<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
GLOBE MANUFACTURING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ALABAMA 3069 63-1101362
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION)
---------------------
456 BEDFORD STREET
FALL RIVER, MASSACHUSETTS 02720
TELEPHONE: (508) 674-3585
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
---------------------
THOMAS A. RODGERS, III
456 BEDFORD STREET
FALL RIVER, MASSACHUSETTS 02720
TELEPHONE: (508) 674-3585
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------------
COPY TO:
LAURIE T. GUNTHER
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any 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, please 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(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
10% Senior Subordinated
Notes due 2008, Series
B..................... $150,000,000 100% $150,000,000 $44,250
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
---------------------
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1998
PRELIMINARY PROSPECTUS
, 1998
GLOBE MANUFACTURING CORP.
LOGO
OFFER TO EXCHANGE ITS 10% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B FOR ANY
AND ALL OF ITS OUTSTANDING 10% SENIOR SUBORDINATED NOTES DUE 2008.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
Globe Manufacturing Corp., an Alabama corporation ( the "Company") hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 10% Senior
Subordinated Notes due 2008, Series B (the "New Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 10% Senior Subordinated Notes due 2008 (the
"Old Notes") of which $150,000,000 principal amount is outstanding. The form
and terms of the New Notes are the same as the form and term of the Old Notes
except that (i) the New Notes will bear a Series B designation and a different
CUSIP number than the Old Notes, (ii) the New Notes will have been registered
under the Securities Act and, therefore, will not bear legends restricting the
transfer thereof and (iii) holders of the New Notes will not be entitled to
certain rights of holders of Old Notes under the Registration Rights Agreement
(as defined). The New Notes will evidence the same debt as the Old Notes (which
they replace) and will be issued under and be entitled to the benefits of the
Indenture dated as of July 31, 1998 (the "Indenture") by and among the Company
and Norwest Bank Minnesota, National Association, as trustee, governing the Old
Notes and the New Notes. The Old Notes and the New Notes are sometimes referred
to herein collectively as the "Notes." See "The Exchange Offer" and
"Description of the Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1998,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
Interest on the Notes will accrue from their date of original issuance and
will be payable semiannually in arrears on February 1 and August 1 of each
year, commencing February 1, 1999, at the rate of 10% per annum. The Notes will
mature on August 1, 2008. The Notes are redeemable, in whole or in part, at the
option of the Company on or after August 1, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, prior to August 1, 2001, the Company, at its option,
may redeem up to 35% of the aggregate principal amount of the Notes originally
issued with the net cash proceeds of one or more Equity Offerings (as defined)
at a redemption price equal to 110.0% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption; provided that
not less than $97.5 million of the aggregate principal amount of the Notes
originally issued remain outstanding following such redemption. See
"Description of the Notes--Optional Redemption."
The New Notes will be, as the Old Notes (which they replace) are, general
unsecured obligations of the Company, and will, as the Old Notes (which they
replace), be subordinated in right of payment to all present
(Cover continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
and future Senior Debt (as defined) of the Company, including the Company's
obligations under the Senior Credit Facility (as defined). The Notes will be
unconditionally guaranteed on a senior subordinated basis (the "Guarantees")
by each of the Company's future Restricted Domestic Subsidiaries (as defined)
(collectively, the "Guarantors"). The Guarantees will be general unsecured
obligations of the Guarantors, subordinated in right of payment to all
Guarantor Senior Debt (as defined) of each Guarantor. The Company has no
existing Restricted Domestic Subsidiaries. As of June 30, 1998, on a pro forma
basis after giving effect to the Transactions, the Company would have had
$120.1 million of Senior Debt (excluding unused commitments of approximately
$45.0 million under the Senior Credit Facility). See "Description of the
Senior Credit Facility" and "Description of the Notes."
In the event of a Change of Control (as defined), each Holder (as defined)
will have the right to require the Company to make an offer to repurchase such
Holder's Notes, in whole or in part, at a price of 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase. See "Description of the Notes--Change of Control."
The Old Notes were sold by the Company on July 31, 1998 to BancAmerica
Robertson Stephens and Merrill Lynch & Co. (the "Initial Purchasers") in a
transaction not registered under the Securities Act in reliance upon an
exemption under the Securities Act (the "Initial Offering"). The Initial
Purchasers subsequently placed the Old Notes with (i) qualified institutional
buyers in reliance upon Rule 144A under the Securities Act and (ii) qualified
buyers outside the United States in reliance upon Regulation S under the
Securities Act. Accordingly, the Old Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The New Notes are being
offered hereunder in order to satisfy the obligations of the Company under the
Registration Rights Agreements entered into by the Company and the Initial
Purchasers in connection with the Initial Offering (the "Registration Rights
Agreement"). See "The Exchange Offer."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holder has
no arrangement or understanding with any person to participate in the
distribution of such New Notes. See "The Exchange Offer--Resale of the New
Notes." Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company, as required by the Registration Rights Agreements,
that such conditions have been met. Each broker-dealer (a "Participating
Broker-Dealer") that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of Distribution."
Shortly after the Initial Offering, Globe Holdings, Inc. ("Globe Holdings"),
the parent company of the Company, sold 49,086 Units, consisting of 14% Senior
Discount Notes due 2009 (the "Old Senior Discount Notes") and Warrants to
purchase 69,481 shares of Class A Common Stock.
Concurrent with this Exchange Offer, Globe Holdings is offering to exchange
$1,000 principal amount at maturity of their 14% Senior Discount Notes due
2009, Series B (the "New Senior Discount Notes") registered under the
Securities Act pursuant to a Registration Statement, for each $1,000 principal
amount at maturity off
ii
<PAGE>
their outstanding Old Senior Discount Notes, of which $49,086,000 aggregate
principal amount at maturity is outstanding as of the date hereof. See "The
Transactions" and "Description of Certain Indebtedness--Discount Notes."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
There has not previously been any public market for the Old Notes or the New
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. The Old Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automatic Linkages ("PORTAL"). There
can be no assurance that an active market for the New Notes will develop. See
"Risk Factors--Absence of a Public Market Could Adversely Affect the Value of
New Notes." Moreover, to the extent that Old Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected.
The New Notes will be available initially only in book-entry form. Except as
described under "Book-Entry Procedures and Transfer," the Company expects that
the New Notes issued pursuant to the Exchange Offer will be represented by one
or more Global Notes (as defined), which will be deposited with, or on behalf
of, the Depository Trust Company ("DTC") and registered in its name or in the
name of Cede & Co., its nominee. Beneficial interests in the Global Notes
representing the New Notes will be shown on, and transfers thereof will be
effected through, records maintained by DTC and its participants. After the
initial issuance of the Global Notes, Notes in certificated form will be
issued in exchange for Global Notes only under limited circumstances as set
forth in the Indenture. See "Book-Entry Procedure and Transfer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
PROSPECTIVE INVESTORS IN THE NEW NOTES ARE NOT TO CONSTRUE THE CONTENTS OF
THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD
CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE NEW NOTES. THE COMPANY IS NOT
MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE NEW NOTES
REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER
APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Offer contemplated hereby. This Prospectus does not contain all
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference
iii
<PAGE>
is made to the exhibit for a more complete description of the document or
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Exchange Offer Registration Statement, including the exhibits thereto,
and periodic reports and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60601. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including for each a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereof by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed on Form 8-K if it were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
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.
The Company is an Alabama corporation with its principal executive offices
located at 456 Bedford Street, Fall River, Massachusetts 02720, and its
telephone number is (508) 674-3585.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the Expiration Date shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of the filing of
such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
or deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus and the Exchange Offer Registration Statement.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available without charge
upon request from Lawrence R. Walsh, Vice President of Finance and
Administration of Globe Manufacturing Corp, 456 Bedford Street, Fall River,
Massachusetts 02720, telephone (508) 674-3585. In order to ensure timely
delivery of the documents, any request should be made by , 1998
(five business days prior to the expiration date).
iv
<PAGE>
MARKET SHARE AND INDUSTRY DATA
The market share and industry data presented herein are based upon estimates
by management of the Company, utilizing various third party sources, where
available. While management believes that such estimates are reasonable and
reliable, in certain cases such estimates cannot be verified by information
available from independent sources. Accordingly, no assurance can be given
that such market share and industry data are accurate in all material
respects.
CERTAIN TERMINOLOGY
As used herein, the following terms have the meanings specified below:
circular knit: a type of weft knit in which the fabric is produced in the
form of a tube, with threads running continuously around the fabric. In
weft knit fabrics, the thread runs crosswise in the fabric, as opposed to
lengthwise in warp knits. Circular knits are used in active wear, swimwear,
casual wear and dress wear.
denier: a weight per unit of length measure of any linear material. In
fibers, a weight numerically equal to the weight in grams of 9,000 meters
of the material. Lower numbers represent finer sizes, and higher numbers
represent coarser sizes.
elastomeric: describes any material (including yarn, fiber, film and
sheets) which exhibits pronounced elastic properties, such elastic
properties being the material's primary value attributes.
gauge: the number of needles, fibers or other elements in a determined
unit of length. For latex thread, gauge means the number of individual
rubber threads which, when placed cross-sectionally beside one another, fit
into a length of one inch. Lower numbers represent coarser sizes and higher
numbers represent finer sizes.
narrow fabric: any knit or woven fabric that is twelve inches or less in
width and has a selvage on each side (other than ribbon and seam bindings).
Narrow fabric applications include waist bands and straps.
nonwoven: a type of fabric in which the fibers are fused or bonded in a
random web or mat, as opposed to interlacing sets as in woven fabric.
Nonwovens are employed in diapers, adult incontinence products, feminine
hygiene products and medical bandages.
spandex: a manufactured fiber in which the fiber-forming substance is a
long-chain synthetic polymer comprised of at least 85% segmented
polyurethane.
warp knit: a type of knit in which the threads run lengthwise in the
fabric, as opposed to crosswise in weft knits. Examples of warp knits
include milanese knits, raschel knits and tricot knits. Warp knit
applications include intimate apparel, body shaping garments, swimwear and
footwear.
woven: a type of fabric generally composed of two sets of yarns, warp and
filling, that is formed by weaving interlacing sets of these yarns.
v
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the detailed information and consolidated financial statements
and notes thereto appearing elsewhere in this Prospectus. As used in this
Prospectus, unless the context otherwise indicates, "Company" or "Globe" refers
to Globe Manufacturing Corp. (formerly known as Globe Elastic Co., Inc.)
together with the historical business and operations undertaken by Globe
Holdings, Inc. (formerly known as Globe Manufacturing Co.) which were
transferred to Globe pursuant to the Asset Drop Down (as defined), and "Globe
Holdings" refers to Globe Holdings, Inc., the Company's sole shareholder.
Except as otherwise set forth herein, references to "pro forma" information for
a period ending on a specified date means information that gives pro forma
effect to the Transactions as if the Transactions had occurred on such date for
balance sheet data and as of the beginning of the period for statement of
income data. See "--The Transactions."
THE COMPANY
OVERVIEW
Globe is a leading domestic manufacturer and worldwide supplier of spandex
and latex elastomeric fibers, marketing its products to more than 500
customers. The Company's fibers are used in a broad range of applications,
including men's and women's hosiery, waistbands, intimate apparel, performance
athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or
foundation) garments, personal care products (including diapers and adult
incontinence products) and footwear. The Company has produced elastomeric
fibers exclusively for over 50 years and has developed long-term relationships
with many of its principal customers, including Fruit of the Loom, Inc.,
Kimberly-Clark Corporation, Minnesota Mining & Manufacturing Company, Sara Lee
Hosiery, Unifi, Inc. and Worldtex, Inc. During the twelve months ended June 30,
1998, the Company had net sales of $179.1 million and EBITDA (as defined) of
$46.3 million.
Spandex fiber, which accounted for 80% of the Company's 1997 sales, is a
highly desirable component of fabrics designed for performance, durability,
comfort, control and resilience due to its unique chemical and physical
properties. Spandex fiber is produced in a broad range of fine and heavy
deniers and is sold on a private label basis and under brand names such as the
Company's GLOSPAN(R) and CLEERSPAN(R), DuPont's Lycra(R) and Bayer's
Dorlastan(R). Recent advances in fabric manufacturing technologies have
facilitated the use of spandex fiber in an increasing number of apparel and
non-apparel applications. Globe has benefited from this recent proliferation of
spandex fiber applications due to its exclusive focus on elastomeric fibers,
superior customer service, broad product line, strong market position and
efficient manufacturing processes.
Management estimates that in 1997 the worldwide market for spandex fiber was
approximately 240 million pounds, representing approximately $2.0 billion in
sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an
estimated 11% compound annual growth rate, and the worldwide spandex fiber
market is expected to grow at approximately 9% over the next three years. Since
1993, demand for fine denier spandex has increased faster than the overall
market due to its growing use in lightweight and high quality apparel
applications and this trend is expected to continue.
The Company operates three manufacturing facilities, which are located in
Fall River, Massachusetts, Tuscaloosa, Alabama and Gastonia, North Carolina.
Since 1993, Globe has invested $97.5 million to increase manufacturing
capacity, enhance productivity and shift its product mix to the faster growing,
higher margin fine denier spandex fiber. During this period, the Company's
annual fine denier spandex fiber production
1
<PAGE>
capacity increased from 2.6 million to 10.6 million pounds. As a result of the
Company's capital investment program and continuous improvement initiatives in
its manufacturing facilities, Globe's fine denier spandex fiber production
yields have improved by 35% and sales per employee have increased by 43% since
1993.
TUSCALOOSA PLANT EXPANSION
Globe is expanding production capacity at its Tuscaloosa, Alabama fine denier
spandex fiber manufacturing facility in response to existing demand from
current customers (the "Tuscaloosa Plant Expansion"). Through June 30, 1998,
Globe had spent approximately $16.1 million of the estimated $22.1 million
project cost. The Tuscaloosa facility, built in 1994, has undergone three prior
capacity expansions. The Tuscaloosa Plant Expansion will increase the Company's
fine denier manufacturing capacity by 3.6 million pounds per annum, or 34%,
with approximately half of this increased capacity expected to be on line in
the fourth quarter of 1998 and the balance expected to be on line in the first
quarter of 1999. As of June 30, 1998, Globe's list price for 40 denier spandex
fiber, the primary product currently produced at the Company's Tuscaloosa
facility, was $11.50 per pound.
COMPETITIVE STRENGTHS
The Company's exclusive focus on elastomeric fibers for over 50 years has
enabled it to develop the following competitive strengths:
Long-Term Customer Relationships and Superior Customer Service. Globe has
established long-term relationships with its principal customers by focusing on
superior technical and customer service. The Company has been a supplier to
Fruit of the Loom, Inc., Kimberly-Clark Corporation, Minnesota Mining and
Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and Worldtex, Inc. for
over ten years. Seven of the Company's ten largest customers have selected
Globe as their preferred supplier of spandex fiber. Globe provides analytical
laboratory services and on-site technical assistance to improve customers'
manufacturing and engineering processes. As a result, a number of the Company's
major customers have selected it as a technology partner to assist in the
development of new spandex applications.
Broad Product Line. The Company believes that it offers the broadest line of
spandex and latex elastomeric fibers in the world. The Company produces a full
line of spandex fibers in deniers ranging from 15 to 5040. These products
feature an assortment of stretch, strength and other performance
characteristics that may be customized for specific applications and
manufacturing processes. Globe also manufactures a wide variety of latex
threads in multiple gauges and formulations. This broad range of product
offerings differentiates the Company in the industry and represents a
competitive advantage, as many customers purchase multiple deniers of spandex
fiber, as well as various gauges of latex thread, and prefer to utilize one
vendor for their elastomeric fiber requirements. The proprietary technologies
and customized equipment used by Globe in its multiple manufacturing processes
enable the Company to cost-effectively produce this broad product line.
Strong Positions in Growing Markets. The Company has established a strong
market position in each of its principal product lines. The Company has an
estimated 16% share of the domestic spandex fiber market and an estimated 7%
share of the worldwide spandex fiber market (based on pounds produced).
Management estimates that worldwide sales of spandex fiber will increase at a
compound annual growth rate of approximately 9% over the next three years and
that fine denier spandex sales will exceed the overall market growth rate
during this period. Fine denier spandex demand has been driven by strong
consumer demand for lightweight and high quality apparel and technological
advances allowing for the use of spandex fibers in the manufacture of such
apparel.
Cost-Efficient Manufacturing. Management believes that the Company's
manufacturing operations are among the most efficient in the industry, allowing
the Company to become one of the world's lowest cost producers of high quality
spandex fiber. Globe has developed proprietary chemical formulations and highly
2
<PAGE>
efficient manufacturing processes that utilize sophisticated process control
systems and custom fabricated manufacturing equipment designed and built by the
Company's engineers. Management believes that Globe's in-house capability to
design, engineer and build its own manufacturing equipment distinguishes the
Company from many of its competitors and provides it with an important
competitive advantage in maintaining product quality as well as controlling
design, development and maintenance costs. In addition, increased production
volume at the Company's facilities has enabled the Company to achieve
significant economies of scale and raw material purchasing power.
Experienced Management Team. The Company is led by an experienced management
team with a track record of achieving profitable growth, developing new
manufacturing processes and expanding the Company's customer base. Between 1993
and the twelve months ended June 30, 1998, the Company's net sales increased
from $107.6 million to $179.1 million and EBITDA increased from $23.7 million
to $46.3 million. The Company's executive officers average approximately 20
years with the Company. The Company's senior management team has a substantial
financial interest in the Company's continued success through their direct
investment in Globe Holdings.
BUSINESS STRATEGY
The Company's business objective is to become the leading global supplier of
elastomeric fiber for use in selected apparel and non-apparel markets. The
Company seeks to achieve this objective by pursuing the following strategies:
Continue Shift in Product Mix to Higher Growth, More Profitable Fine Denier
Products. Since 1993, Globe has expanded its annual production capacity of
higher growth fine denier spandex fiber from 2.6 million to 10.6 million
pounds. Fine denier spandex fiber is used in applications requiring lightweight
or high quality fabric, and has been generally more profitable than heavy
denier spandex fiber due to the complexity of the manufacturing process
required and strong market demand. Fine denier spandex fiber sales accounted
for approximately 49% of Globe's 1997 total sales, up from 25% in 1993. The
Tuscaloosa Plant Expansion, which will increase the Company's annual production
capacity for fine denier spandex fiber to 14.2 million pounds, will enable the
Company to further address the increase in demand for fine denier spandex
fiber.
Develop Innovative Spandex Fiber Applications. Globe's product managers and
research and development engineers work closely with existing and prospective
customers to develop innovative applications for spandex fiber. For example,
the Company worked with a fleece manufacturer for over two years to develop a
new four-way stretch fleece product for outerwear that incorporates Globe's
spandex fiber. Cooperative efforts such as this have enabled Globe to enhance
its relationships with existing customers and attract new customers.
Improve Manufacturing Productivity; Reduce Production Costs. The Company
seeks to continually improve manufacturing efficiency and reduce production
costs in order to maintain its position as one of the world's lowest cost
producers of high quality spandex fiber. The Company seeks to improve
manufacturing yields, increase equipment utilization, and reduce production
costs by upgrading process monitoring equipment, enhancing production processes
and increasing throughput. Each of the Company's manufacturing facilities is
certified under ISO 9001, and the Company actively incorporates the principles
of continuous improvement.
Increase International Sales. Globe estimates that the international market
accounts for two-thirds of the worldwide spandex fiber market. International
spandex fiber markets are growing rapidly due to increasing consumerism of the
world's population, coupled with increases in personal disposable income. From
1993 to 1997, Globe's international sales increased from 19% of sales to 28% of
sales (primarily in western Europe and Latin America) as the Company expanded
the size and geographic scope of its international sales to 46 countries. The
Company seeks to further expand its international sales by leveraging its
existing sales and marketing infrastructure and capitalizing on Globe's
expanded manufacturing capacity.
