................
(Title)
................................................................................
(Name of Firm)
Dated: .........................................................................
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This
Letter is to be completed by noteholders, 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. Certificates for all physically tendered
Outstanding Notes, 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. Outstanding Notes tendered hereby must be in
denominations of principal amount of maturity of $1,000 and any integral
multiple thereof.
Noteholders whose certificates for Outstanding Notes 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 Outstanding Notes pursuant to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of
the Prospectus. Pursuant to such procedures,
- such tender must be made through an Eligible Institution (as defined in
Instruction 4 below),
- prior to the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Letter (or
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
Outstanding Notes and the amount of Outstanding Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five
Nasdaq National Market trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically
tendered Outstanding Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter will be deposited by the Eligible
Institution with the Exchange Agent, and
- the certificates for all physically tendered Outstanding Notes, in proper
form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter, are received by the Exchange
Agent within five Nasdaq trading days after the date of execution of the
Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Outstanding Notes 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 Outstanding Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit the
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section in the prospectus.
2. Tender by Holder. Only a holder of Outstanding Notes may tender such
Outstanding Notes in the Exchange Offer. Any beneficial holder of Outstanding
Notes who is not the registered holder and who wishes to tender should arrange
with the registered holder to execute and deliver this Letter on his or her
behalf or must, prior to completing and executing this Letter and delivering his
or her Outstanding Notes, either make appropriate arrangements to register
ownership of the Outstanding Notes in such holder's name or obtain a properly
completed bond power from the registered holder.
3. Partial Tenders. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Outstanding Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of 9 1/4%
Senior Subordinated Notes due 2007 (Outstanding Notes)" above. The entire
principal amount of Outstanding Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire principal
amount of all Outstanding Notes is not tendered, then Outstanding Notes for the
principal amount of Outstanding Notes not tendered and a certificate or
certificates representing Exchange Notes issued in exchange for any Outstanding
<PAGE> 9
Notes accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Outstanding Notes are accepted for exchange.
4. Signatures on This Letter; Powers of Attorney and Endorsements;
Guarantee of Signatures. If this Letter is signed by the registered holder of
the Outstanding Notes tendered hereby, the signature must correspond exactly
with the name as written on the face of the certificates without any change
whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Outstanding Notes specified herein and tendered hereby, no endorsements of
certificates or separate powers of attorney are required. If, however, the
Exchange Notes are to be issued, or any untendered Outstanding Notes are to be
reissued, to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate powers of attorney 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 powers of attorney, in either case signed
exactly as the name or names on 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 powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Outstanding Notes or signatures on powers
of attorney required by this Instruction 4 must be guaranteed by a firm which is
a participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter must be guaranteed by an Eligible Institution
unless the Outstanding Notes are tendered
- by a registered holder of Outstanding Notes (which term, for purposes of
the Exchange Offer, includes any participant in the Book-Entry Transfer
Facility system whose name appears on a security position listing as the
holder of such Outstanding Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter, or
- for account of an Eligible Institution.
5. Special Payment and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Notes or substitute Outstanding Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of Outstanding Notes through DTC, if different from DTC). In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Noteholders tendering
Outstanding Notes by book-entry transfer may request that Outstanding Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Outstanding Notes not exchanged will be returned to the name and
address of the person signing this Letter.
6. Tax Identification Number. Federal income tax law requires that a holder
whose offered Outstanding Notes are accepted for exchange must provide the
Company (as payer) with his, her or its correct taxpayer identification number
("TIN"), which, in the case of an exchanging holder who is an individual, is his
or her social security number. If the Company is not provided with the correct
TIN or an adequate basis for exemption, such holder may be subject to a $50
penalty imposed by the Internal Revenue Service and payments made with
<PAGE> 10
respect to Outstanding Notes purchased pursuant to the Exchange Offer may be
subject to backup withholding at a 31% rate. If withholding results in an
overpayment of taxes, a refund may be obtained. Exempt holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9."