3
<PAGE>
THE TRANSACTIONS
The consummation of the Initial Offering occurred concurrently with the
effectiveness of the recapitalization (the "Recapitalization") of Globe
Holdings, the Company's sole shareholder. The Recapitalization was effected
pursuant to an agreement and plan of merger dated June 23, 1998 (the "Merger
Agreement") between Globe Holdings and Globe Acquisition Company ("MergerCo"),
a newly formed affiliate of Code, Hennessy & Simmons III, L.P. ("Code Hennessy
& Simmons"), pursuant to which MergerCo merged with and into Globe Holdings
(the "Merger"). As a result of the Merger and the Recapitalization, Code
Hennessy & Simmons, certain members of management and certain other investors
have an aggregate investment of $75.0 million (the "Equity Sponsor Investment")
in Globe Holdings, comprised of a rollover of approximately $7.2 million (the
"Retained Investment") by management and other pre-Merger shareholders of Globe
Holdings (the "Pre-Merger Shareholders") and an investment by Code Hennessy &
Simmons and certain other investors in an aggregate amount equal to
approximately $67.8 million. The Equity Sponsor Investment included a $25.0
million loan to Globe Holdings by Code Hennessy & Simmons (the "CHS Loan"),
which was repaid with the net proceeds of the offering (the "Units Offering")
by Globe Holdings of the Old Senior Discount Notes and Warrants. See "Recent
Developments." Immediately prior to the Merger, Globe Holdings transferred
substantially all of its assets and liabilities to the Company (the "Asset Drop
Down").
Pursuant to the Merger and the Recapitalization: (i) the Company incurred
approximately $120.0 million of borrowings (consisting of $115.0 million in
term loans and approximately $5.0 million in revolving loans) under a new
senior secured credit facility (the "Senior Credit Facility"); (ii) the Company
repaid its indebtedness outstanding under certain loan credit facilities
(collectively, the "Old Credit Facility"); (iii) holders of the shares of
common stock of Globe Holdings outstanding prior to the Recapitalization
received cash (including the payment by Globe Holdings of fees and expenses on
their behalf) equal to $315.0 million less (x) the amount of the Company's
outstanding indebtedness for borrowed money as of the date of the Merger and
(y) the amount of the Retained Investment (the "Cash Merger Consideration");
and (iv) Globe Holdings deposited $15.0 million (the "Escrow Amount") into
escrow to secure certain indemnification and other obligations of the Pre-
Merger Shareholders under the Merger Agreement. See "Use of Proceeds," "Certain
Relationships and Related Transactions--Recapitalization," and "Description of
Senior Credit Facility."
The Initial Offering, the Asset Drop Down, the Recapitalization, the Merger,
the initial borrowings under the Senior Credit Facility, the repayment of
borrowings under the Old Credit Facility and the Equity Sponsor Investment are
collectively referred to herein as the "Transactions." See "Use of Proceeds"
and "Description of Senior Credit Facility."
RECENT DEVELOPMENTS
The Old Notes were sold by the Company on July 31, 1998 to the Initial
Purchasers pursuant to a Purchase Agreement dated July 28, 1998 (the "Purchase
Agreement"). The Initial Purchasers subsequently resold the Old Notes to (i)
qualified institutional buyers pursuant to Rule 144A under the Securities Act
and (ii) qualified buyers outside the United States in reliance upon Regulation
S under the Securities Act. Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into a Registration Rights Agreement dated as of
July 31, 1998 (the "Registration Rights Agreement"), which grants the holders
of the Old Notes certain exchange and registration rights. The Exchange Offer
is intended to satisfy such exchange rights which terminate upon the
consummation of the Exchange Offer.
On August 6, 1998, Globe Holdings consummated the Units Offering under Rule
144A of the Securities Act, pursuant to which the Globe Holdings issued and
sold 49,086 units (the "Units"), each consisting of one Old Senior Discount
Note and one warrant (a "Warrant") to purchase 1.4155 shares of Class A Common
Stock, $.01 par value, of Globe Holdings. The Units were initially sold to
BancAmerica Robertson Stephens. The aggregate purchase price of the Units was
$25,000,000 and the net proceeds to Globe Holdings were $24,562,490, after
deducting underwriting discounts and commissions and other expenses payable by
Globe Holdings.
4
<PAGE>
THE EXCHANGE OFFER
Securities Offered........ $150,000,000 aggregate principal amount of 10% Se-
nior Subordinated Notes due 2008, Series B.
The Exchange Offer........ $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, $150,000,000 aggregate princi-
pal amount of Old Notes are outstanding. The Com-
pany will issue the New Notes to holders on or
promptly after the Expiration Date.
Based on an interpretation by the staff of the Com-
mission set forth in no-action letters issued to
third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the regis-
tration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and that such holder does not intend to
participate and has no arrangement or understanding
with any person to participate in the distribution
of such New Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of market-
making activities or other trading activities may
be a statutory underwriter. Each Participating Bro-
ker-Dealer that receives New Notes for its own ac-
count pursuant to the Exchange Offer must acknowl-
edge that it will deliver a prospectus in connec-
tion with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating Broker-
Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or sup-
plemented from time to time, may be used by a Par-
ticipating Broker-Dealer in connection with resales
of New Notes received in exchange for Old Notes
where such Old Notes were acquired by such Partici-
pating Broker-Dealer as a result of market-making
activities or other trading activities. The Company
has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for
use in connection with any such resale. See "Plan
of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the New Notes
could not rely on the position of the staff of the
Commission enunciated in no-action letters and, in
the absence of an exemption therefrom, must comply
with the registration and prospectus delivery re-
quirements of the Securities Act in connection with
any resale transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the Com-
pany.
5
<PAGE>
Expiration Date........... 5:00 p.m., New York City time, on , 1998
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is ex-
tended.
Accrued Interest on the
New Notes and the Old
Notes..................... Each New Note will bear interest from its issuance
date. Holders of Old Notes that are accepted for
exchange will receive, in cash, accrued interest
thereon to, but not including, the issuance date of
the New Notes. Such interest will be paid with the
first interest payment on the New Notes (February
1, 1999). Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the
New Notes.
Conditions to the
Exchange Offer............ The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer--Conditions."
Procedures for Tendering
Old Notes................. Each holder of Old Notes wishing to accept the Ex-
change Offer must complete, sign and date the ac-
companying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions con-
tained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsim-
ile, together with the Old Notes and any other re-
quired documentation to the Exchange Agent (as de-
fined) at the address set forth herein. By execut-
ing the Letter of Transmittal, each holder will
represent to the Company that, among other things,
the New Notes acquired pursuant to the Exchange Of-
fer are being obtained in the ordinary course of
business of the person receiving such New Notes,
whether or not such person is the holder, that nei-
ther the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such New Notes
and that neither the holder nor any such other per-
son is an "affiliate," as defined under Rule 405 of
the Securities Act, of the Company. See "The Ex-
change Offer--Purpose and Effect of the Exchange
Offer" and "--Procedures for Tendering."
Untendered Old Notes...... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further exchange rights and such Old Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Old Notes could be adversely affected.
Consequences of Failure
to Exchange............... The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted securi-
ties. Accordingly, such Old Notes may be resold
only (i) to the Company, (ii) pursuant to Rule 144A
or Rule 144 under the Securities Act or pursuant to
some other exemption under the Securities Act,
(iii) outside the United States to a foreign person
pursuant to the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act.
See "The Exchange Offer--Consequences of Failure to
Exchange."
6
<PAGE>
Shelf Registration
Statement................. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) is
not eligible under applicable securities laws to
participate in the Exchange Offer, and such holder
has satisfied certain conditions relating to the
provision of information to the Company for use
therein, the Company has agreed to register the Old
Notes on a shelf registration statement (the "Shelf
Registration Statement") and use its best efforts to
cause it to be declared effective by the Commis-sion
as promptly as practical on or after the con-
summation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain circum-
stances, a maximum of two years, to cover resales of
the Old Notes held by any such holders.
Special Procedures for
Beneficial Owners......... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and deliv-
ering its Old Notes, either make appropriate ar-
rangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Guaranteed Delivery
Procedures................ Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Ex-
change Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the guar-
anteed delivery procedures set forth in "The Ex-
change Offer--Guaranteed Delivery Procedures."
Withdrawal Rights......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes
and Delivery of New
Notes..................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the Ex-
change Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Use of Proceeds........... There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Exchange Agent............ Norwest Bank Minnesota, National Association is
serving as Exchange Agent in connection with the
exchange offer of New Notes for Old Notes.
7
<PAGE>
THE NEW NOTES
General................... The form and terms of the New Notes are the same as
the form and terms of the Old Notes (which they re-
place) except that (i) the New Notes bear a Series
B designation and have a different CUSIP number
than the Old Notes, (ii) the New Notes have been
registered under the Securities Act and, therefore,
will not bear legends restricting the transfer
thereof, and (iii) the holders of New Notes will
not be entitled to certain rights under the Regis-
tration Rights Agreement, including the provisions
providing for an increase in the interest rate on
the Old Notes in certain circumstances relating to
the timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
See "The Exchange Offer--Purpose and Effect of the
Exchange Offer." The New Notes will evidence the
same debt as the Old Notes and will be entitled to
the benefits of the Indentures. See "Description of
New Notes."
Issuer.................... Globe Manufacturing Corp.
Securities Offered........ $150,000,000 principal amount of 10% Senior Subor-
dinated Notes due 2008, Series B.
Maturity Date............. August 1, 2008.
Interest Payment Dates.... February 1 and August 1 of each year, commencing on
February 1, 1999.
Mandatory Sinking Fund or
Redemption................ None
Optional Redemption....... The New Notes may be redeemed, in whole or in part,
at any time on or after August 1, 2003 at the op-
tion of the Company, at the redemption prices set
forth herein, plus, in each case, accrued and un-
paid interest, if any, to the date of redemption.
In addition, at any time prior to August 1, 2001,
the Company may, at its option, redeem up to 35% in
aggregate principal amount of the New Notes at a
redemption price of 110.0% of the principal amount
thereof, plus accrued and unpaid interest to the
date of redemption, with the net cash proceeds of
one or more Equity Offerings, provided that not
less than $97.5 million of the aggregate principal
amount of the New Notes remains outstanding immedi-
ately after the occurrence of such redemption.
Change of Control......... In the event of a Change of Control, each Holder
will have the right to require the Company to make
an offer to repurchase such Holder's New Notes, in
whole or in part, at a price of 101% of the aggre-
gate principal amount thereof, plus accrued and un-
paid interest to the date of repurchase.
Subordination............. The New Notes will be general unsecured obligations
of the Company, subordinated in right of payment to
all present and future Senior Debt of the Company,
including the Company's obligations under the Se-
nior Credit Facility. Claims in respect of the New
Notes will also be effectively subordinated to all
secured indebtedness of the Company to the extent
of the value of the assets securing such indebted-
ness. As of June
8
<PAGE>
30, 1998, on a pro forma basis, after giving effect
to the Transactions, the Company would have had ap-
proximately $120.1 million of Senior Debt (exclud-
ing unused commitments of approximately $45.0 mil-
lion under the Senior Credit Facility).
Guarantees................ The New Notes will be unconditionally guaranteed on
a senior subordinated basis by each of the
Company's future Restricted Domestic Subsidiaries.
The Guarantees will be general unsecured
obligations of the Guarantors, subordinated in
right of payment to all Guarantor Senior Debt of
each Guarantor. Claims in respect of the New Notes
will also be effectively subordinated to all
obligations of any subsidiary of the Company that
is not a Guarantor. The Company has no existing
Restricted Domestic Subsidiaries.
Certain Covenants......... The Indenture pursuant to which the New Notes will
be issued (the "Indenture"), among other things,
limits the ability of the Company and its
Restricted Subsidiaries to: (i) incur additional
indebtedness; (ii) issue Disqualified Stock; (iii)
make certain restricted payments; (iv) grant liens
on assets; (v) merge, consolidate or transfer
substantially all of their assets; (vi) enter into
transactions with Related Persons; (vii) impose
restrictions on any Restricted Subsidiary's ability
to pay dividends or make certain other payments to
the Company and its Restricted Subsidiaries; (viii)
enter into certain guarantees; (ix) sell assets;
and (x) issue capital stock of Restricted
Subsidiaries.
A description of the terms of the New Notes, including definitions of terms
which are capitalized above, is set forth herein under "Description of the
Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Old Notes in exchange for New Notes, including
factors affecting forward-looking statements. These risk factors are generally
applicable to the Old Notes as well as the New Notes.
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following information is qualified in its entirety by the consolidated
financial statements of the Company. The following summary consolidated
financial data as of the dates and for the periods indicated were derived from
the audited and unaudited consolidated financial statements of the Company
contained elsewhere in this Prospectus. The unaudited consolidated financial
data at June 30, 1998 and for the six months ended June 30, 1997 and June 30,
1998 include all adjustments (consisting only of normal recurring adjustments)
which management considers necessary for a fair presentation of the financial
information for these unaudited periods. The results of operations for the six
months ended June 30, 1998 are not necessarily indicative of the results of
operations that may be expected for the full fiscal year 1998. The unaudited
pro forma consolidated financial data and the summary unaudited pro forma
consolidated balance sheet data as of June 30, 1998 give effect to the
Transactions as if they had occurred on such date (for balance sheet data) or
at the beginning of the period (for statement of income data). None of the pro
forma consolidated financial data set forth below (including the summary
unaudited pro forma consolidated balance sheet data) purport to be indicative
of the results that actually would have been obtained had all of the events
been completed as of the date assumed and for the periods presented and are not
intended to be a projection of the Company's future results or financial
position. The following summary consolidated financial information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company and the related notes thereto.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR ENDED SIX MONTHS SIX MONTHS
DECEMBER 31, PRO FORMA ENDED JUNE 30, ENDED
---------------------------- DECEMBER 31, ---------------- JUNE 30,
1995 1996 1997 1997 1997 1998 1998
-------- -------- -------- ------------ ------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $128,319 $152,603 $170,941 $170,941 $84,283 $92,490 $ 92,490
Cost of sales........... 97,182 110,609 115,099 115,099 56,450 59,556 59,556
-------- -------- -------- -------- ------- ------- --------
Gross margin........... 31,137 41,994 55,842 55,842 27,833 32,934 32,934
Selling, general and
administrative
expenses............... 18,515 21,705 24,381 24,286 10,616 12,083 12,042
Research and development
costs.................. 2,260 2,533 2,633 2,633 1,190 2,040 2,040
-------- -------- -------- -------- ------- ------- --------
Operating income....... 10,362 17,756 28,828 28,923 16,027 18,811 18,852
Other income (expenses):
Interest, net........... (6,030) (5,285) (3,968) (25,703) (2,097) (1,788) (12,749)
Loss in investment in
joint venture (1)...... (643) -- -- -- -- -- --
Other income, etc....... 438 875 372 372 86 655 655
-------- -------- -------- -------- ------- ------- --------
Income before income
taxes and
extraordinary income.. 4,127 13,346 25,232 3,592 14,016 17,678 6,758
Provision for income
taxes.................. 1,718 4,784 8,383 (316) 5,255 6,638 2,248
-------- -------- -------- -------- ------- ------- --------
Income before
extraordinary item.... 2,409 8,562 16,849 3,908 8,761 11,040 4,510
Loss from write-off of
deferred financing
cost, net (2).......... 1,294 -- 301 301 301 -- --
-------- -------- -------- -------- ------- ------- --------
Net income.............. $ 1,115 $ 8,562 $ 16,548 $ 3,607 $ 8,460 $11,040 $ 4,510
======== ======== ======== ======== ======= ======= ========
OTHER FINANCIAL DATA:
Gross margin %.......... 24.3% 27.5% 32.7% 32.7% 33.0% 35.6% 35.6%
EBITDA (3) (5).......... $ 22,480 $ 28,960 $ 42,377 $ 42,249 $21,203 $25,161 $ 25,097
EBITDA margin (%) (4)
(5).................... 17.5% 19.0% 24.8% 24.7% 25.2% 27.2% 27.1%
Depreciation and
amortization........... $ 10,688 $ 9,676 $ 12,208 $ 12,208 $ 4,562 $ 5,366 $ 5,366
Capital expenditures.... 8,640 5,806 17,101 17,230 6,913 17,127 17,192
Ratio of earnings to
fixed charges.......... 1.12x 1.49x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------
PRO
ACTUAL FORMA (5)
-------- ---------
(DOLLARS
IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 2,466 $ 2,919
Working capital............................................. 14,877 28,961
Working capital as adjusted (6)............................. 30,567 32,873
Property, plant and equipment, net.......................... 69,814 69,814
Total assets................................................ 121,853 135,432
Total debt.................................................. 60,716 271,891
Shareholders' equity (deficit).............................. 42,149 (155,407)
</TABLE>
- ---------------------
(1) Represents the Company's share of the operating losses incurred by a joint
venture in which the Company acquired a 40% interest in 1990. The Company
accounted for its investment in the joint venture using the equity method
of accounting.
(2) Reflects non-recurring charges related to the write-off of the unamortized
balance of deferred financing costs in the year in which the related
refinancing occurred. The amounts are shown net of applicable income tax.
(3) EBITDA represents income before interest expense (net), income taxes,
depreciation and amortization, gain or loss on disposal of assets, noncash
charges associated with net periodic postretirement benefit costs, non-cash
stock based compensation and extraordinary, unusual, non-recurring charges
consisting of (a) those referred to in footnotes (1) and (2) above, (b)
certain nonrecurring legal expenses related to environmental matters of
$454,000 in 1997, $308,000 and $67,000 in the six months ended June 30,
1997 and 1998, respectively, and $214,000 in the twelve months ended June
30, 1998 and (c) fees and expenses relating to the Transactions. EBITDA is
not intended to represent cash flow from operations or net income as
defined by generally accepted accounting principles and should not be
considered as a measure of liquidity or an alternative to, or more
meaningful than, operating income or operating cash flow as an indication
of the Company's operating performance. EBITDA is included herein because
management believes that certain investors find it a useful tool for
measuring the Company's ability to service its debt.
(4) EBITDA margin represents EBITDA as calculated in footnote (3) above as a
percentage of net sales.
(5) The unaudited pro forma consolidated financial data and related ratios give
effect to the consummation of the Transactions as if they occurred on the
first day of such period for statement of income data and as of such date
for balance sheet data. Pro forma EBITDA represents EBITDA for such period
as adjusted (a) to exclude the amount ($872,000) by which the salary and
bonus paid by the Company to Thomas A. Rodgers, Jr. during such period
exceeds the amount that will be paid to Mr. Rodgers following the
Transactions, and (b) to include the annual $1.0 million management fee to
be paid to an affiliate of Code Hennessy & Simmons following the
consummation of the Transactions. In connection with the Transaction the
Company incurred a one time compensation expense charge of $3,318
associated with the vesting of stock options and $2,320 associated with
bonuses paid to certain members of management. Although the Company expects
to charge such amounts in the period following the transaction date, such
charge is not reflected in the accompanying pro forma financial
information. See "Management" and "Certain Relationships and Related
Transactions--Management Agreement" and "--Consulting Agreement."
(6) Working capital as adjusted represents the difference between current
assets less cash, and current liabilities less the current portions of long
term debt and long term capital leases and notes payable.
11
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully, in addition to
the other information contained in this Prospectus before tendering the Old
Notes in exchange for the New Notes. In connection with the forward-looking
statements which appear in this Prospectus, prospective purchasers of New
Notes should carefully review the factors discussed below and the cautionary
statements referred to in "Risk Factors--Risks Regarding Forward-Looking
Statements." The risk factors set forth below are generally applicable to the
Old Notes as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, including Exxon Capital Holdings
Corporation, SEC No-Action Letter (available April 13, 1988) (the "Exxon
Capital Letter"), Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(available June 5, 1991) (the "Morgan Stanley Letter"), and similar letters,
the Company believes that the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold or otherwise transferred by any holder
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of such
holder's business and such Holder has no arrangement with any person to
participate in the distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 180 days from
the Expiration Date, it will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer for the purpose of participating
in a distribution of the New Notes cannot rely on the Morgan Stanley Letter or
similar letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Old Notes not so tendered
could be adversely affected. See "The Exchange Offer."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
New Notes by holders who are entitled to participate in this Exchange Offer.