To prevent backup withholding, each exchanging holder must provide his, her
or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that
- the holder is exempt from backup withholding,
- the holder has been notified by the IRS that he, she or it is subject to
backup withholding as a result of a failure to report all interest or
dividends, or
- the IRS has notified the holder that he, she or it is no longer subject
to backup withholding.
In order to satisfy the Exchange Agent that a foreign individual qualifies
as an exempt recipient, such holder must submit a statement signed under penalty
of perjury attesting to such exempt status. Such statements may be obtained from
the Exchange Agent. If the Outstanding Notes are in more than one name or are
not in the name of the actual owner, consult the Substitute Form W-9 for
information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until you
furnish your TIN to the Company.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Outstanding Notes pursuant to the exchange offer.
If, however, certificates representing Exchange Notes or Outstanding Notes for
principal amounts not tendered or accepted for exchange 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 Outstanding Notes tendered hereby, or if tendered
Outstanding Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Outstanding Notes pursuant to the exchange
offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or on 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 7, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes listed in this Letter
of Transmittal.
8. Waiver of Conditions. The Company reserves the absolute right to amend,
waive or modify specified conditions in the exchange offer in the case of any
Outstanding Notes tendered.
9. No Conditional Transfers. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Outstanding Notes,
by execution of this Letter, shall waive any right to receive notice of the
acceptance of their Outstanding Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Outstanding Notes nor shall any of them incur any liability for failure to give
any such notice.
10. Mutilated, Lost, Stolen or Destroyed Outstanding Notes. Any tendering
holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
11. Requests for Assistance or Additional Copies. Questions and requests
for assistance for additional copies of the prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Exchange Agent at the address specified in the prospectus.
<PAGE> 11
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE OUTSTANDING NOTES OUTSTANDING NOTES
SURRENDERED TENDERED ACCEPTED
----------- ----------------- -----------------
<S> <C> <C>
------------------ ------------------ ------------------
------------------ ------------------ ------------------
------------------ ------------------ ------------------
------------------ ------------------ ------------------
</TABLE>
Delivery Prepared by Checked By Date
<PAGE> 12
PAYER'S NAME: PARK-OHIO INDUSTRIES, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Name (if joint names, list first and circle the name of the person or entity whose number you enter in Part I below. See
instructions if your name has changed.)
- --------------------------------------------------------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------------------------------------------------------
City, state and ZIP Code
- --------------------------------------------------------------------------------------------------------------------------------
List account number(s) here (optional)
- --------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Please provide your Tax-
FORM W-9 payer Identification Number ---------------------------------------
("TIN") in the box at right and Social Security Number
DEPARTMENT OF THE TREASURY certify by signing and dating below.
INTERNAL REVENUE SERVICE OR ----------------------------------
TIN
------------------------------------------------------------------------------------
PART II -- Check the box if you are NOT subject to backup withholding under the
provisions of section 3408(a)(1)(C) of the Internal Revenue Code because (1) you
have not been notified that you are subject to backup withholding as a result of
failure to report all interest or dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup withholding. [ ]
------------------------------------------------------------------------------------
PART III -- AWAITING TIN
- --------------------------------------------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under the penalties of perjury, I certify that the information provided on this form is true, correct and
complete.
- --------------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 13
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
FOR THIS TYPE SOCIAL SECURITY
OF ACCOUNT: NUMBER OF --
- ---------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
account or, if combined
funds, any one 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
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person(3)
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 and valid trust
under State law
8. Sole proprietorship The owner(4)
account
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE SOCIAL SECURITY
OF ACCOUNT: NUMBER OF --
- ---------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate or The legal entity (do not
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, or The organization
educational organization
account
12. Partnership account held The partnership
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> 14
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, 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
any 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)(l).