The holders of Old Notes (other than any such holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who are
not eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement with respect to such Old Notes. The New Notes will constitute new
issues of securities with no established trading market. The Company does not
intend to list the New Notes on any national securities exchange or seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System.
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The Initial Purchasers have advised the Company that they currently intend to
make a market in the New Notes, but they are not obligated to do so and may
discontinue such market making at any time. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statement. Accordingly, no assurance can be given that
an active public or other market will develop for the New Notes or as to the
liquidity of the trading market for the New Notes. If a trading market does
not develop or is not maintained, holders of the New Notes may experience
difficulty in reselling the New Notes or may be unable to sell them at all. If
a market for the New Notes develops, any such market may be discontinued at
any time.
If a public trading market develops for the New Notes, future trading prices
of such securities will depend on many factors including, among other things,
prevailing interest rates, the Company's results of operations and market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the New Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal (or
Agent's Message) and all other required documents. Therefore, holders of the
Old Notes desiring to tender such Old Notes in exchange for New Notes should
allow sufficient time to ensure timely delivery. The Company is under no duty
to give notification of defects or irregularities with respect to the tenders
of Old Notes for exchange. Old Notes that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. See "The Exchange Offer."
SUBSTANTIAL LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company is highly leveraged. As a result of the Transactions, including
the Initial Offering and the Company's payment of a substantial portion of the
net proceeds therefrom to Globe Holdings to enable Globe Holdings to pay the
Cash Merger Consideration, the Company's aggregate indebtedness for borrowed
money and interest expense increased and its shareholders' equity decreased.
On a pro forma basis, after giving effect to the Transactions, the Company
would have had total Debt (as defined) of $271.9 million and a shareholders'
deficit of approximately $155.6 million as of June 30, 1998. In addition,
subject to the restrictions in the Senior Credit Facility and the Indenture,
the Company may incur additional Debt from time to time to finance working
capital, capital expenditures, acquisitions, or for other purposes.
The Indenture governing the Notes as well as the Senior Credit Facility (or
any replacement facilities of the Company or any subsidiary of the Company)
contain certain restrictive financial and other covenants. The Company's high
degree of leverage and restrictions in its debt agreements could have
important consequences to the holders of the Notes, including the following:
(i) a substantial portion of the Company's cash flow from operations will be
dedicated to debt service and will not be available for operations and other
purposes; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures,
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acquisitions or other purposes may be limited or impaired; (iii) the Company's
operating flexibility with respect to certain matters will be limited by
covenants contained in the Indenture and the Senior Credit Facility which will
limit the ability of the Company and its Restricted Subsidiaries to, among
other things, incur additional indebtedness, grant liens on assets, merge,
consolidate or transfer substantially all of their assets, enter into
transactions with Related Persons, impose restrictions on any Restricted
Subsidiary's ability to pay dividends or make certain other payments to the
Company and its Restricted Subsidiaries, enter into certain guarantees, sell
assets and issue capital stock of Restricted Subsidiaries; (iv) the Company
will be substantially more leveraged than certain of its competitors, which
may place the Company at a competitive disadvantage; (v) the Company's degree
of leverage may make it more vulnerable to economic downturns, may reduce its
flexibility in responding to changing business and economic conditions and may
limit its ability to pursue other business opportunities, to finance its
future operations or capital needs, and to implement its business strategy;
and (vi) certain of the Company's borrowings will be at variable rates of
interest, which will expose the Company to the risk of increased interest
rates. See "Business--Business Strategy," "Description of Senior Credit
Facility" and "Description of the Notes."
Required payments of principal and interest on the Company's long-term debt
are expected to be financed from cash flow from operations and debt
financings. The Company's ability to generate cash for the repayment of debt
will be dependent upon the future performance of the Company's businesses,
which will in turn be subject to financial, business, economic, and other
factors affecting the business and operations of the Company, including
factors beyond its control, such as prevailing economic conditions. There can
be no assurance that cash flow from operations will be sufficient to enable
the Company to service its debt and meet its other obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SUBORDINATION OF THE NOTES AND THE GUARANTEES
The Notes are and any Guarantees will be subordinated in right of payment to
all Senior Debt of the Company and Guarantor Senior Debt of the Guarantors,
respectively, including the Company's obligations under the Senior Credit
Facility. In the event of bankruptcy, liquidation or reorganization of the
Company or the Guarantors, the assets of the Company or the Guarantors will be
available to pay obligations on the Notes only after all Senior Debt or
Guarantor Senior Debt, as the case may be, has been paid in full, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Notes then outstanding. In addition, indebtedness outstanding under the Senior
Credit Facility is secured by substantially all of the assets of the Company
and its domestic subsidiaries. Claims in respect of the Notes will be
effectively subordinated to all secured indebtedness of the Company and the
Guarantors to the extent of the value of the assets securing such indebtedness
and to all liabilities (including trade payables) of any subsidiary of the
Company that is not a Guarantor. As of June 30, 1998, on a pro forma basis
after giving effect to the Transactions, the Company would have had
approximately $121.8 million of Senior Debt (excluding unused commitments of
approximately $43.2 million under the Senior Credit Facility). Additional
Senior Debt and Guarantor Senior Debt may be incurred by the Company and the
Guarantors from time to time subject to certain restrictions contained in the
Senior Credit Facility and the Indenture. See "Description of Senior Credit
Facility" and "Description of the Notes."
CHANGE OF CONTROL
A Change of Control (as defined) could require the Company to refinance
substantial amounts of indebtedness, including indebtedness under the Notes
and the Senior Credit Facility. Upon the occurrence of a Change of Control,
the holders of the Notes would be entitled to require the Company to
repurchase the Notes at a purchase price equal to 101% of the principal amount
of such Notes, plus accrued and unpaid interest, if any, to the date of
repurchase. Such right is subordinated to the rights of the holders of Senior
Debt. These requirements and the subordination of the Notes will limit the
ability of the Company to repurchase the Notes. The source of funds for any
such repurchase would be the Company's available cash or cash generated from
operations or other sources, including borrowings, sales of equity or funds
provided by a new controlling person.
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However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of the
Notes tendered. In addition, the Senior Credit Facility prohibits the
repurchase of the Notes by the Company in such an event, unless and until such
time as the indebtedness under the Senior Credit Facility is repaid in full.
The Company's failure to make such repurchases in such instances would result
in a default under both the Notes and the Senior Credit Facility. Future
indebtedness of the Company may also contain restrictions or repayment
requirements with respect to certain events or transactions that would
constitute a Change of Control. In the event of a Change of Control, there can
be no assurance that the Company would have sufficient assets to satisfy all
of its obligations under the Notes or the Senior Credit Facility. The effect
of such requirements may make it more difficult or delay attempts by others to
obtain control of the Company. See "Description of the Notes--Change in
Control" and "Description of Senior Credit Facility."
COMPETITION
The elastomeric fiber industry is highly competitive. The Company competes
in the spandex fiber markets primarily with E.I. du Pont de Nemours and
Company ("DuPont") and Bayer AG ("Bayer"), both of which have domestic
facilities, and with a number of foreign competitors. The Company's primary
competitors in the latex thread markets are foreign producers. Some of the
Company's competitors have substantially greater financial, marketing,
manufacturing, distribution, sales and support resources, market share and
brand awareness than the Company. There can be no assurance that the Company
will be able to compete successfully in the future against its competitors or
that the Company will not experience increased price competition, which could
materially and adversely affect the Company's results of operations, financial
condition and ability to meet its obligations under the Notes. See "Business--
Competition."
ENVIRONMENTAL COMPLIANCE
The Company is subject to comprehensive and evolving federal, state and
local environmental, health and safety requirements, including laws and
regulations relating to air emissions, wastewater management, the handling and
disposal of waste and the cleanup of properties affected by hazardous
substances. Violations of environmental, health and safety laws may result in
the imposition of significant fines and other penalties, and certain
environmental laws impose joint and several liability, without regard to
fault, on persons responsible for releases of hazardous substances to the
environment.
The Company's management believes that its operations have been and are in
substantial compliance with environmental, health and safety requirements, and
that it has no liabilities arising under such requirements, except as would
not be expected to have a material adverse effect on the Company's operations,
financial condition or competitive position. Some risk of environmental,
health and safety liability is inherent in the Company's business, however,
and there can be no assurance that material environmental, health or safety
costs will not arise in the future.
Since 1986, the Company has received requests for information and related
correspondence from the U.S. Environmental Protection Agency (the "U.S. EPA")
and other third parties indicating that the Company might be responsible under
the federal Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA") or equivalent state laws (collectively, the "Superfund
laws") for costs associated with the investigation and cleanup of ten
contaminated sites. The Company's management believes that the Company has
resolved its involvement with respect to eight of these sites (five of which
were inter-related) since 1988 and that the Company's involvement in matters
arising under the Superfund laws will not have a material adverse effect on
the Company's operations, liquidity or financial condition.
In December 1996, the Company's management learned that U.S. EPA and the
U.S. Attorney's Office were conducting an investigation into whether the
Company had engaged in criminal violations of environmental laws with respect
to its Fall River, Massachusetts facility. The investigators have not informed
the Company of the
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scope of their inquiry. The Company has provided certain information regarding
its Fall River operations to the federal investigators and believes it has
cooperated fully with their inquiry. The Company does not know whether the
investigation is currently active. If the Company is charged with violations
of environmental laws, it may be subject to substantial fines and other
penalties, which could have a material adverse effect on the Company's results
of operations, financial condition and ability to meet its obligations under
the Notes. See "Business--Environmental, Health and Safety Matters."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
The Company's top ten customers accounted for approximately 48% of 1997
sales, with one customer, Unifi, Inc. (a manufacturer of covered yarns for
men's and women's hosiery and narrow fabrics), accounting for approximately 9%
of 1997 sales. As is customary in the elastomeric fiber industry, the Company
does not generally have long-term supply agreements with its customers. While
the Company believes its customer relationships are generally good, a
significant decrease or interruption in business from any of the Company's
significant customers could have a material adverse effect on the Company's
results of operations, financial condition and ability to meet its obligations
under the Notes. See "Business--Customers."
DEPENDENCE ON SUPPLIERS
During 1997, raw materials represented 42% of the Company's total cost of
sales and 28% of net sales. The primary raw materials used by the Company are
polytetramethylene ether glycol, which the Company purchases from BASF
Corporation ("BASF"), and polyester resin, which the Company purchases from
two suppliers. These materials are used in a wide variety of products, and
based on its experience, management believes that adequate quantities of these
materials will be available from existing or alternative suppliers in the
foreseeable future. There can be no assurance, however, that such materials
will continue to be available in adequate supply in the future or that
shortages or disruptions in supply will not result in a material adverse
effect on the Company's results of operations, financial condition or ability
to meet its obligations under the Notes. The Company's ten largest suppliers
accounted for approximately 93% of its total raw material purchases and 31% of
its total cost of sales in 1997, with BASF, Polyurethane Specialties Corp. and
Ennar-Latex, Inc. accounting for 39%, 24% and 16% of such raw material
purchases, respectively. Although the prices for the Company's raw materials
have generally been stable over the past five years, the prices of certain of
the raw materials used by the Company have fluctuated, and there can be no
assurance that the prices of the Company's raw materials will not fluctuate in
the future. A significant increase in the price of raw materials that cannot
be passed on to customers could have a material adverse effect on the
Company's results of operations, financial condition and ability to meet its
obligations under the Notes.
FOREIGN SALES RISK
Sales to international customers represented approximately 28% of sales in
1997 and 47% of total receivables as of December 31, 1997, and the Company is
seeking to increase its international sales. Demand for the Company's products
is affected by economic and political conditions in each of the countries in
which it sells its products and by certain other risks of doing business
abroad, including fluctuations in the value of currencies (which may affect
demand for products priced in United States dollars), import duties, changes
to import and export regulations (including quotas), possible restrictions on
the transfer of funds, labor or civil unrest, long payment cycles, greater
difficulty in collecting accounts receivable and the burdens and cost of
compliance with a variety of foreign laws. Changes in policies by foreign
governments could result in, for example, increased duties, higher taxation,
currency conversion limitations, or limitations on imports or exports, any of
which could have a material adverse effect on the Company's results of
operations, financial condition and ability to meet its obligations under the
Notes. Globe's principal export markets are Europe, Central/South America and
Asia. The current economic crisis in Asia has resulted in a flood of fiber,
fabric and apparel into Europe from Asia, which has had a negative impact on
prices and the Company's sales in Europe. A continued economic crisis in Asia
may precipitate further downturns in spandex fiber consumption in all of
Globe's export markets.
TEXTILE INDUSTRY AND CYCLICALITY
In 1997, approximately 92% of the Company's sales were to the textile and
apparel industries. These industries are highly cyclical and are characterized
by rapid shifts in consumer demand, as well as competitive
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pressures and price and demand volatility. The demand for the Company's
products is principally dependent upon the level of demand for certain types
of apparel. The demand for apparel is in turn dependent on consumer spending,
which may be adversely affected by economic downturns, changing retailer and
consumer demands, declines in consumer confidence or spending, and other
factors beyond the Company's control. A reduction in the level of demand for
apparel or a decrease in consumer demand for products containing elastomeric
fibers could have a material adverse effect on the Company's result of
operations, financial condition and ability to meet its obligations under the
Notes.
CONTROL BY PRINCIPAL SHAREHOLDER
Code Hennessy & Simmons owns approximately 75.6% of the outstanding voting
stock of Globe Holdings, which in turn owns all of the issued and outstanding
capital stock of the Company. Consequently, Code Hennessy & Simmons, through
its voting stock holdings in Globe Holdings and its ability to designate all
of the members of the boards of directors of Globe Holdings and of the
Company, exercises significant influence over the policies and direction of
the Company. Code Hennessy & Simmons' interests may differ from the interests
of the holders of the Notes. See "Management--Executive Officers and
Directors" and "Certain Relationships and Related Transactions."
PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is dependent on the proprietary technology included in
its manufacturing processes. Much of this technology is not patented. The
Company relies primarily on intellectual property laws, confidentiality
procedures and contractual provisions to protect its intellectual property.
The Company seeks to protect the majority of its technology under trade secret
laws, which afford only limited protection. There can be no assurance that
intellectual property laws will protect the confidentiality of the Company's
technology and processes. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to obtain and use
information that the Company regards as proprietary. Furthermore, there can be
no assurance that others will not independently develop similar technology or
design around any intellectual property rights held by the Company. In
addition, no assurance can be given that alternative technologies will not be
developed that are superior to or less costly than the Company's existing
technology.
The Company may in the future be notified that it is infringing certain
patent or other intellectual property rights of others, although there are no
such pending lawsuits against the Company or unresolved notices that it is
infringing intellectual property rights of others. No assurance can be given
that in the event of such infringement, licenses could be obtained on
commercially reasonable terms, if at all, or that litigation will not occur.
The failure to obtain necessary licenses or other rights or the occurrence of
litigation arising out of such claims could have a material adverse effect on
the Company's results of operations and financial condition and its ability to
meet its obligations under the Notes.
EXPANSION OF PRODUCTION CAPACITY
All of the Company's significant spandex fiber competitors have been engaged
in production expansion, product improvement and global marketing programs
since 1993. The Company's ability to achieve its strategic objectives and to
retain or increase its current share of the spandex fiber market will require
it to make significant capital expenditures in order to expand its production
capacity, particularly for fine denier spandex fiber. The Company is adding
3.6 million pounds of fine denier spandex fiber capacity to its facility in
Tuscaloosa, Alabama at an estimated cost of $22.1 million, with approximately
half of this increased capacity expected to be on line in the fourth quarter
of 1998 and the balance expected to be on line in the first quarter of 1999.
There can be no assurance that the expansion will be completed within the
Company's timetable or budget. A lengthy delay in the completion of the
Tuscaloosa plant expansion or significant cost over-runs in connection
therewith could have a material adverse effect on the Company's result of
operations, financial condition and ability to meet its obligations under the
Notes.
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ANTITRUST AND ANTIDUMPING PROCEEDINGS
In April 1997 two domestic purchasers of extruded latex thread filed a
complaint against a number of foreign manufacturers and distributors of such
thread, including an Indonesian limited liability company in which Globe
Holdings then owned a 40% interest (the "Joint Venture"). The complaint
alleges an international conspiracy to restrain trade in, and fix prices of,
the thread in the United States ("U.S."). Neither the Company nor Globe
Holdings has been named as a defendant in the case. The Joint Venture has
alleged in its motion to dismiss that not all parties to the conspiracy have
been joined, and there can be no assurance that the Company will not be named
in the future.
On March 31, 1998 a petition was filed with the U.S. Department of Commerce
alleging subsidization and dumping of Indonesian extruded latex thread. The
Department of Commerce is currently conducting an investigation into the
allegations. The proceedings could result in additional duties being levied on
extruded latex thread imported from Indonesia. During 1996 and 1997, the
Company purchased approximately $5.9 million and $9.9 million of latex thread
from the Joint Venture for resale in the North American market.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's success depends to a significant extent upon the efforts and
abilities of the Company's senior management employees. The loss of the
services of one or more of such persons could have a material adverse effect
on the Company. The Company believes that its continued future success will
depend on its ability to attract, retain or develop highly skilled managerial,
technical and marketing personnel. There can be no assurance that it will be
able to do so. See "Management."
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
If the Company, its significant customers or suppliers fail to make
necessary modifications and conversions on a timely basis, the year 2000 issue
could have a material adverse effect on Company operations. However, the
impact cannot be quantified at this time. The Company believes that its
competitors face similar risks.
The Company has established a corporate-wide project team to identify non-
compliant software and complete the corrections required for the year 2000
issue. The Company has completed its repairs for major manufacturing systems
in all locations. The Company also completed its repair of its major financial
systems. The Company's current target is to resolve compliance issues in its
distribution systems and other ancillary systems by March 31, 1999. The
Company also has made inquiry of its major customers and suppliers to assess
their compliance. Nevertheless, there can be no absolute assurance that there
will not be a material adverse effect on the Company if third party
governmental or business entities do not convert or replace their systems in a
timely manner and in a way that is compatible with the Company's systems.
Costs related to the year 2000 issue are funded through operating cash
flows. Through June 30, 1998, the Company expended approximately $108,000 in
systems development and remediation efforts, including the cost of new
software and modifying the applicable code of existing software. The Company
estimates remaining costs to be between $50,000 and $100,000. The Company
presently believes that the total cost of achieving year 2000 compliant
systems is not expected to be material to the Company's financial condition,
liquidity or results of operations.
Time and cost estimates are based on currently available information.
Developments that could affect estimates include, but are not limited to, the
availability and cost of trained personnel, the ability to locate and correct
all relevant computer code and systems and remediation success of the
Company's customers and suppliers.
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CERTAIN INSOLVENCY CONSIDERATIONS
The incurrence by the Company of indebtedness such as the Notes to finance
the Transactions may be subject to review under relevant state and federal
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or
on behalf of unpaid creditors of the Company. Under these laws, if a court
were to find that, after giving effect to the sale of the Notes and the
application of the net proceeds therefrom, or the exchange of the Old Notes
for New Notes, either (a) the Company incurred such indebtedness with the
intent of hindering, delaying or defrauding creditors or (b) the Company
received less than reasonably equivalent value or consideration for incurring
such indebtedness and (i) was insolvent or was rendered insolvent by reason of
such transactions, (ii) was engaged in a business or transaction for which the
assets remaining with the Company constituted unreasonably small capital or
(iii) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court may subordinate such
indebtedness to presently existing and future indebtedness or obligations of
the Company, avoid the issuance of such indebtedness and direct the repayment
of any amounts paid thereunder to the Company's creditors or take other action
detrimental to the holders of such indebtedness.
In the event that under relevant state or federal law a Guarantor is
determined, at the time it executed its Guarantee, to have come within clauses
(a) or (b) of the first paragraph of this subsection, the Guarantee by such
Guarantor may be voidable (in whole or in part) or the claim of the holders of
the Notes in respect of such Guarantee may be subordinated (in whole or in
part) to other obligations and liabilities of such Guarantor, in each case
based on the theory that such Guarantee constituted a fraudulent conveyance
under applicable federal or state fraudulent transfer or conveyance statutes.