- 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 tax-payer identification numbers to payers
who must report for payments to IRS. 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, 1994, payers must generally
withhold 31% 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
underpayment 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.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PARK-OHIO INDUSTRIES, INC.
CUSIPS 700677AC1; 700677F4
As set forth in the prospectus dated , 1999, of Park-Ohio
Industries, Inc. (the "Company") and in the accompanying Letter of Transmittal
and instructions thereto, this form or one substantially equivalent hereto must
be used to accept the Company's offer to exchange all of its outstanding 9 1/4%
Senior Subordinated Notes due 2007 (the "Outstanding Notes") for its 9 1/4%
Senior Subordinated Notes due 2007, which have been registered under the
Securities Act of 1933, if certificates for the Outstanding Notes are not
immediately available or if the Outstanding Notes, the Letter of Transmittal or
any other documents required thereby cannot be delivered to the Exchange Agent,
or the procedure for book-entry transfer cannot be completed, prior to 5:00
P.M., New York City time, on , 1999 (the "Expiration Date"). This
form may be delivered by an Eligible Institution by hand or transmitted by
facsimile transmission, overnight courier or mail to the Exchange Agent as set
forth below.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS THE OFFER IS EXTENDED. TENDERS OF OUTSTANDING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
To: Norwest Bank Minnesota, National Association, The Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55402 (612) 667-9764
</TABLE>
------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A
FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Outstanding Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Park-Ohio Industries, Inc. (the
"Company"), upon the terms and subject to the conditions set forth in the
prospectus and the Letter of Transmittal (which together constitute the
"Exchange Offer"), receipt of which is hereby acknowledged, Outstanding Notes
pursuant to the guaranteed delivery procedures set forth in Instruction I of the
Letter of Transmittal.
The undersigned understands that tenders of Outstanding Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned understands that tenders of Outstanding Notes pursuant
to the Exchange Offer may be withdrawn only in accordance with the procedures
set forth in "The Exchange Offer -- Withdrawal of Tenders" section of the
prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
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<S> <C>
Certificate No(s). for Outstanding Notes (if
available) Address
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
Principal Amount of Outstanding Notes Area Code and Tel. No.
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
Name(s) of Record Holder(s) Signature(s)
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
Dated:
---------------------------------------------
If Outstanding Notes will be delivered by
book-entry transfer at the Depository Trust
Company,
Depository Account No:
---------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as its (their) name(s) appear on
certificates for Outstanding Notes or on a security position listing as the
owner of Outstanding Notes, or by person(s) authorized to become registered
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
<PAGE> 3
PLEASE PRINT NAME(S) AND ADDRESS(ES)
NAME(S):
...............................................................................
...............................................................................
...............................................................................
CAPACITY:
...............................................................................
ADDRESS(ES):
...............................................................................
...............................................................................
<PAGE> 4
GUARANTEE
(Not To Be Used for Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, hereby
(a) represents that the above named person(s) "own(s)" the Outstanding
Notes tendered hereby within the meaning of Rule 14e-4 under the Exchange Act,
(b) represents that such tender of Outstanding Notes complies with Rule
14e-4 under the Exchange Act and
(c) guarantees that delivery to the Exchange Agent of certificates for the
Outstanding Notes tendered hereby, in proper form for transfer (or confirmation
of the book-entry transfer of such Outstanding Notes into the Exchange Agent's
Account at the Depository Trust Company, pursuant to the procedures for book-
entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will be
received by the Exchange Agent at one of its addresses set forth above within
five Nasdaq National Market trading days after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND OUTSTANDING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME
PERIOD SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm:
Address:
(Zip Code)
Area Code and Tel. No.:
Authorized Signature:
Name:
(Please Type or Print)
Title:
Date: ______________________________________
NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS FORM; OUTSTANDING NOTES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE
EXCHANGE AGENT WITHIN FIVE NASDAQ NATIONAL MARKET TRADING DAYS AFTER THE
EXPIRATION DATE.