In the event that such claims are asserted after any payments are made by a
Guarantor under its Guarantee, there is a risk that persons who received such
payments will be ordered by a court to return to such Guarantor's creditors or
its trustee in bankruptcy all or a portion of such payments.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and mature.
There can be no assurance as to what standard a court would apply in order
to determine insolvency. A court may find that the Company did not receive
fair consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the Old Notes. In addition, if a court were to
find that any of the components of the Transactions constituted a fraudulent
transfer, a court may find that the Company did not receive fair consideration
or reasonably equivalent value for the incurrence of the indebtedness
represented by the Old Notes and the New Notes.
The Company believes that it received equivalent value at the time the
indebtedness under the Old Notes was incurred. In addition, the Company does
not believe that, after giving effect to the Transactions, it (i) was or will
be insolvent or rendered insolvent, (ii) was or will be engaged in a business
or transaction for which its remaining assets constituted unreasonably small
capital or (iii) intends or intended to incur, or believes or believed that it
will or would incur, debts beyond its ability to pay such debts as they
mature. These beliefs are based on the Company's operating history and
analysis of internal cash flow projections and estimated values of assets and
liabilities of the Company at the time of the Initial Offering. There can be
no assurance, however, that a court passing on these issues would make the
same determination.
ABSENCE OF ESTABLISHED PUBLIC MARKET
The Notes are a new issue of securities for which there is no established
traders market. While application has been made to have the Notes accepted for
trading in the PORTAL market, there can be no assurance that an
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active trading market for the Notes will develop in the PORTAL market or
elsewhere. The Company has been advised by the Initial Purchasers that the
Initial Purchasers currently intend to make a market in the Notes; however,
they are not obligated to do so and any market making activity may be
discontinued at any time. Therefore, there can be no assurance that an active
public market for the Notes will develop or, if developed, will continue to
exist. If a public trading market develops for the Notes, future trading
prices of the Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending upon such factors, the Notes may
trade at a discount from their principal amount. See "Plan of Distribution."
In addition, the liquidity of, and trading markets for, the Notes also may
be materially and adversely affected by declines in the market for high yield
securities generally. Such declines may adversely affect such liquidity and
trading markets independent of the actual performance of, and prospects for,
the Company.
RISKS REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including,
without limitation, statements concerning the Company's future financial
position, business strategy, budgets, projected costs and plans and objectives
of management for future operations. These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements generally can be identified by
the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "believe," "should," "plans," or
"continue" or the negative thereof or variations thereon or similar
terminology. Without limiting the foregoing, forward-looking statements are
set forth herein under the captions "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. These forward-looking
statements are subject to a number of risks and uncertainties, including,
without limitation, those identified under "Risk Factors" and elsewhere in
this Prospectus and other risks and uncertainties indicated from time to time
in the Company's filings with the Securities and Exchange Commission. Actual
results could differ materially from these forward-looking statements.
20
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. In consideration for issuing the New Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are the same as the form and
terms of the New Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for New Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the New
Notes will not result in any increase or decrease in the indebtedness of the
Company. As such, no effect has been given to the Exchange Offer in the pro
forma statements or capitalization table.
The net proceeds to the Company from the sale of the Old Notes in the
Initial Offering (after deducting discounts and estimated fees and expenses)
were utilized by the Company to consummate the Transactions. See "Certain
Relationships and Related Transactions--Recapitalization" and "Description of
Senior Credit Facility."
21
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited historical consolidated
capitalization of the Company as of June 30, 1998 and as adjusted on a pro
forma basis to give effect to the Transactions as if they had occurred on June
30, 1998. See "Use of Proceeds." This table should be read in conjunction with
the "Selected Consolidated Financial Data" and the related notes thereto, and
the Company's consolidated financial statements, including related notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30,
1998
------------------
ACTUAL PRO FORMA
-------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................. $ 2,466 $ 2,919
======== ========
Long-term debt (including current maturities):
Old Credit Facility................................. $ 60,625 $ --
Senior Credit Facility: (1)
Revolving loan facility........................... -- 6,800
Term loan facility................................ -- 115,000
Old Notes........................................... -- 150,000
Capital lease obligations........................... 91 91
-------- --------
Total long-term debt............................ 60,716 271,891
-------- --------
Shareholders' equity (deficit)........................ 42,149 (155,407)
-------- --------
Total capitalization............................ $102,865 $116,484
======== ========
</TABLE>
- ----------------------
(1) The Senior Credit Facility provides for term loans in an aggregate
principal amount of $115.0 million and revolving loans of up to $50.0
million. See "Description of Senior Credit Facility."
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following information is qualified in its entirety by the consolidated
financial statements of the Company. The following selected consolidated
financial data as of the dates and for the periods indicated were derived from
the audited and unaudited consolidated financial statements of the Company
contained elsewhere in this Prospectus, except data as of, and for the years
ended December 31, 1993, and 1994, which was derived from audited consolidated
financial statements of the Company not included in this Prospectus. The
unaudited consolidated financial statements for the six months ended June 30,
1997 and June 30, 1998 include all adjustments consisting only of normal
recurring adjustments which management considers necessary for a fair
presentation of results for these unaudited periods. The results of operations
for the six months ended June 30, 1998 are not necessarily indicative of
results of operations that may be expected for the full fiscal year 1998. The
following selected consolidated financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company and the related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $107,612 $112,475 $128,319 $152,603 $170,941 $84,283 $ 92,490
Cost of sales........... 75,980 84,321 97,182 110,609 115,099 56,450 59,556
-------- -------- -------- -------- -------- ------- --------
Gross margin........... 31,632 28,154 31,137 41,994 55,842 27,833 32,934
Selling, general and
administrative
expenses............... 13,467 14,152 18,515 21,705 24,381 10,616 12,083
Research and development
costs.................. 1,561 3,506 2,260 2,533 2,633 1,190 2,040
-------- -------- -------- -------- -------- ------- --------
Operating income....... 16,604 10,496 10,362 17,756 28,828 16,027 18,811
Other income (expenses):
Interest, net........... (2,212) (3,514) (6,030) (5,285) (3,968) (2,097) (1,788)
Loss in investment in
joint venture (1)...... -- (617) (643) -- -- -- --
Other income, etc....... 492 341 438 875 372 86 655
-------- -------- -------- -------- -------- ------- --------
Income before income
taxes and
extraordinary income.. 14,884 6,706 4,127 13,346 25,232 14,016 17,678
Provision for income
taxes.................. 5,680 2,882 1,718 4,784 8,383 5,255 6,638
-------- -------- -------- -------- -------- ------- --------
Income before
extraordinary item.... 9,204 3,824 2,409 8,562 16,849 8,761 11,040
Loss from write-off of
deferred financing
cost,
net (2)................ -- -- 1,294 -- 301 301 --
-------- -------- -------- -------- -------- ------- --------
Net income............. $ 9,204 $ 3,824 $ 1,115 $ 8,562 $ 16,548 $ 8,460 $ 11,040
======== ======== ======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
Gross margin %.......... 29.4% 25.0% 24.3% 27.5% 32.7% 33.0% 35.6%
EBITDA (3).............. $ 23,747 $ 20,509 $ 22,480 $ 28,960 $ 42,377 $21,203 $ 25,161
EBITDA margin % (4)..... 22.1% 18.2% 17.5% 19.0% 24.8% 25.2% 27.2%
Depreciation and
amortization........... $ 5,284 $ 8,228 $ 10,688 $ 9,676 $ 12,208 $ 4,562 $ 5,366
Capital expenditures.... $ 24,542 $ 24,284 $ 8,640 $ 5,806 $ 17,101 $ 6,913 $ 17,127
Ratio of earnings to
fixed charges (5)...... 6.4x 1.9x 1.6x 3.4x 6.3x 6.8x 8.8x
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 2,241 $ 1,336 $ 3,143 $ 3,101 $ 1,947 $ 2,376 $ 2,466
Working capital......... 8,021 9,391 5,052 4,263 19,453 19,339 14,877
Working capital as
adjusted (6)........... 11,308 19,361 20,747 17,250 27,518 25,522 30,567
Property, plant and
equipment, net......... 40,332 56,323 53,499 50,122 57,950 52,554 69,814
Total assets............ 69,599 93,414 92,824 91,329 105,133 98,509 121,853
Total debt.............. 50,141 69,182 66,698 50,615 56,917 59,215 60,716
Redeemable cumulative
preferred stock........ 6,466 6,466 6,466 6,466 -- -- --
Shareholders' equity.... 2,324 5,298 5,563 13,594 31,109 20,230 42,149
</TABLE>
23
<PAGE>
- ----------------------
(1) Represents the Company's share of the operating losses incurred by a joint
venture in which the Company acquired a 40% interest in 1990. The Company
accounted for its investment in the joint venture using the equity method
of accounting.
(2) Reflects non-recurring charges related to the write-off of the unamortized
balance of deferred financing costs in the year in which the related
refinancing occurred. The amounts are shown net of applicable income tax.
(3) EBITDA represents income before interest expense (net), income taxes,
depreciation and amortization, gain or loss on disposal of assets, noncash
charges associated with net periodic postretirement benefit costs, non-
cash stock based compensation and extraordinary, unusual, non-recurring
charges consisting of (a) those referred to in footnotes (1) and (2)
above, and (b) certain nonrecurring legal expenses related to
environmental matters of $454,000 in 1997, $308,000 and $67,000 in the six
months ended June 30, 1997 and 1998, respectively, and $214,000 in the
twelve months ended June 30, 1998. EBITDA is not intended to represent
cash flow from operations or net income as defined by generally accepted
accounting principles and should not be considered as a measure of
liquidity or an alternative to, or more meaningful than, operating income
or operating cash flow as an indication of the Company's operating
performance. EBITDA is included herein because management believes that
certain investors find it a useful tool for measuring the Company's
ability to service its debt.
(4) EBITDA margin represents EBITDA as calculated in footnote (3) above as a
percentage of net sales.
(5) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before taxes plus fixed charges. Fixed
charges consist of interest expense, capitalized interest costs,
amortization of debt issuance costs and the portion of rental expense on
capital and operating leases deemed representative of the interest factor.
(6) Working capital as adjusted represents the difference between current
assets less cash, and current liabilities less the current portions of
long term debt and long term capital leases and notes payable.
24
<PAGE>
GLOBE MANUFACTURING CORP.
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") are based on the historical financial statements of the
Company included elsewhere in this Prospectus.
The unaudited pro forma balance sheet gives effect to the Transactions as
though such events were consummated on June 30, 1998. The unaudited pro forma
statement of income for the year ended December 31, 1997 gives effect to the
Transactions as if such events were consummated on January 1, 1997. The
unaudited pro forma statement of income for the six months ended June 30, 1998
gives effect to the Transactions as if such events were consummated on January
1, 1998. The pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable.
The Pro Forma Financial Statements do not purport to be indicative of the
results that would have been obtained had such transactions described above
occurred as of the assumed dates. In addition, the Pro Forma Financial
Statements do not purport to project the Company's results of operations for
any future date or period.
The Pro Forma Financial Statements should be read in conjunction with the
financial statements of the Company and the notes thereto, included elsewhere
herein.
25
<PAGE>
GLOBE MANUFACTURING CORP.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
---------------------------------
1998 ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 2,466 $ 453 (a) $ 2,919
Accounts receivable, net................... 29,659 -- 29,659
Receivable from joint venture.............. 210 -- 210
Taxes receivable........................... -- 2,266 (b) 2,266
Inventories................................ 11,825 -- 11,825
Prepaid expenses and other assets.......... 1,207 -- 1,207
Deferred income taxes...................... 2,449 -- 2,449
-------- ------- --------
Total current assets......................... 47,816 2,719 50,535
Property, plant and equipment:
Land and land improvements................. 942 -- 942
Building and building improvements......... 33,122 -- 33,122
Manufacturing equipment.................... 79,265 -- 79,265
Furniture and equipment.................... 2,087 -- 2,087
Autos and trucks........................... 319 -- 319
Construction in progress................... 23,086 -- 23,086
-------- ------- --------
138,821 -- 138,821
Less accumulated depreciation.............. (69,007) -- (69,007)
-------- ------- --------
Net property, plant and equipment............ 69,814 -- 69,814
Deferred income taxes........................ 2,694 112 (b) 2,806
Cash surrender value of life insurance, net
of loans.................................... 927 -- 927
Intangible assets............................ -- -- --
Investment in joint venture.................. -- -- --
Notes receivable from officers............... 286 -- 286
Other Assets................................. 10 -- 10
Deferred financing costs, new................ -- 11,054 (c) 11,054
Deferred financing costs, net of
amortization................................ 306 (306)(d) --
-------- ------- --------
Total assets............................. $121,853 $13,579 $135,432
======== ======= ========
</TABLE>
- --------
(a) Reflects the impact of the sources and uses of funds of the Transactions.
(b) Reflects a statutory income tax rate of 40.2% for the pro forma adjustments
related to certain pro forma charges.
(c) Reflects the cost of raising additional debt.
(d) Reflects write off of deferred fees associated with Old Credit Facility.
26
<PAGE>
GLOBE MANUFACTURING CORP.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------
1998 ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 8,883 $ -- $ 8,883
Accrued expenses......................... 5,900 (40)(e) 5,860
Payable to joint venture................. -- -- --
Dividend payable......................... -- -- --
Note payable............................. 10,000 (3,200)(f) 6,800
Taxes payable............................ -- -- --
Long-term lease obligations due within
one year................................ 31 -- 31
Long-term debt obligations due within one
year.................................... 8,125 (8,125)(f) --
-------- --------- ---------
Total current liabilities.................. 32,939 (11,365) 21,574
Long-term debt............................. 42,500 72,500 (f) 115,000
Senior subordinated notes.................. -- 150,000 (g) 150,000
Long-term lease obligation................. 60 -- 60
Other long-term postretirement liability... 4,205 -- 4,205
Minimum pension liability.................. -- -- --
STOCKHOLDERS' EQUITY
Preferred stock.......................... -- -- --
Common stock, Class A.................... 2 (2)(h) --
Common stock, Class B.................... 16 (16)(h) --
Common stock, Class C.................... -- 22 (i) 22
Paid in capital.......................... 10,785 32,277 (i) 43,062
Retained earnings........................ 67,508 (265,999)(h) (198,491)
-------- --------- ---------
78,311 (233,718) (155,407)
Less treasury stock, at cost:
Common, Class A.......................... (4,187) 4,187 (h) --
Common, Class B.......................... (28,657) 28,657 (h) --
-------- --------- ---------
(32,844) 32,844 --
Unearned compensation...................... (3,318) 3,318 (j) --
-------- --------- ---------
Total stockholders' equity................. 42,149 (197,556) (155,407)
-------- --------- ---------
Total liabilities & stockholders'
equity................................ $121,853 $ 13,579 $ 135,432
======== ========= =========
</TABLE>
- --------
(e) Reflects payment of certain Old Credit Facility fees.
(f) Reflects net payment of Old Credit Facility and proceeds of new Senior
Credit Facility.
(g) Reflects proceeds from the Old Notes.
(h) Reflects payment for redemption of previous stockholders and retirement of
treasury stock.
(i) Reflects new equity contribution.
(j) Reflects vesting of outstanding options.
27
<PAGE>
GLOBE MANUFACTURING CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------
1997 ADJUSTMENTS PRO FORMA(D)
-------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................. $170,941 $ -- $170,941
Cost of sales............................. 115,099 -- 115,099
-------- -------- --------
Gross margin.......................... 55,842 -- 55,842
Selling, general and administrative
expenses................................. 24,381 (95)(a) 24,286
Research and development costs............ 2,633 -- 2,633
-------- -------- --------
Operating income...................... 28,828 95 28,923
Other Income/(Expense)....................
Interest................................ (3,968) (21,735)(b) (25,703)
Loss in investment in joint venture..... -- -- --
Other income, net....................... 372 -- 372
-------- -------- --------
Income before income taxes and
extraordinary items.................. 25,232 (21,640) 3,592
Provision for income taxes................ 8,383 (8,699)(c) (316)
-------- -------- --------
Income before extraordinary item...... $ 16,849 $(12,941) $ 3,908
======== ======== ========
</TABLE>
- --------
(a) Represents amortization of debt issuance costs associated with the old
credit facility.
(b) Adjustment to reflect pro forma interest expense calculated using (i)
7.94% per annum on $6,000 for the revolver; (ii) 7.94% on $60,000 for the
Term Loan A; (iii) 8.44% on $55,000 for the Term Loan B; (iv) 10.0% on
$150,000 for the Senior Subordinated Note; (v) amortization of deferred
finance charges; (vi) less capitalized interest costs of $635.
(c) Reflects a statutory income tax rate of 40.2% for the pro forma
adjustments.
(d) In connection with the Transaction the Company incurred a one time
compensation expense charge of $3,318 associated with the vesting of stock
options and $2,320 associated with bonuses paid to certain members of
management. Although the Company expects to charge such amounts in the
period following the transaction date, such charge is not reflected in the
accompanying pro forma financial information.
28
<PAGE>
GLOBE MANUFACTURING CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR PERIOD ENDED JUNE 30,
-------------------------------------
1998 ADJUSTMENTS PRO FORMA(D)
------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................. $92,490 $ -- $ 92,400
Cost of sales............................. 59,556 -- 59,556
------- -------- --------
Gross margin.......................... 32,934 -- 32,934
Selling, general and administrative
expenses................................. 12,083 (41) (a) 12,042
Research and development costs............ 2,040 -- 2,040
------- -------- --------
Operating income...................... 18,811 41 18,852
Other Income/(Expense)
Interest................................ (1,788) (10,961) (b) (12,749)
Loss in investment in joint venture..... -- -- --
Other income, net....................... 655 -- 655
------- -------- --------
Income before income taxes............ 17,678 (10,920) 6,758
Provision for income taxes................ 6,638 (4,390) (c) 2,248
------- -------- --------
Net income................................ $11,040 $ (6,530) $ 4,510
======= ======== ========
</TABLE>
- --------
(a) Represents amortization of debt issuance costs associated with the old
credit facility.
(b) Reflects pro forma interest expense calculated using (i) 7.94% per annum
on $6,000 for the revolver; (ii) 7.94% on $60,000 for the Term Loan A;
(iii) 8.44% on $55,000 for the Term Loan B; (iv) 10.0% on $150,000 for the
Senior Subordinated Note; (v) amortization of deferred finance charges;
(vi) less capitalized interest costs of $469.
(c) Reflects a statutory income tax rate of 40.2% for the pro forma
adjustments.
(d) In connection with the Transaction the Company incurred a one time
compensation expense charge of $3,318 associated with the vesting of stock
options and $2,320 associated with bonuses paid to certain members of
management. Although the Company expects to charge such amounts in the
period following the transaction date, such charge is not reflected in the
accompanying pro forma financial information.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations is qualified in its entirety by, and should be read
in conjunction with, the consolidated financial statements of the Company and
related notes thereto included elsewhere in this Prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in the
forward-looking statements as a result of certain factors including, but not
limited to, those discussed in "Risk Factors," "Business" and elsewhere in
this Prospectus. The Company disclaims any obligation to update information
contained in any forward-looking statement. See "Risk Factors--Risks Regarding
Forward-Looking Statements."
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information derived
from the consolidated financial statements of income expressed as a percentage
of net sales. There can be no assurance that the trends in sales growth or
operating results will continue in the future.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------- -------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................ 75.7% 72.5% 67.3% 67.0% 64.4%
Gross margin................................. 24.3% 27.5% 32.7% 33.0% 35.6%
Selling, general & administrative expenses... 14.4% 14.2% 14.3% 12.6% 13.1%
Research and development expenses............ 1.8% 1.7% 1.5% 1.4% 2.2%
Operating income............................. 8.1% 11.6% 16.9% 19.0% 20.3%
</TABLE>
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales of the Company for the six months ended June 30, 1998 increased
$8.2 million, or 9.7%, to $92.5 million from $84.3 million for the
corresponding period in 1997. The increase in sales was primarily attributable
to a 34.0% increase in fine denier spandex fiber volume and a 6.4% increase in
average heavy denier spandex fiber price associated with a change in mix
within the Company's heavy denier product line.
Gross margin of the Company for the six months ended June 30, 1998 increased
$5.1 million, or 18.3%, to $32.9 million from $27.8 million for the
corresponding period in 1997. The Company's gross margin as a percentage of
net sales increased to 35.6% for the six months ended June 30, 1998 from 33.0%
for the corresponding period in 1997. The increase in gross margin was
primarily due to a 4.9% reduction in fine denier spandex fiber unit costs
attained through operating efficiencies and economies of scale resulting from
increased capacity at the Company's Tuscaloosa, Alabama facility and a
favorable shift in product mix towards higher margin fine denier spandex fiber
products. Fine denier spandex fiber sales represented 56.0% of total sales in
the six months ended June 30, 1998, compared to 47.2% in the corresponding
period in 1997.
Selling, general and administrative expenses for the Company for the six
months ended June 30, 1998 increased $1.5 million, or 14.2%, to $12.1 million
from $10.6 million for the corresponding period in 1997. Selling, general and
administrative expenses for the Company as a percentage of net sales increased
to 13.1% for the six months ended June 30, 1998 from 12.6% in the
corresponding period in 1997. The change from the previous year was primarily
due to an increase in allowances for bad debt and additional selling expenses
associated with an increased level of foreign sales.
Research and development expenses for the Company for the six months ended
June 30, 1998 increased $0.8 million, or 66.7%, to $2.0 million from $1.2
million for the corresponding period in 1997. Research and
30
<PAGE>
development expenses for the Company as a percentage of net sales increased to
2.2% for the six months ended June 30, 1998 from 1.4% for the corresponding
period in 1997. The increase in research and development expense was
associated with the development of new heavy denier spandex fiber products.
Net interest expense for the Company for the six months ended June 30, 1998
decreased $0.3 million, or 14.3%, to $1.8 million from $2.1 million in the
corresponding period in 1997. The decrease in interest expense was primarily
attributable to an increase in capitalized interest as well as a decrease in
interest rates.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales of the Company for 1997 increased $18.3 million, or 12.0%, to
$170.9 million from $152.6 million in 1996. The increase in sales was
primarily due to a 5.3% increase in average fine denier spandex fiber prices
and a 17.7% increase in fine denier spandex fiber volume.
Gross margin of the Company for 1997 increased $13.8 million, or 32.9%, to
$55.8 million from $42.0 million in 1996. The Company's gross margin as a
percentage of net sales increased to 32.7% in 1997 from 27.5% in 1996. The
increase in gross margin reflects a reduction in fine denier spandex fiber
unit costs attributable to economies of scale created by an increase in fine
denier spandex fiber capacity at the Company's Tuscaloosa, Alabama facility,
gains in efficiencies achieved through improved production processes and a
decline in latex raw material costs. The increase in gross margin also
reflects a favorable shift in product mix toward higher margin fine denier
spandex fiber products. Fine denier spandex fiber sales represented 49.4% of
total net sales in 1997 compared to 44.2% in 1996.
Selling, general and administrative expenses for the Company in 1997
increased $2.7 million, or 12.4%, to $24.4 million from $21.7 million in 1996.
The increase in selling, general and administrative expenses was primarily
attributable to the higher level of net sales achieved in 1997. As a
percentage of net sales, selling, general and administrative expenses
increased to 14.3% in 1997 from 14.2% in 1996.
Research and development expenses for the Company in 1997 increased $0.1
million, or 4.0%, to $2.6 million from $2.5 million in 1996. Research and
development expenses for the Company as a percentage of net sales decreased to
1.5% in 1997 from 1.7% in 1996. The decrease was primarily due to the higher
level of net sales attained in 1997.
Net interest expense for the Company in 1997 decreased $1.3 million, or
24.5%, to $4.0 million from $5.3 million in 1996. The decrease in interest
expense was primarily due to a decline in interest rates and the
capitalization of $0.5 million of interest expense in 1997 in connection with
a capital expansion project.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales of the Company for 1996 increased $24.3 million, or 18.9%, to
$152.6 million from $128.3 million in 1995. The increase in sales was
primarily due to a 56.4% increase in fine denier spandex fiber volume related
to increased manufacturing capacity.
Gross margin of the Company for 1996 increased $10.9 million, or 35.0%, to
$42.0 million from $31.1 million for the corresponding period in 1995. The
Company's gross margin as a percentage of net sales increased to 27.5% in 1996
from 24.3% in 1995. The increase in gross margin was primarily due to a
favorable shift in product mix toward higher margin fine denier spandex fiber
products. Fine denier spandex fiber sales represented 44.2% of total net sales
in 1996 compared to 34.8% in 1995. In addition, the Company's gross margin in
1995 was negatively impacted by Globe's first expansion of its Tuscaloosa
facility, which temporarily reduced manufacturing efficiencies, and by lower
average selling prices of fine denier spandex resulting from Bayer entering
the domestic market.
Selling, general and administrative expenses for the Company in 1996
increased $3.2 million, or 17.3%, to $21.7 million from $18.5 million in 1995.
Selling, general and administrative expenses for the Company as a percentage
of net sales decreased to 14.2% in 1996 from 14.4% in 1995. The decrease in
selling, general and administrative expense as a percentage of net sales was
primarily attributable to the increase in sales noted above.
31
<PAGE>
Research and development expenses for the Company in 1996 increased $0.2
million, or 8.7%, to $2.5 million from $2.3 million in 1995. Research and
development expenses for the Company as a percentage of net sales decreased to
1.7% in 1996 from 1.8% in 1995. The decrease in research and development
expense as a percentage of net sales reflects the higher level of net sales
achieved in 1996.
Net interest expense for the Company in 1996 decreased $0.7 million, or
11.7%, to $5.3 million from $6.0 million in 1995. The decrease in interest
expense was primarily due to a decrease in the average debt outstanding
throughout the year and a decline in interest rates.
The Company reported an extraordinary loss of $1.3 million, net of tax, in
1995 to reflect the write-off of unamortized deferred financing costs
associated with the restatement of its credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $12.7 million in 1995, $21.9
million in 1996 and $20.3 million in 1997. The increase in cash provided by
operating activities for 1996 was primarily due to increases in profitability,
accounts payable, taxes payable, accrued expenses and a reduction of inventory
balances, partially offset by an increase in accounts receivable. The
reduction in cash provided by operating activities in 1997 was due to
increases in accounts receivable, inventory balances and deferred tax assets,
and a reduction in taxes payable, partially offset by an increase in
amortization of unearned compensation. For the six months ended June 30, 1998,
cash provided by operating activities was $14.0 million compared to $7.2
million for the same period in 1997. This increase was primarily attributable
to increases in profitability, accounts payable and accrued expenses and a
reduction in inventory, partially offset by an increase in accounts
receivable. The average days' sales outstanding for accounts receivable was
approximately 44, 54 and 56 days for the years ended 1995, 1996 and 1997,
respectively. Average days' sales outstanding was 64 days at June 30, 1998.
The increase in average days' sales outstanding was primarily attributable to
an increase in foreign sales. Foreign sales represented 27.5% and 32.2% of
sales for the year end December 31, 1997 and for the six months ended June 30,
1998, respectively.
The Company's inventories decreased from $15.9 million at December 31, 1995
to $11.8 million at December 31, 1996. This decrease was primarily
attributable to a decrease in fine denier spandex fiber quantities and cost
aggregating to a 42%, or $2.3 million, decrease. The Company's inventory
increased from $11.8 million at December 31, 1996 to $13.8 million at December
31, 1997. This increase was primarily due to higher fine denier production
capacity and anticipated higher heavy denier sales levels. The Company's
inventories decreased from $13.5 million at June 30, 1997 to $11.8 million at
June 30, 1998. This decrease was primarily due to lower fine denier spandex
thread manufacturing costs and reduced latex thread inventory.
The Company's accounts payable increased from $4.7 million at December 31,
1995 to $7.2 million at December 31, 1996. The Company's accounts payable
increased from $7.2 million at December 31, 1996 to $7.4 million at December
31, 1997. The increase in accounts payable was attributable to capital
expenditures incurred to increase fine denier spandex fiber capacity. The
Company's accounts payable increased from $7.7 million at June 30, 1997 to
$8.9 million at June 30, 1998. The increase was primarily due to capital
expenditures incurred to increase fine denier capacity.
The Company has historically financed its operations and acquisitions
through a combination of internally generated funds and borrowings under its
existing credit agreement. The Company financed the construction of the
Tuscaloosa plant, as well as the subsequent expansions of the facility, under
its existing credit facilities.
Capital expenditures were $5.8 million in 1996, $17.1 million in 1997 and
$17.1 million for the six months ended June 30, 1998. Capital expenditures
incurred during 1996 consisted primarily of general maintenance and process
improvement expenditures, and the capital expenditures incurred during 1997
consisted primarily of expenditures for the expansion of the Tuscaloosa
facility and general maintenance and process improvement expenditures. The
capital expenditures incurred during the first six months of 1998 included
$12.6 million of plant expansion expenditures. The Company anticipates that
its capital expenditures for the balance of 1998 will be approximately $10.0
million, of which $6.0 million is related to the Tuscaloosa Plant Expansion
and $1.5 million is related to the Company's new enterprise resource planning
system, which is expected to be installed
32
<PAGE>
in 1998 and 1999. The Company estimates that based on anticipated levels of
operations its capital expenditures will be approximately $6.0 million in each
of 1999 and 2000.
The Company applied the net proceeds of the Initial Offering and the Equity
Sponsor Investment, together with borrowings under the Senior Credit Facility,
to repay all outstanding obligations under the Old Credit Facility and to pay
a dividend to Globe Holdings to permit it to pay the Cash Merger Consideration
and to pay the fees and expenses incurred in connection with the Transactions.
In connection with the Transactions, the Company also entered into the Senior
Credit Facility, which enables the Company to borrow up to $165.0 million,
subject to certain borrowing conditions. The Senior Credit Facility is fully
secured and consists of a $115.0 million term loan facility, which was fully
drawn upon the consummation of the Transactions, and a $50.0 million revolving
loan facility. The revolving loan facility is available for general corporate
and working capital purposes. See "Description of Senior Credit Facility."
As a result of the Initial Offering and the other Transactions, the
Company's total debt significantly increased. Interest payments on the Notes
and under the Senior Credit Facility represent significant liquidity
requirements for the Company. The Notes require semi-annual payments and
interest on the loans under the Senior Credit Facility is due at least
quarterly.
Although there can be no assurance, the Company anticipates that its cash
flow generated from operations and borrowings under the Senior Credit Facility
will be sufficient to fund the Company's working capital needs, planned
capital expenditures, scheduled interest payments (including interest payments
on the Notes and amounts outstanding under the Senior Credit Facility) and
other cash needs for the next twelve months. However, the Company may require
additional funds if it enters into strategic alliances, acquires significant
assets or businesses or makes significant investments in furtherance of its
growth strategy. The ability of the Company to satisfy its capital
requirements will be dependent upon the future financial performance of the
Company, which in turn will be subject to general economic conditions and to
financial, business, and other factors, including factors beyond the Company's
control.
Instruments governing the Company's indebtedness, including the Senior
Credit Facility and the Indenture, contain financial and other covenants that
restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of substantially all of the
assets of the Company. Such limitations, together with the highly leveraged
nature of the Company, could limit corporate and operating activities,
including the Company's ability to respond to market conditions, to provide
for unanticipated capital investments or to take advantage of business
opportunities. See "Risk Factors--Substantial Leverage and Debt Service
Requirements."
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
If the Company, its significant customers or suppliers fail to make
necessary modifications and conversions on a timely basis, the year 2000 issue
could have a material adverse effect on Company operations. However, the
impact cannot be quantified at this time. The Company believes that its
competitors face similar risks.
The Company has established a corporate-wide project team to identify non-
compliant software and complete the corrections required for the year 2000
issue. The Company has completed its repairs for major manufacturing systems
in all locations. The Company also completed its repair of its major financial
systems. The Company's current target is to resolve compliance issues in its
distribution systems and other ancillary systems by March 31, 1999. The
Company also has made inquiry of its major customers and suppliers to assess
33
<PAGE>
their compliance. Nevertheless, there can be no absolute assurance that there
will not be a material adverse effect on the Company if third party
governmental or business entities do not convert or replace their systems in a
timely manner and in a way that is compatible with the Company's systems.
Costs related to the year 2000 issue are funded through operating cash
flows. Through June 30, 1998, the Company expended approximately $108,000 in
systems development and remediation efforts, including the cost of new
software and modifying the applicable code of existing software. The Company
estimates remaining costs to be between $50,000 and $100,000. The Company
presently believes that the total cost of achieving year 2000 compliant
systems is not expected to be material to the Company's financial condition,
liquidity or results of operations.
Time and cost estimates are based on currently available information.
Developments that could affect estimates include, but are not limited to, the
availability and cost of trained personnel, the ability to locate and correct
all relevant computer code and systems and remediation success of the
Company's customers and suppliers.
INFLATION
The Company does not believe that inflation has had any material effect on
the Company's business over the past three years.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("Statement 130"), which establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. Statement 130 is effective for fiscal years
beginning after December 15, 1997. Disclosure of total comprehensive income is
required in interim period financial statements. Management does not believe
that comprehensive income for prior periods will differ significantly from net
income in those periods.
In June, 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("Statement 131"), which is effective for years beginning after December 15,
1997. However, Statement 131 need not be applied to interim financial
statements in the initial year of application. Statement 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. Since Statement 131 is effective for financial statements for
fiscal years beginning after December 15, 1997, the Company will adopt the new
requirements retroactively in 1998. Management has not yet determined the
impact Statement 131 will have on disclosures of the Company's reported
segments.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits ("Statement 132"), that revises disclosure
requirements of FASB Statements No. 87, Employers' Accounting for Pensions,
and No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. Statement 132 is effective for fiscal years beginning after December
15, 1997. The Statement does not change the recognition or measurement of
pension or post-retirement benefit plans, but standardizes disclosure
requirements for pensions and other post-retirement benefits, eliminates
certain disclosures and requires additional information. Management does not
anticipate that the adoption of Statement 132 will have a material impact on
its financial position or the results of its operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and for Hedging Activities
("Statement 133"). Statement 133 is effective for years beginning after June
15, 1999. Statement 133 provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities.
Management does not anticipate that the adoption of Statement 133 will have a
material impact on its financial position or the results of its operations.
34
<PAGE>
BUSINESS
OVERVIEW
Globe is a leading domestic manufacturer and worldwide supplier of spandex
and latex elastomeric fibers, marketing its products to more than 500
customers. The Company's fibers are used in a broad range of applications,
including men's and women's hosiery, waistbands, intimate apparel, performance
athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or
foundation) garments, personal care products (including diapers and adult
incontinence products) and footwear. The Company has produced elastomeric
fibers exclusively for over 50 years and has developed long-term relationships
with many of its principal customers, including Fruit of the Loom, Inc.,
Kimberly-Clark Corporation, Minnesota Mining & Manufacturing Company, Sara Lee
Hosiery, Unifi, Inc. and Worldtex, Inc. During the twelve months ended June
30, 1998, the Company had net sales of $179.1 million and EBITDA of $46.3
million.
Spandex fiber, which accounted for 80% of the Company's 1997 sales, is a
highly desirable component of fabrics designed for performance, durability,
comfort, control and resilience due to its unique chemical and physical
properties. Spandex fiber is produced in a broad range of fine and heavy
deniers and is sold on a private label basis and under brand names such as the
Company's GLOSPAN(R) and CLEERSPAN(R), DuPont's Lycra(R) and Bayer's
Dorlastan(R). Recent advances in manufacturing technologies have facilitated
the use of spandex fiber in an increasing number of apparel and non-apparel
applications. Globe has benefited from this recent proliferation of spandex
fiber applications due to its exclusive focus on elastomeric fibers, superior
customer service, broad product line, strong market position and efficient
manufacturing processes.
Management estimates that in 1997 the worldwide market for spandex fiber was
approximately 240 million pounds, representing approximately $2.0 billion in
sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an
estimated 11% compound annual growth rate, and the worldwide spandex fiber
market is expected to grow at approximately 9% over the next three years.
Since 1993, demand for fine denier spandex has increased faster than the
overall market due to its growing use in lightweight and high quality apparel
applications and this trend is expected to continue.
The Company operates three manufacturing facilities, which are located in
Fall River, Massachusetts, Tuscaloosa, Alabama and Gastonia, North Carolina.
Since 1993, Globe has invested $97.5 million to increase manufacturing
capacity, enhance productivity and shift its product mix to the faster
growing, higher margin fine denier spandex fiber. During this period, the
Company's annual fine denier spandex fiber production capacity increased from
2.6 million to 10.6 million pounds. As a result of the Company's capital
investment program and continuous improvement initiatives in its manufacturing
facilities, Globe's fine denier spandex fiber production yields have improved
by 35%, and sales per employee have increased by 43% since 1993.
TUSCALOOSA PLANT EXPANSION
Globe is expanding production capacity at its Tuscaloosa, Alabama fine
denier spandex fiber manufacturing facility in response to existing demand
from current customers. Through June 30, 1998, Globe had spent approximately
$16.1 million of the estimated $22.1 million project cost. The Tuscaloosa
facility, built in 1994, has undergone three prior capacity expansions. The
Tuscaloosa Plant Expansion will increase the Company's fine denier
manufacturing capacity by 3.6 million pounds per annum, or 34%, with
approximately half of this increased capacity expected to be on line in the
fourth quarter of 1998 and the balance expected to be on line in the first
quarter of 1999. As of June 30, 1998, Globe's list price for 40 denier spandex
fiber, the primary product produced at the Company's Tuscaloosa facility, was
$11.50 per pound.
COMPETITIVE STRENGTHS
The Company's exclusive focus on elastomeric fibers for over 50 years has
enabled it to develop the following competitive strengths:
Long-Term Customer Relationships and Superior Customer Service. Globe has
established long-term relationships with its principal customers by focusing
on superior technical and customer service. The Company
35
<PAGE>
has been a supplier to Fruit of the Loom, Inc., Kimberly-Clark Corporation,
Minnesota Mining and Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and
Worldtex, Inc. for over ten years. Seven of the Company's ten largest
customers have selected Globe as their preferred supplier of spandex fiber.
Globe provides analytical laboratory services and on-site technical assistance
to improve customers' manufacturing and engineering processes. As a result, a
number of the Company's major customers have selected it as a technology
partner to assist in the development of new spandex applications.
Broad Product Line. The Company believes that it offers the broadest line of
spandex and latex elastomeric fibers in the world. The Company produces a full
line of spandex fibers in deniers ranging from 15 to 5040. These products
feature an assortment of stretch, strength and other performance
characteristics that may be customized for specific applications and
manufacturing processes. Globe also manufactures a wide variety of latex
threads in multiple gauges and formulations. This broad range of product
offerings differentiates the Company in the industry and represents a
competitive advantage, as many customers purchase multiple deniers of spandex
fiber, as well as various gauges of latex thread, and prefer to utilize one
vendor for their elastomeric fiber requirements. The proprietary technologies
and customized equipment used by Globe in its multiple manufacturing processes
enable the Company to cost-effectively produce this broad product line.
Strong Positions in Growing Markets. The Company has established a strong
market position in each of its principal product lines. The Company has an
estimated 16% share of the domestic spandex fiber market and an estimated 7%
share of the worldwide spandex fiber market (based on pounds produced).
Management estimates that worldwide sales of spandex fiber will increase at a
compound annual growth rate of approximately 9% over the next three years and
that fine denier spandex sales will exceed the overall market growth rate
during this period. Fine denier spandex demand has been driven by strong
consumer demand for lightweight and high quality apparel and technological
advances allowing for the use of spandex fibers in the manufacture of such
apparel.
Cost-Efficient Manufacturing. Management believes that the Company's
manufacturing operations are among the most efficient in the industry,
allowing the Company to become one of the world's lowest cost producers of
high quality spandex fiber. Globe has developed proprietary chemical
formulations and highly efficient manufacturing processes that utilize
sophisticated process control systems and custom fabricated manufacturing
equipment designed and built by the Company's engineers. Management believes
that Globe's in-house capability to design, engineer and build its own
manufacturing equipment distinguishes the Company from many of its competitors
and provides it with an important competitive advantage in maintaining product
quality as well as controlling design, development and maintenance costs. In
addition, increased production volume at the Company's facilities has enabled
the Company to achieve significant economies of scale and raw material
purchasing power.
Experienced Management Team. The Company is led by an experienced management
team with a track record of achieving profitable growth, developing new
manufacturing processes and expanding the Company's customer base. Between
1993 and the twelve months ended June 30, 1998, the Company's net sales
increased from $107.6 million to $179.1 million and EBITDA increased from
$23.7 million to $46.3 million. The Company's executive officers average
approximately 20 years with the Company. The Company's senior management team
has a substantial financial interest in the Company's continued success
through their direct investment in Globe Holdings.
BUSINESS STRATEGY
The Company's business objective is to become the leading global supplier of
elastomeric fiber for use in selected apparel and non-apparel markets. The
Company seeks to achieve this objective by pursuing the following strategies:
Continue Shift in Product Mix to Higher Growth, More Profitable Fine Denier
Products. Since 1993, Globe has expanded its annual production capacity of
higher growth fine denier spandex fiber from 2.6 million to 10.6 million
pounds. Fine denier spandex fiber is used in applications requiring
lightweight or high quality fabric, and has been generally more profitable
than heavy denier spandex fiber due to the complexity of the manufacturing
36
<PAGE>
process required and strong market demand. Fine denier spandex fiber sales
accounted for approximately 49% of Globe's 1997 total sales, up from 25% in
1993. The Tuscaloosa Plant Expansion, which will increase the Company's annual
production capacity for fine denier spandex fiber to 14.2 million pounds, will
enable the Company to further address the increase in demand for fine denier
spandex fiber.
Develop Innovative Spandex Fiber Applications. Globe's product managers and
research and development engineers work closely with existing and prospective
customers to develop innovative applications for spandex fiber. For example,
the Company worked with a fleece manufacturer for over two years to develop a
new four-way stretch fleece product for outerwear that incorporates Globe's
spandex fiber. Cooperative efforts such as this have enabled Globe to enhance
its relationships with existing customers and attract new customers.
Improve Manufacturing Productivity; Reduce Production Costs. The Company
seeks to continually improve manufacturing efficiency and reduce production
costs in order to maintain its position as one of the world's lowest cost
producers of high quality spandex fiber. The Company seeks to improve
manufacturing yields, increase equipment utilization, and reduce production
costs by upgrading process monitoring equipment, enhancing production
processes and increasing throughput. Each of the Company's manufacturing
facilities is certified under ISO 9001, and the Company actively incorporates
the principles of continuous improvement.
Increase International Sales. Globe estimates that the international market
accounts for two-thirds of the worldwide spandex fiber market. International
spandex fiber markets are growing rapidly due to increasing consumerism of the
world's population, coupled with increases in personal disposable income. From
1993 to 1997, Globe's international sales increased from 19% of sales to 28%
of sales (primarily in western Europe and Latin America) as the Company
expanded the size and geographic scope of its international sales to 46
countries. The Company seeks to further expand its international sales by
leveraging its existing sales and marketing infrastructure and capitalizing on
Globe's expanded manufacturing capacity.
INDUSTRY OVERVIEW
The Company competes primarily in the worldwide market for spandex fiber and
the domestic market for latex thread.
Spandex Fiber
The worldwide spandex fiber industry has experienced significant growth in
recent years. First developed in the early 1960s, spandex fiber has repeatable
stretch and recovery capabilities, end-to-end uniformity, and unlike most
other elastomeric fibers, is resistant to breakdown from exposure to
oxidation, ozone, light, solvents, body oils, and perspiration. In addition,
advances in polymer chemistry and manufacturing technology have allowed
manufacturers to produce increasingly finer elastomeric fibers. These
production advances and the physical characteristics of spandex fiber have
made spandex fiber a highly desirable component of an increasing number of
applications.
As the production capabilities of spandex fiber suppliers have improved,
fabric manufacturers have also developed new processes that have allowed them
to integrate spandex fiber into a number of new applications. Traditionally,
manufacturers of circular knit fabrics were unable to use spandex fiber in the
manufacturing process unless the spandex fiber had been covered with another
fiber, such as cotton or nylon. Recently, new technologies enabling
manufacturers to knit uncovered spandex fibers have spurred an increased use
of spandex fiber in sheer, lightweight circular knit products.
Suppliers of spandex fiber such as the Company generally target six end-use
markets for their fibers: circular knits (which includes product applications
such as active wear, swimwear and casual wear); hosiery; nonwovens (personal
care products such as diapers); narrow fabrics (waistbands and straps); warp
knits (intimate apparel and body shaping garments); and stretch wovens.
Stretch wovens include fabrics that are used in men's suits and pants, as well
as other new applications, and this segment represents a growth opportunity
for industry participants such as Globe.
37
<PAGE>
Management estimates that in 1997 the worldwide market for spandex fiber was
approximately 240 million pounds, representing approximately $2.0 billion in
sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an
estimated 11% compound annual growth rate, and the worldwide spandex fiber
market is projected to grow at a compound annual growth rate of approximately
9% over the next three years. Since 1993, demand for fine denier spandex fiber
has increased faster than the overall market due to its growing use in
lightweight and high quality apparel applications and this trend is expected
to continue. Currently, approximately 61% of spandex fiber consumption occurs
in the major industrialized regions, including the U.S., Japan, and western
Europe. International spandex fiber markets are growing rapidly due to
increasing consumerism of the world's population, coupled with increases in
personal disposable income.
Spandex fiber is currently produced throughout the world. Management
estimates that there are approximately 16 spandex fiber manufacturers in the
world, with the top 5 manufacturers accounting for approximately 77% of the
worldwide market. These manufacturers are expected to increase capacity to
meet anticipated demand and maintain their respective market shares.
Latex Thread
The Company estimates that in 1997 the U.S. market for extruded latex thread
was approximately 35 million pounds. The primary markets include men's
hosiery, narrow fabrics and fused tapes. Fine gauges of latex thread are
typically used in men's hosiery. Medium and heavy gauges are used in narrow
fabrics and fused tapes. Fused tapes are used for face masks and insert
elastics. The Company produces a heat resistant latex thread which resists
degradation caused by repeated household laundry drying cycles.
PRODUCTS AND CUSTOMERS
Products
The Company develops, manufactures and sells spandex and latex elastomeric
fibers. The Company's products include fine denier spandex fiber (15 to 140
denier), heavier denier spandex fiber (184 to 5040 denier), and latex thread
in a variety of gauges. Spandex fiber accounted for 80% of the Company's sales
in 1997, and latex thread accounted for the remaining 20%.
Spandex Fiber. The unique chemical and physical properties of spandex fiber
make it a desirable component of fabrics designed for performance, durability,
comfort, control and resilience. Spandex fiber, produced from polyether or
polyester, has repeatable stretch and recovery capabilities, end-to-end
uniformity, and unlike most other elastomeric fibers, is resistant to
breakdown from exposure to oxidation, ozone, light, solvents, body oils and
perspiration. Such properties, together with the wide range of available
deniers, make spandex fiber suitable for a broad range of applications,
including men's and women's hosiery, waistbands, intimate apparel, performance
athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or
foundation) garments, personal care products (including diapers and adult
incontinence products) and footwear. Spandex fiber can be made in deniers much
finer than alternative elastomeric fibers while retaining uniform physical
properties, and can be heat set in finishing, thereby allowing manufacturers
to create ultra sheer and lightweight, yet highly elastic fabrics. Although
spandex fiber typically accounts for a small percentage of the total fiber in
an application (ranging from 2% in men's suits to 40% in women's foundation
garments), it can be used to enhance the performance of an increasing number
of apparel and non-apparel products.
Latex Thread. The Company's first product was latex thread. Extruded latex
thread, which is round, was developed in the 1940's to replace cut rubber
thread, which was square and limited in size and usage. Finer gauge latex
thread is used in men's hosiery and athletic socks. Mid-range gauges are
typically used for narrow fabrics, such as waistbands, straps and insert
elastics, and for specialty products and medical garments. Coarse gauge latex
thread is also used for narrow fabrics and in specialty products. The Company
has engineered various latex thread compound formulations in response to
market needs for high-strength, chemical and heat resistance, and durability,
and the Company believes opportunities exist for additional uses for latex
thread.
38
<PAGE>
The Company's products have historically been sold to a variety of customers
in five end-markets: circular knits, hosiery, nonwovens, narrow fabrics and
warp knits. In addition, the Company has recently begun selling products to
the stretch woven market for use in suiting fabrics and outerwear linings. The
following table lists the Company's principal product lines, applications for
these products, the fiber utilized in the products, and representative
customers.
<TABLE>
<CAPTION>
PRODUCT LINE
AND PERCENTAGE REPRESENTATIVE
OF 1997 SALES PRODUCT APPLICATIONS FIBER UTILIZED CUSTOMERS
-------------- ------------------------------ ----------------- --------------
<C> <C> <C> <S>
Hosiery Women's sheer hosiery 10-560 denier Unifi, Inc.
36% of sales Men's hosiery spandex fiber; Sara Lee Ho-
Athletic socks fine gauge latex siery
thread Kayser Roth
Hosiery, Inc.
McMichael
Mills, Inc.
Worldtex, Inc.
Tanofil A.G.
Golden Lady
S.P.A.
Americal Cor-
poration
Pennaco Ho-
siery, Inc.
Circular Knits Active wear 20-105 denier C.K.M. Indus-
35% of sales Swimwear spandex fiber tries, Inc.
Casual wear Textivision,
Dress wear SA de CV
Cotton athletic wear Tanofil,
A.G./Karl Na-
gele GmbH &
Co. K.G.
Texere 2000
Inc.
Elatex--D&S
International
Taiwan
Narrow Fabrics Waistband elastics 280-5040 denier Fruit of the
16% of sales Straps spandex fiber; Loom, Inc.
Insert elastics 22-50 gauge Asheboro Elas-
Accent laces latex thread tic Corp.
Hanes Mens-
wear, Inc.
Beech Island
Knitting Co.
North East
Knitting, Inc.
Sun Hing
Elastics &
Lace Flat A.C.
Nonwovens Diapers 280-1400 denier Kimberly-Clark
8% of sales Adult incontinence products spandex fiber; Corporation
Feminine hygiene products 30-50 gauge latex Minnesota Min-
Medical bandages thread ing & Manufac-
Industrial protective clothing turing Com-
pany
Paragon Trade
Brands, Inc.
Warp Knits Intimate apparel 20-560 denier Guilford Mills
5% of sales Body shaping garments spandex fiber Inc.
Swimwear The Moore Com-
Footwear pany, Inc.--
Darlington
Fabrics Divi-
sion
Liberty Fab-
rics, Inc.
Charbert Divi-
sion of NFA
Corp.-- Alton
Operating
Corp.
</TABLE>
The Company has historically maintained a strong position in the hosiery and
narrow fabrics markets. Management estimates that Globe's spandex fibers are
utilized in the waistband of over 90% of the pantyhose sold in the United
States. In addition, the Company believes it is the leading domestic supplier
of latex thread for men's dress hosiery and men's underwear waistbands.
Fine denier spandex fiber accounted for approximately 49% of the Company's
total 1997 sales, up from 25% in 1993. Based on current market demand for
products which utilize lightweight or high quality fabrics, the Company
believes that fine denier products manufactured for the circular knit, warp
knit and stretch woven markets will represent an increasing percentage of
Globe's sales.
Customers
The Company sells its products to a diverse customer base of intermediate
and end-use manufacturers. Intermediate users of the Company's products, which
include Unifi, Inc., C.K.M. Industries, Inc. and Worldtex, Inc., cover the
elastomeric fibers with other materials, and then either sell them to another
manufacturer or knit or weave them. The Company's end-use customers, which
include Fruit of the Loom, Inc., Sara Lee Hosiery,
39
<PAGE>
Hanes Menswear, Inc., and Kayser-Roth Corporation (manufacturer of No Nonsense
pantyhose), produce finished goods from the elastomeric fibers supplied by the
Company. Most of the Company's customers rely on sophisticated technologies
and production techniques to manufacture products of which the Company's
fibers are a significant value-added component. These customers typically
operate high speed, high volume production lines. In order to run their
production lines efficiently and avoid costly line stoppages, customers rely
on the Company's ability to provide reliable, on time delivery of high quality
products. A number of the Company's customers have selected Globe as a
preferred supplier of elastomeric fiber.
Globe markets its products to over 500 customers. The Company's top ten
customers accounted for approximately 48% of 1997 sales, with sales to Unifi,
Inc., a manufacturer of covered yarns for men's and women's hosiery and for
narrow fabrics, accounting for approximately 9% of 1997 sales. Export sales
represented approximately 28% of the Company's total sales in 1997. As is
customary in the industry, the Company generally does not have long-term
supply agreements with its customers.
SALES AND MARKETING
Globe's sales and marketing functions are organized into three product
lines: hosiery/narrow fabrics; wide fabrics (including circular knits, warp
knits, stretch wovens); and nonwovens. Each product line requires different
technical expertise and is the responsibility of one of the Company's product
managers. Management believes that organizing its sales and marketing team by
product line is the most efficient and effective way to develop and maintain
customer relationships, to stay abreast of technical and other developments
that may result in changing customer or consumer preferences and to take
advantage of new business opportunities.
The Company markets and sells its products under the direction of three
product managers who are supported by an extensive organization comprised of
26 individuals, including key account managers, inside sales staff, field
sales personnel, and technical service and customer service personnel. By
providing dedicated support to key customers, the Company believes it can
better support these larger customers, who, in many cases, have a variety of
different product application or production requirements. Domestic sales are
handled primarily by the Company's internal sales organization. International
sales activity is coordinated by a senior manager and supported by a dedicated
customer service staff. The Company sells its products internationally through
35 commissioned agents or authorized distributors, covering 46 countries.
Technical service is an integral part of Globe's sales and marketing efforts
and includes providing product testing analysis of fabric composition at the
Company's laboratories, assisting customers with the integration of Globe's
products into the customer's production process and the development of methods
to enhance a customer's products through the incorporation of the Company's
elastomeric fibers. The Company's sales and marketing organization regularly
provides market feedback to Globe's research and development teams. The
Company believes this high level of service has been instrumental in retaining
and attracting customers.
Globe sells spandex fiber under its GLOSPAN(R) and CLEERSPAN(R) brand names.
The Company does not require customers to co-brand their fabrics or products
with its brand name. The Company believes that this marketing strategy is
attractive for customers who seek to build their own brand identity and desire
flexibility in sourcing their spandex fiber requirements.
COMPETITION
Spandex Fiber. The Company competes in the spandex fiber markets primarily
on the basis of product quality, service, price and product innovation. The
Company competes in the spandex fiber market primarily with DuPont and Bayer,
both of which have domestic facilities, and with a number of foreign
competitors. Some of the Company's competitors have substantially greater
financial, marketing, manufacturing, distribution, sales and support
resources, market share and brand awareness than the Company. The Company
seeks to differentiate its product offerings by providing a high level of
technical and customer service, and believes that DuPont and Bayer are the
only other major spandex fiber suppliers that provide similar levels of
technical and customer service.
40
<PAGE>
Despite significant growth in demand for spandex fiber since 1990, the
number of spandex fiber manufacturers has remained relatively constant
primarily due to the technological expertise required to produce spandex fiber
and the substantial capital requirements to establish a spandex fiber
manufacturing facility. Because spandex fiber production is not labor-
intensive, the Company believes that the availability of low-cost unskilled
labor does not provide foreign manufacturers with a significant competitive
advantage.
Latex Thread. The Company competes in the latex thread market on the basis
of product quality, product variety and price. The Company focuses its latex
thread product marketing efforts on high quality and specialty latex thread,
which requires high levels of customer support. The Company believes that its
customer service and product quality, and its ability to respond to the just-
in-time inventory needs of domestic customers, permit it to compete
effectively with foreign latex thread manufacturers. The Company's primary
competitors in the latex thread markets are foreign producers. See "Risk
Factors--Competition."
SUPPLIERS
During 1997, raw materials represented 42% of the Company's total cost of
sales and 28% of net sales. The primary raw materials used by the Company are
polytetramethylene ether glycol, which the Company purchases from BASF, and
polyester resin, which the Company purchases from two suppliers. These
materials are used in a wide variety of products, and based on its experience,
management believes that adequate quantities of these materials will be
available from existing or alternative suppliers in the foreseeable future.
The Company's ten largest suppliers accounted for approximately 93% of its
total raw material purchases and 31% of its total cost of sales in 1997, with
BASF, Polyurethane Specialties Corp. and Ennar Latex, Inc. accounting for 39%,
24% and 16% of such raw material purchases, respectively. The prices for the
Company's raw materials have generally been stable over the past five years,
although there can be no assurance that they will not fluctuate in the future.
See "Risk Factors--Dependence on Suppliers."
INTELLECTUAL PROPERTY
The Company utilizes a variety of proprietary technology in its
manufacturing processes. In addition to its proprietary technology, management
believes that the Company's research, development and engineering skills, as
well as its technical know-how, are significant to the Company's business.
Much of the Company's technology is not patented. The Company relies primarily
on intellectual property laws, confidentiality procedures and contractual
provisions to protect its intellectual property. The Company seeks to protect
the majority of its technology under trade secret laws, which afford only
limited protection. See "Risk Factors--Protection of Intellectual Property."
The Company owns certain brand names and trademarks used in its business,
including GLOSPAN(R) and CLEERSPAN(R).
MANUFACTURING
General. The Company utilizes multiple manufacturing processes that allow it
to cost-effectively produce a broad range of elastomeric fibers. The Company
utilizes real-time control and monitoring systems that continuously monitor
key process variables using a sophisticated closed loop system of computers,
sensors and custom software.
Spandex Fiber. The Company produces spandex fiber in a wide variety of
deniers, using dry-spin and reaction spin processes. Typically, spandex fiber
of heavier deniers is produced by the reaction spin process, while fine denier
threads are produced by the dry-spin process.
In 1985, the Company began commercial production of fine denier spandex
fiber using a dry-spin, polyether-based process at its Fall River facility.
Fine denier fiber production is a continuous process accomplished by vertical
spinning of the polymer from the top of a production cell to the bottom, where
the chamber is heated and filled with nitrogen in order to strip the solvent
from the fiber. The solvent is removed from the cell chamber as a gas,
recovered and recycled in a separate process. The process is monitored and
41
<PAGE>
controlled by a state-of-the-art computer system developed specifically for
the Company. The Company produces fine denier spandex fiber using the dry-spin
process at its facilities in Fall River, Massachusetts and Tuscaloosa,
Alabama, and currently has the capacity to produce 10.6 million pounds of fine
denier spandex fiber annually using the dry-spin process. The Company's dry-
spin operations run 24 hours a day, 7 days a week, 52 weeks a year.
The Company believes that it is the only manufacturer of spandex fiber using
the reaction spin process, which is based on technology proprietary to the
Company. The process begins with the preparation of the prepolymer which is
transported to an extruder, where it is processed through pumps and filters.
The resulting pressure forces the prepolymer through a series of tubes and
spinerettes, which distribute the prepolymer into a spinning tank where the
chemical reaction which gives the fiber its elasticity occurs and the fibers
are formed. The fibers are heated, cured and dried in ovens and then cooled,
lubricated and spooled for shipment. In some cases, the Company uses a
proprietary process which permits the Company to deliver the fiber in "knit-
tape" form, which facilitates its use for certain customers. The Company
conducts reaction spin production at its Fall River, Massachusetts, and
Gastonia, North Carolina facilities. It currently has the capacity to produce
13.4 million pounds of heavy denier spandex fiber annually using the reaction
spin process.
Latex Thread. The Company manufactures latex thread through a batch process
which begins with the combination of latex (a natural rubber material) and
various base chemicals. This compound is matured, heated and fed to extruders,
where it is pumped through a series of filters and distributed separately out
of a group of capillaries. These capillaries produce latex thread which is
then moved through an acid bath reservoir before being washed, dried and
cured. At the end of the extruder, the fibers are combined into ribbons of
various counts depending on customer needs. The Company produces latex thread
at its Fall River, Massachusetts facility, and currently has the capacity to
produce 11.0 million pounds of latex thread annually.
FACILITIES
The following table sets forth certain information with respect to the
Company's principal facilities.
<TABLE>
<CAPTION>
SQUARE
LOCATION FOOTAGE OWNED/LEASED PRINCIPAL FUNCTION
-------- ------- ------------ --------------------------
<S> <C> <C> <C>
Fall River, Massachusetts... 375,000 Owned Headquarters
Fine denier spandex fiber
Heavy denier spandex fiber
Latex thread
Gastonia, North Carolina.... 180,000 Owned Heavy denier spandex fiber
80,000 Owned Distribution center
10,000 Leased Warehouse
Tuscaloosa, Alabama......... 157,000 Owned Fine denier spandex fiber
Rancho Dominguez,
California................. 15,000 Leased Warehouse
</TABLE>
The Company believes that its facilities are adequate and suitable for the
purposes for which they are utilized by the Company. The Company is currently
expanding production capacity at its Tuscaloosa, Alabama fine denier spandex
fiber manufacturing facility in response to existing demand from current
customers. See "--Tuscaloosa Plant Expansion."
EMPLOYEES
As of June 30, 1998, the Company had approximately 902 employees. Of these,
approximately 174 are salaried employees and 728 are hourly workers. Of the
approximately 174 salaried employees, 57 perform manufacturing functions, 48
are technical employees, 25 perform sales and marketing functions and 44
perform administrative functions. None of the Company's employees are covered
by a collective bargaining agreement. The Company believes its relationships
with its employees are good.
42
<PAGE>
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company is subject to stringent environmental, health and safety
requirements, including laws and regulations relating to air emissions,
wastewater management, the handling and disposal of waste and the cleanup of
properties affected by hazardous substances. The Company's management believes
that its operations have been and are in substantial compliance with
environmental, health and safety requirements, and that it has no liabilities
arising under such requirements, except as would not be expected to have a
material adverse effect on the Company's operations, financial condition or
competitive position.
During 1996 and 1997, respectively, the Company spent approximately $0.3
million and $0.9 million on environmental, health and safety compliance
activities at its three operating locations. The Company estimates that
approximately $1.0 million will be spent in 1998 on such activities, including
efforts to resolve pending compliance issues relating to air emissions and
wastewater discharges from the Company's Fall River, Massachusetts facility.
Although the Company's management believes its estimate of 1998 costs to be
reasonable, there can be no assurances that actual expenditures will not
exceed the estimated amount.
Since 1986, the Company has received requests for information and related
correspondence from the U.S. EPA and other third parties indicating that the
Company might be responsible under CERCLA or Superfund laws for costs
associated with the investigation and cleanup of ten contaminated sites. The
Company's management believes that the Company has resolved its involvement
with respect to eight of these sites (five of which were inter-related) since
1988 and that the Company's involvement in matters arising under the Superfund
laws will not have a material adverse effect on the Company's operations,
liquidity or financial condition.
In December 1996, the Company's management learned that the U.S. EPA and the
U.S. Attorney's Office were conducting an investigation into whether the
Company had engaged in criminal violations of environmental laws with respect
to its Fall River, Massachusetts facility. The investigators have not informed
the Company of the scope of their inquiry. The Company has provided certain
information regarding its Fall River operations to the federal investigators
and believes it has cooperated fully with their inquiry. The Company does not
know whether the investigation is currently active. If the Company is charged
with violations of environmental laws, it may be subject to substantial fines
and other penalties. Based on the Company's discussions with the investigators
and the results of the Company's internal investigation of this matter, the
Company's management does not believe that the investigation will result in
any monetary or other penalties that would have a material adverse effect on
the Company's financial condition, results of operations or ability to meet
its obligations under the Notes. The Merger Agreement provides that the
Indemnification Escrow Fund will be available to indemnify the Company from,
among other items, any liabilities arising out of this investigation to the
extent related to the activities of the Company prior to the Merger. This
indemnity expires on December 31, 2001. See "Certain Relationships and Related
Transactions--Recapitalization" and "Risk Factors--Environmental Compliance."
LEGAL PROCEEDINGS
In April 1997 two domestic purchasers of extruded latex thread filed a
complaint against a number of foreign manufacturers and distributors of such
thread, including an Indonesian limited liability company in which Globe
Holdings then owned a 40% interest (the "Joint Venture"). The complaint
alleges an international conspiracy to restrain trade in, and fix prices of,
the thread in the U.S. Neither the Company nor Globe Holdings has been named
as a defendant in the case. The Joint Venture has alleged in its motion to
dismiss that not all parties to the conspiracy have been joined. There can be
no assurance that the Company will not be named in the future. The Merger
Agreement provides that the Indemnification Escrow Fund will be available to
indemnify the Company from, among other items, any liabilities arising out of
any criminal or civil antitrust claims or investigations resulting from the
above-described proceedings to the extent related to the Company's activities
prior to the Merger. This indemnity expires on December 31, 2001.
On March 31, 1998 a petition was filed with the U.S. Department of Commerce
alleging subsidization and dumping of Indonesian extruded latex thread. The
Department of Commerce is currently conducting an
43
<PAGE>
investigation into the allegations. The proceedings could result in additional
duties being levied on extruded latex thread imported from Indonesia. During
1996 and 1997, the Company purchased approximately $5.9 million and $9.9
million of latex thread from the Joint Venture for resale in the North
American market.
From time to time, the Company has been and is involved in various legal
proceedings, all of which management believes are routine in nature and
generally incidental to the conduct of its business. The ultimate legal and
financial liability of the Company with respect to such proceedings cannot be
estimated with certainty, but the Company believes, based on its examination
of such matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the Company's results of
operations, financial condition and its ability to meet its obligations under
the Notes.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
July 14, 1998 are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas A. Rodgers, Jr... 84 Chairman
Thomas A. Rodgers, III.. 53 President and Chief Executive Officer, Director
Lawrence R. Walsh....... 46 Vice President, Finance and Administration
Americo Reis............ 64 Vice President, Operations
Robert L. Bailey........ 60 Vice President, Sales and Marketing
William J. Girrier...... 42 Director of Marketing and Business Development
Kevin T. Cardullo....... 38 Director of Finance and Accounting
Andrew W. Code.......... 39 Director
Peter M. Gotsch......... 34 Director
Edward M. Lhee.......... 28 Director
</TABLE>
The present principal occupations and recent employment history of each of
the executive officers and directors of the Company listed above are set forth
below.
Thomas A. Rodgers, Jr., co-founded Globe Holdings in 1945. He has served as
Chairman since 1945, and served as President from 1945 to 1992.
Thomas A. Rodgers, III, is the son of Thomas A. Rodgers, Jr., and has served
as President of the Company since 1992. He served as the Executive Vice
President and Chief Operating Officer of the Company from 1985 to 1992. Mr.
Rodgers joined the Company in 1968. Mr. Rodgers has been a Director of the
Company since 1972.
Lawrence R. Walsh has served as Vice President, Finance and Administration
of the Company since 1982. From 1976 to 1982, he was employed by Smith
Precious Metals Co.
Americo Reis joined the Company in 1959, and has served as the Company's
Vice President, Operations since 1982. From 1957 to 1959, he served in the
U.S. Army and from 1954 to 1957, he was employed by Goodyear Tire & Rubber Co.
Robert L. Bailey has served as the Company's Vice President, Sales and
Marketing since he joined the Company in 1979. From 1972 to 1979, he served as
Vice President of Sales for the Yarn Division of Texfi Industries, Inc., and
from 1967 to 1972 was Vice President of Sales for Intercontinental Fibers.
William J. Girrier has been with the Company since 1990, first as Marketing
Manager and then as Director of Marketing and Business Development. From 1987
to 1990, he was an Associate Manager of The Robbins Group, a commercial real
estate development company. From 1978 to 1987, he served as a Naval Officer in
various command and staff positions at the Pentagon and onboard warships.
Kevin T. Cardullo has served as the Company's Director of Finance and
Accounting since 1992. He is a Certified Public Accountant, and worked as a
Senior Manager with Ernst & Young from 1986 to 1992. Mr. Cardullo was with
Coopers & Lybrand from 1983 to 1986.
Andrew W. Code is a Partner of Code Hennessy & Simmons LLC ("CHS"), which
manages three private equity funds, including Code, Hennessy & Simmons III,
L.P. Since founding the first such fund in 1988, Mr. Code has been actively
involved in the investment organization and investment management activities
of CHS. Mr. Code was a Vice President with Citicorp's Leveraged Capital Group
from 1986 to 1988, and prior to 1986 he was employed by American National
Bank. He is a director of SCP Pool Corporation, a distributor of swimming pool
supplies.
45
<PAGE>
Peter M. Gotsch has been a Partner of CHS since 1997, and has been employed
by CHS and its affiliates since 1989. From 1987 to 1989, Mr. Gotsch was a
Corporate Banking Officer at The First National Bank of Chicago, N.A. He is a
director of SCP Pool Corporation.
Edward M. Lhee has been an associate of CHS since 1997. From 1995 to 1997,
he attended the Kellogg Graduate School of Management. From 1992 to 1995, Mr.
Lhee was employed by Morgan Stanley & Co., where he worked as a financial
analyst in the mergers and acquisitions and corporate finance departments.
The following table summarizes the compensation paid by Globe Holdings and
its subsidiaries, including the Company, to the Company's Chief Executive
Officer and four other most highly compensated executive officers at December
31, 1997 (collectively, the "Named Executive Officers") for services rendered
to the Company in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR ($) ($) (1) OPTIONS/SARS ($) (2)
- ------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Rodgers, Jr... 1997 759,668 5,000 -- -- 198,796
Chairman
Thomas A. Rodgers, III.. 1997 549,042 197,500 -- 11,250 1,900
President
Americo Reis............ 1997 211,982 72,500 -- 3,750 1,900
Vice President,
Operations
Lawrence R. Walsh....... 1997 218,889 72,500 -- 3,750 3,166
Vice President, Finance
and Administration
Robert L. Bailey........ 1997 176,828 72,500 -- 3,750 1,900
Vice President, Sales
and Marketing
</TABLE>
- ----------------------
(1) Other Annual Compensation was not reportable.
(2) Reflects reimbursement of premiums for life insurance for Thomas A.
Rodgers, Jr. and Company contributions under a 401(k) plan for the other
Named Executive Officers.
The following table sets forth information with respect to all options
granted in fiscal 1997 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
- ------------------------------------------------------------------------- ----------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (1) FISCAL YEAR ($/SH) DATE (2) ($)
- ---- ------------ ------------ ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Thomas A. Rodgers, Jr... -- -- -- -- --
Thomas A. Rodgers, III.. 11,250 50.0% 30.00 12/31/07 2,468,700
Americo Reis............ 3,750 16.7% 30.00 12/31/07 822,900
Lawrence R. Walsh....... 3,750 16.7% 30.00 12/31/07 822,900
Robert L. Bailey........ 3,750 16.7% 30.00 12/31/07 822,900
</TABLE>
- ----------------------
(1) The options vested upon consummation of the Recapitalization and the
Merger, and are exercisable for common stock and preferred stock of Globe
Holdings pursuant to the Recapitalization. See "Certain Relationships and
Related Transactions--Recapitalization." The Company expects to implement
a new stock option plan.
(2) The Black-Scholes option pricing model was used to determine the grant
date present value of the options. The grant date present value of the
options was calculated to be $219.44 per share, based on an expected life
of 5 years and an assumed risk-free interest rate of 5.7%.
46
<PAGE>
The following table sets forth information with respect to all options
exercised in fiscal 1997 and the year-end value of unexercised options held by
the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/SARS UNEXERCISED IN-THE-
AT FISCAL MONEY OPTIONS/SAR'S
YEAR END AT FISCAL YEAR-END
------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/
NAME (#) ($) (#) UNEXERCISABLE ($)
- ---- --------------- -------- ------------- -------------------
<S> <C> <C> <C> <C>
Thomas A. Rodgers, Jr... -- -- -- --
Thomas A. Rodgers, III.. -- -- 11,250/11,250 2,385,000/2,385,000
Americo Reis............ -- -- 3,750/ 3,750 795,000/ 795,000
Lawrence R. Walsh....... -- -- 3,750/ 3,750 795,000/ 795,000
Robert L. Bailey........ -- -- 3,750/ 3,750 795,000/ 795,000
</TABLE>
PENSION PLANS
Globe maintains a Non-Qualified Pension Plan and a Deferred Compensation
Plan, pursuant to which each of Thomas A. Rodgers, III, Americo Reis, Lawrence
R. Walsh and Robert L. Bailey (the "Participating Executives") will be
entitled to receive certain payments upon retirement. Under the Non-Qualified
Pension Plan, each of the Participating Executives will receive a lump sum
distribution upon retirement at age 65. The amounts payable under the Non-
Qualified Pension Plan were determined by the Company and its consultants to
approximate 50% of estimated final compensation. Pursuant to the Deferred
Compensation Plan, each Participating Executive is entitled to receive,
beginning at his retirement at age 65, an annual distribution payable for the
following 15 years. The following table shows the estimated annual benefits
payable under the Non-Qualified Pension Plan and the Deferred Compensation
Plan for each of the Participating Executives.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT UPON
RETIREMENT AT AGE 65
-------------------------------
NON-QUALIFIED DEFERRED
NAME PENSION PLAN COMPENSATION PLAN
---- ------------- -----------------
<S> <C> <C>
Thomas A. Rodgers, Jr. (1)................ $ -- $ --
Thomas A. Rodgers, III.................... $206,400 $90,000
Americo Reis.............................. $ 86,400 $25,000
Lawrence R. Walsh......................... $104,000 $15,000
Robert L. Bailey.......................... $ 96,000 $20,000
</TABLE>
- ----------------------
(1) Thomas A. Rodgers, Jr. does not participate in the Non-Qualified Pension
Plan or the Deferred Compensation Plan.
EMPLOYMENT AGREEMENTS
Each of Messrs. Thomas A. Rodgers, III, Americo Reis, Lawrence R. Walsh and
Robert L. Bailey are parties to an Employment Agreement with Globe Holdings
dated as of December 31, 1997 (the "Employment Agreements"). The Employment
Agreements were transferred to the Company pursuant to the Asset Drop Down.
The Employment Agreements provide for annual base salaries for Messrs.
Rodgers, Reis, Walsh and Bailey of at least $549,000, $212,000, $219,000 and
$200,000, respectively, and provide that such executives shall generally be
entitled to participate in all bonus and benefit plans made available to
executives. The Employment Agreements have a term of three years, but may be
terminated earlier by the Company or the executive. If an executive's
employment is terminated by the Company without Cause or by the executive with
Good Reason (each as defined in the Employment Agreements), then the Company
will be required to pay the executive his base salary through December 2000
and the maximum amount he would have been entitled to under the Company's
incentive plans for the year in which the termination occurred, and will also
be required to provide insurance benefits for three years from the date of
termination, except to the extent the executive obtains comparable benefits
from a subsequent employer.
47
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following summaries of the material terms of certain agreements to which
the Company is a party do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of such
agreements, including the definitions of certain terms therein and the
exhibits and schedules thereto. Copies of such agreements may be obtained from
the Company or the Initial Purchasers.
RECAPITALIZATION
The consummation of the Initial Offering occurred concurrently with the
effectiveness of the Recapitalization. The Recapitalization was effected
pursuant to the Merger Agreement between Globe Holdings and MergerCo, a newly
formed affiliate of Code Hennessy & Simmons. In connection with the Merger and
the Recapitalization, (i) Globe Holdings transferred substantially all of its
assets and liabilities to the Company pursuant to the Asset Drop Down, (ii)
Code Hennessy & Simmons and certain other investors invested approximately
$42.8 million in common stock and preferred stock of MergerCo and (iii) Code
Hennessy & Simmons made the CHS Loan in the amount of $25.0 million. Pursuant
to the Merger Agreement: (i) MergerCo merged with and into Globe Holdings,
with Globe Holdings being the surviving corporation; (ii) the common stock of
MergerCo was converted into common stock of the surviving corporation (the
"New Common Stock") and the preferred stock of MergerCo became preferred stock
of the surviving corporation (the "New Preferred Stock"); (iii) the CHS Loan
became the obligation of the surviving corporation; (iv) certain stock and all
stock options of Globe Holdings was converted into or became exercisable for
New Common Stock and New Preferred Stock; (v) holders of the remaining stock
of Globe Holdings outstanding prior to the Merger received the Cash Merger
Consideration (including the payment by Globe Holdings of fees and expenses on
their behalf) in an aggregate amount equal to $315.0 million less (x) the
amount of Globe Holdings' outstanding indebtedness as of the date of the
Merger and (y) the amount of the Retained Investment; and (vi) $15.0 million
was deposited into escrow as the Escrow Amount. Following the consummation of
the Recapitalization, the CHS Loan was repaid with the net proceeds to Globe
Holdings from the Units Offering.
The Escrow Amount consists of (a) $5.0 million to secure the obligations of
the Pre-Merger Shareholders with respect to the post-closing adjustment of the
Cash Merger Consideration and (b) $10.0 million to satisfy any indemnification
obligations of the Pre-Merger Shareholders under the Merger Agreement. The
Adjustment Escrow Fund is required to be applied and/or released upon the
determination of the final closing date consolidated net asset value of the
Company and the balance of the Indemnification Escrow Fund is required to be
released promptly after December 31, 2001.
Pursuant to the Merger Agreement, the Pre-Merger Shareholders have agreed to
indemnify Globe Holdings and certain of its related parties for all
liabilities and other losses arising from, among other things, (i) any breach
of representations, warranties or pre-closing covenants of Globe Holdings
contained in or contemplated by the Merger Agreement, (ii) the failure of any
Pre-Merger Shareholders to have good, valid and marketable title to the shares
of common stock held by such Pre-Merger Shareholder, (iii) the environmental
investigation relating to Globe Holdings' facility in Fall River,
Massachusetts to the extent related to activities prior to the effective time
of the Merger, (iv) the antitrust claims and investigations relating to the
alleged conspiracy by the Joint Venture to restrain trade in, and fix prices
of, latex thread in the United States to the extent related to activities
prior to the effective time of the Merger and (v) certain other matters. With
respect to claims based on any misrepresentation or breach of any
representation or warranty made by Globe Holdings, the Pre-Merger Shareholders
are not required to indemnify Globe Holdings unless the aggregate of all
amounts for which indemnity would otherwise be payable exceeds $1.0 million
and, in such event, the Pre-Merger Shareholders will only be responsible for
the amount in excess of $1.0 million. In addition, the indemnification
obligations of the Pre-Merger Shareholders are generally limited to the amount
held in the Indemnification Escrow Fund, other than with respect to claims
based on fraud or on the failure of a Pre-Merger Shareholder to have good,
valid and marketable title to his shares of common stock.
48
<PAGE>
The Merger Agreement contains representations and warranties typical of
agreements of like nature, including, without limitation, those relating to
corporate organization and capitalization, the valid authorization, execution,
delivery and enforceability of all transaction documents, Globe Holdings'
financial statements, the absence of material adverse changes in the business,
assets, financial condition and results of operations, the absence of material
undisclosed liabilities, tax matters, the quality and title of personal and
real property, material contracts, intellectual property, employee benefits
plans, environmental matters, compliance with laws, governmental
authorizations, permits and licenses and insurance matters. Generally, the
representations and warranties of Globe Holdings expire 18 months after the
closing date of the Merger except that (i) those relating to environmental
matters remain in full force and effect until the second anniversary of the
closing date of the Merger and (ii) those relating to tax matters survive
until the expiration of the applicable statute of limitations.
Prior to the Merger, Thomas A. Rodgers, Jr. and Thomas A. Rodgers, III
beneficially owned, directly or indirectly, an aggregate of approximately 39%
of the common stock of Globe Holdings on a fully-diluted basis. In addition,
Messrs. Bailey, Reis and Walsh beneficially owned, in the aggregate,
approximately 2% of the common stock of Globe Holdings on a fully-diluted
basis. In connection with the Merger, these individuals received a pro rata
portion of the aggregate merger consideration.
MANAGEMENT AGREEMENT
In connection with the Recapitalization, the Company entered into a
Management Agreement with CHS Management III, L.P. ("CHS Management"), an
affiliate of Code Hennessy & Simmons LLC, pursuant to which CHS Management
will provide financial and management consulting services to the Company and
receive a monthly fee of $83,333. In addition, pursuant to the Management
Agreement the Company paid to CHS Management $3.0 million at the closing of
the Transactions as compensation for services rendered by CHS Management to
the Company in connection with the Transactions. The Management Agreement also
provides that when and as the Company consummates the acquisition of other
businesses, the Company will pay to CHS Management a fee equal to the greater
of $250,000 and one percent of the acquisition price of each such business as
compensation for services rendered by CHS Management to the Company in
connection with the consummation of such acquisition. The term of the
Management Agreement is five years, subject to automatic renewal unless either
CHS Management or the Company elects to terminate. The Company believes that
the fees to be paid to CHS Management for the professional services to be
rendered are at least as favorable to the Company as those which could be
negotiated with an unrelated third party. The Company reimbursed CHS
Management for expenses related to the Transactions and will reimburse CHS
Management for expenses incurred in rendering services to the Company and
Globe Holdings under the Management Agreement.
SECURITYHOLDERS AGREEMENT
In connection with the Recapitalization, Globe Holdings' shareholders
entered into a Securityholders Agreement. This agreement provides, among other
things, for the nomination of and voting for at least five directors of Globe
Holdings by Globe Holdings' shareholders. The Securityholders Agreement also
provides that Code Hennessy & Simmons will be entitled to appoint all of the
directors of Globe Holdings. The following individuals have been initially
designated by Code Hennessy & Simmons to serve as directors: Thomas A.
Rodgers, Jr., Thomas A. Rodgers, III, Andrew W. Code, Peter M. Gotsch and
Edward M. Lhee. See "Management."
EXECUTIVE SECURITIES AGREEMENTS
In connection with the Recapitalization, each of Lawrence R. Walsh, Americo
Reis and Robert L. Bailey entered into an Executive Securities Agreement with
Globe Holdings and Code Hennessy & Simmons which provides for, among other
things, repurchase rights with respect to the Globe Holdings securities held
by them upon termination of employment (other than retirement) and
restrictions on transfer of such securities.
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<PAGE>
REGISTRATION AGREEMENT
In connection with the Recapitalization, Globe Holdings' shareholders
entered into a Registration Agreement. The Registration Agreement grants
certain demand registration rights to Code Hennessy & Simmons. An unlimited
number of such demand registrations may be requested by Code Hennessy &
Simmons. In the event that Code Hennessy & Simmons makes such a demand
registration request, all other shareholders of Globe Holdings will be
entitled to participate in such registration on a pro rata basis (based on
shares held). Code Hennessy & Simmons may request, pursuant to its demand
registration rights, and each other shareholder may request, pursuant to his
or its participation rights, that up to all of such shareholder's shares of
common stock be registered by Globe Holdings. Globe Holdings is entitled to
postpone such a demand registration for up to 180 days under certain
circumstances. In addition, the parties to the Registration Agreement are
granted certain rights to have shares included in registrations initiated by
Globe Holdings or its shareholders ("piggyback registration rights"). Expenses
incurred in connection with the exercise of such demand or piggyback
registration rights shall, subject to limited exceptions, be borne by Globe
Holdings.
EXECUTIVE LOAN
In December 1992, Globe Holdings made a loan to Thomas A. Rodgers, III to
assist him in paying taxes incurred in a previous recapitalization of Globe
Holdings. As of June 30, 1998, the balance of such loan, including accrued
interest, was $285,397. The loan was repaid prior to the Merger.
NON-COMPETITION AGREEMENT
In connection with the Merger and the Recapitalization, each of the Named
Executive Officers entered into a Non-Competition Agreement with Globe
Holdings pursuant to which the Named Executive Officers agreed not to engage
anywhere in the U.S. in any business that manufactures, distributes or sells
polyester or polyester spandex fiber, latex thread or other elastomeric fiber
for a period of three years (or, in the case of Mr. Bailey, until December 31,
2000). The Named Executive Officers also agreed not to solicit employees or
customers of Globe Holdings or its subsidiaries, or to hire any person who was
an employee of Globe Holdings or any of its subsidiaries within twelve months
after such person's employment with Globe Holdings or any subsidiary is
terminated. The Named Executive Officers also agreed to maintain the
confidentiality of information regarding the business and affairs of Globe
Holdings and its subsidiaries.
SALE BONUS
In February 1998, Globe Holdings instituted a management reward program
pursuant to which each of the Named Executive Officers was entitled to receive
a cash bonus upon consummation of the Merger. The amount of the bonus paid was
based on a percentage of the consideration paid in connection with the Merger.
Pursuant to the program, Thomas A. Rodgers, Jr. and Thomas A. Rodgers, III
received an aggregate of $825,000; and Messrs. Reis, Walsh and Bailey each
received $412,500. In addition, Messrs. Cardullo and Girrier each received a
bonus of $50,000 upon consummation of the Merger.
INVESTMENT BANKING FEES
Prior to the Merger, certain affiliates of Goldman, Sachs & Co. owned an
aggregate of approximately 46% of the common stock of Globe Holdings on a
fully-diluted basis prior to the consummation of the Merger, and three members
of the Board of Directors of Globe Holdings prior to the Merger were
affiliates of Goldman, Sachs & Co. Goldman, Sachs & Co. acted as financial
advisor to Globe Holdings in connection with the Transactions, for which it
received a fee.
TAX SHARING AGREEMENT
The operations of the Company are included in the Federal income tax returns
filed by Globe Holdings. Prior to the closing of the Initial Offering, Globe
Holdings and the Company entered into a Tax Sharing Agreement ("Tax Sharing
Agreement") pursuant to which the Company agreed to advance to Globe Holdings
so long as Globe Holdings files consolidated income tax returns that include
the Company (i) payments for the Company's share of income taxes assuming the
Company is a stand-alone entity, which in no event may exceed
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<PAGE>
the group's consolidated tax liabilities for such year, and (ii) payments to
or on behalf of Globe Holdings in respect of franchise or similar taxes and
governmental charges incurred by it relating to the business, operations or
finances of the Company.
CONSULTING AGREEMENT
In connection with the Merger and the Recapitalization, Thomas A. Rodgers,
Jr. entered into a consulting agreement with the Company, pursuant to which he
will be compensated at a rate of $100,000 per annum, and agreed to perform
special projects for the Company and such other matters as the Company's Board
of Directors or officers reasonably request.
CHS LOAN
In connection with the Recapitalization, Code Hennessy & Simmons extended
the CHS Loan to Globe Holdings in the principal amount of $25.0 million. The
CHS Loan was repaid with the net proceeds to Globe Holdings from the Units
Offering. The CHS Loan bore interest at a rate of 14% per annum and would have
matured on July 31, 2009.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Globe Holdings owns all of the Company's issued and outstanding capital
stock. The following table sets forth certain information as of September 15,
1998 regarding the beneficial ownership of the capital stock of Globe Holdings
by (i) each shareholder who beneficially owns more than 5% of the common stock
of Globe Holdings, (ii) each director and Named Executive Officer of the
Company and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated below, each of the persons named in the
table has sole voting and investment power with respect to the securities
beneficially owned by it or him as set forth opposite its or his name. Unless
otherwise noted, the address for each director and executive officer of the
Company is c/o the Company, 456 Bedford Street, Fall River, Massachusetts
02720.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------- ----------------------
NAME OF BENEFICIAL OWNER NUMBER (1) PERCENT (1) NUMBER (1) PERCENT (1)
------------------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Code, Hennessy & Simmons
III, L.P. (2).............. 1,647,437 75.6 21,999.6 75.6
Thomas A. Rodgers, Jr. (3).. 166,244 7.6 2,220 7.6
Thomas A. Rodgers, III...... 89,862 4.1 1,200 4.1
Americo Reis (4)............ 22,465 1.0 300 1.0
Lawrence R. Walsh (4)....... 22,465 1.0 300 1.0
Robert L. Bailey (4)........ 22,465 1.0 300 1.0
William J. Girrier.......... -- -- -- --
Kevin T. Cardullo........... -- -- -- --
Andrew W. Code (5).......... 1,647,437 75.6 21,999.6 75.6
Peter M. Gotsch (5)......... 1,647,437 75.6 21,999.6 75.6
Edward M. Lhee ............. 1,977 * 26.4 *
Brinson Partners, Inc.
(6)(7)..................... 224,655 10.3 3,000 10.3
Virginia Retirement System
(7)........................ 179,724 8.2 2,400 8.2
All executive officers and
directors as a group (9
persons)................... 1,806,671 80.4 24,126 80.4
</TABLE>
- --------
* Less than 1%
(1) Includes shares of Common Stock and Preferred Stock subject to options
which are exercisable within 60 days of September 15, 1998.
(2) The business address of Code, Hennessy & Simmons III, L.P. is 10 South
Wacker Drive, Suite 3175, Chicago, Illinois 60606.
(3) All of such shares are held of record by the Thomas A. Rodgers, Jr.
Grantor Retained Annuity Trust, of which Thomas A. Rodgers, Jr. is the
sole beneficiary.
(4) All of the shares shown are issuable upon exercise of outstanding options.
(5) All of such shares are held of record by Code, Hennessy & Simmons III,
L.P. Messrs. Code and Gotsch are officers, directors and shareholders of
the sole general partner of Code, Hennessy & Simmons III, L.P. and share
investment and voting power with respect to the securities owned by Code,
Hennessy & Simmons III, L.P. Each of Messrs. Code and Gotsch disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. The business address of Messrs. Code and Gotsch is c/o
Code, Hennessy & Simmons III, L.P., 10 South Wacker Drive, Suite 3175,
Chicago, Illinois 60606.
(6) Brinson Partners, Inc. ("BPI") has advised the Company that it is an
Investment Adviser registered under Section 203 of the Investment Advisers
Act of 1940. Of the shares shown: (i) 38,631 shares of Common Stock and
515.87 shares of Preferred Stock are held of record by Brinson Venture
Capital Fund III, L.P., of which BPI is the general partner and (ii) 6,300
shares of Common Stock and 84.13 shares of Preferred Stock are held of
record by Brinson MAP Venture Capital Fund III, a trust of which a wholly
owned subsidiary of BPI is the sole trustee. As a result, BPI has sole
voting and dispositive power with respect to such shares. The address of
BPI is 209 South LaSalle Street, Chicago, Illinois 60604-1295.
(7) BPI serves as an Investment Adviser to Virginia Retirement System and
shares voting and dispositive power with respect to the shares held of
record by Virginia Retirement System. The address of Virginia Retirement
System is 1200 East Main Street, Richmond, Virginia 23219.
52
<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
General. As part of the Transactions, the Company entered into the Senior
Credit Facility with Bank of America National Trust and Savings Association,
as a lender and as administrative agent, BancAmerica Robertson Stephens, as
arranger, Merrill, Lynch, Pierce, Fenner & Smith, Inc. as syndication agent,
and certain other financial institutions (the "Lenders").
The Senior Credit Facility provides for two term loans to the Company for
$60.0 million and $55.0 million ("Term Loan A" and "Term Loan B,"
respectively, and collectively, the "Term Loans") and revolving loans to the
Company for up to $50.0 million (including letters of credit) (the "Revolving
Loan" and, together with the Term Loans, the "Loans"). Subject to certain
restrictions, the Senior Credit Facility may be used to finance the
Transactions and for working capital and general corporate purposes of the
Company and its subsidiaries.
Repayment. Term Loan A and the Revolving Loan must be repaid six and one-
half years following the date of the closing of the Senior Credit Facility.
Term Loan B must be repaid eight years following the date of the closing of
the Senior Credit Facility. Loans made pursuant to the Senior Credit Facility
may be borrowed, repaid and, in the case of the Revolving Loans, reborrowed,
without premium or penalty (other than prepayments of Eurodollar Loans (as
defined in the Senior Credit Facility) which may be subject to customary
breakage costs), from time to time until maturity, subject to the satisfaction
of certain conditions on the date of any such borrowing. In addition, the
Senior Credit Facility provides for mandatory repayments (with corresponding
permanent reductions on Revolving Loan commitments) of any outstanding
borrowings out of any proceeds received from a sale of assets (other than
sales of inventory in the ordinary course of business, sales of certain
obsolete assets, and certain other exceptions), net cash proceeds of permitted
debt and equity issuances (subject to certain exceptions), net cash proceeds
from insurance recovery and condemnation events (subject to certain
reinvestment rights) and 75% of annual excess cash flow, reducing to 50% when
the ratio of total debt to EBITDA is less than 3.75:1.
Security; Guaranty. The obligations of the Company under the Senior Credit
Facility are guaranteed by Globe Holdings and will be guaranteed by each of
the Company's future direct and indirect domestic subsidiaries and, so long as
there are no adverse tax consequences, foreign subsidiaries. The obligations
of the Company under the Senior Credit Facility and each of the guarantors
under its guarantee is or will be secured by substantially all of the assets
of such person and the capital stock of subsidiaries owned by the Company and
the guarantors.
Interest. At the Company's option, the interest rates per annum applicable
to the loans under the Senior Credit Facility will be a fluctuating rate of
interest measured by reference to one or a combination (at the Company's
election) of the following: (i) the Base Rate (as defined in the Senior Credit
Facility), plus the applicable borrowing margin, or (ii) the relevant
Eurodollar Rate (as defined in the Senior Credit Facility), plus the
applicable borrowing margin. The applicable borrowing margin under the Senior
Credit Facility for Base Rate-based borrowings is 1.25% for the Term Loan A
and the Revolving Loan and 1.75% for the Term Loan B; the applicable borrowing
margin under the Senior Credit Facility for Eurodollar Rate-based borrowings
is 2.25% for the Term Loan A and the Revolving Loan and 2.75% for the Term
Loan B, subject to adjustment in each case based on the Company's Leverage
Ratio (defined in the Senior Credit Facility as the ratio of Total Debt (as
defined in the Senior Credit Facility) to EBITDA (as defined in the Senior
Credit Facility)).
Fees. The Company has agreed to pay certain fees in connection with the
Senior Credit Facility, including: (i) letter of credit fees; (ii) agency
fees; and (iii) commitment fees. Commitment fees are payable at a rate per
annum of 0.5% on the undrawn amounts of the Senior Credit Facility, subject to
adjustment based on the Company's Leverage Ratio.
Covenants. The Senior Credit Facility requires the Company to meet certain
financial tests, including a maximum leverage ratio, a minimum interest
coverage ratio and a minimum fixed charge coverage ratio. The Senior Credit
Facility also contains covenants which, among other things, restrict the
ability of the Company and its subsidiaries (subject to certain exceptions) to
incur liens, transact with affiliates, incur indebtedness,
53
<PAGE>
declare dividends or redeem or repurchase capital stock, make loans and
investments, engage in mergers, acquisitions and asset sales, acquire assets,
stock, or debt securities of any person, have additional subsidiaries, amend
its certificate of incorporation and bylaws, and make capital expenditures.
The Senior Credit Facility also requires the Company and its restricted
subsidiaries to satisfy certain customary affirmative covenants and to make
certain customary indemnifications to the Lenders and the administrative agent
under the Senior Credit Facility.
Events of Default. The Senior Credit Facility contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, certain events of bankruptcy and insolvency, ERISA
violations, judgment defaults, cross-default to certain other indebtedness,
and a change in control of Globe Holdings or the Company.
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<PAGE>
DESCRIPTION OF THE NEW NOTES
The New Notes offered hereby are to be issued as a separate series under an
Indenture dated as of July 31, 1998 (the "Indenture") between the Company and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The
form and terms of the New Notes are the same as the form and terms of the Old
Notes (which they replace) except that (i) the New Notes bear a Series B
designation and a different CUSIP number than the Old Notes, (ii) the New
Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof, and (iii) the holders of New
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, which rights will terminate when the Exchange Offer is
consummated. The Old Notes issued in the Initial Offering and the New Notes
offered hereby are referred to collectively as the "Notes." The following
summary of the material provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all provisions of the Indenture, a copy of which can be obtained from the
Trustee upon request. Upon the issuance of the New Notes, or the effectiveness
of the Shelf Registration Statement, the Indenture will be subject to and
governed by the provisions of the Trust Indenture Act of 1939 (the "Trust
Indenture Act" ). The definitions of certain terms used in the following
summary are set forth below under "--Certain Definitions." Wherever particular
sections or defined terms of the Indenture not otherwise defined herein are
referred to, such Sections or defined terms shall be incorporated herein by
reference, and those terms made a part of the Indenture by the Trust Indenture
Act also are incorporated herein by reference.
GENERAL
The Notes, which mature on August 1, 2008, will be limited to $300.0 million
in aggregate principal amount, $150.0 million of which will be issued on the
Issue Date. Additional amounts may be issued in one or more series from time
to time, subject to the limitations set forth under "Certain Covenants--
Incurrence of Debt and Issuance of Preferred Stock." The Notes will not be
entitled to any sinking fund. The Notes will be redeemable at the option of
the Company as described below under "--Optional Redemption."
The Notes will bear interest from the Issue Date at the rate of 10% per
annum payable semiannually in arrears on February 1 and August 1 of each year
commencing on February 1, 1999 until the principal thereof is paid or made
available for payment to the Holders of record at the close of business on the
immediately preceding January 15 or July 15, respectively. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. The
circumstances under which the interest rate may increase are described under
"--Exchange Offer; Registration Rights."
Principal, premium, if any, and interest on the Notes will be payable at the
office or agency of the Trustee maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest
may be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, if any, and interest with respect to Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Notes will be issued in denominations
of $1,000 and integral multiples thereof.
All references herein to payments of principal, premium, if any, and
interest on the Notes shall be deemed to include any applicable Additional
Interest (as defined) that may become payable in respect of the Notes. See "--
Exchange Offer; Registration Rights."
SUBORDINATION
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all current and future Senior Debt of the
Company, including the Company's obligations under the
55
<PAGE>
Senior Credit Facility. The Notes will also be effectively subordinated to all
secured Debt of the Company and any Guarantor to the extent of the value of
the assets securing such Debt. The Notes will rank pari passu with any future
senior subordinated indebtedness of the Company and will rank senior to any
future Subordinated Debt of the Company. As of June 30, 1998, on a pro forma
basis after giving effect to the Transactions, the Company would have had an
aggregate of approximately $121.8 million of Senior Debt (excluding unused
commitments of approximately $43.2 million under the Senior Credit Facility).
The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to the payment of principal, premium, if any, and interest, jointly
and severally, by all future direct and indirect Restricted Domestic
Subsidiaries of the Company (the "Guarantors"). The Company has no existing
Restricted Domestic Subsidiaries.
In connection with the Transactions, the Company entered into the Senior
Credit Facility, under which the Company may borrow up to an aggregate of
$165.0 million, subject to compliance with certain covenants and financial
ratios. See "Description of Senior Credit Facility."
Upon any payment or distribution of assets of the Company of any kind or
character to creditors of the Company in a total or partial liquidation,
winding up, reorganization or dissolution of the Company or in a voluntary or
involuntary bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, an assignment for the
benefit of creditors or any marshaling of the Company's assets and
liabilities, the holders of all Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt whether or not such interest is an
allowed claim in any such proceeding) before the Holders of the Notes will be
entitled to receive any payment of any kind or character with respect to the
Notes, and until all Obligations with respect to all Senior Debt are paid in
full in cash, any distribution to which the Holders of the Notes would be
entitled shall be made to the holders of Senior Debt or their Representative
(except that Holders of the Notes may receive Permitted Junior Securities and
payments made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
Neither the Company nor any Person on behalf of the Company may make any
payment of any kind or character upon or in respect of the Notes (except from
the trust described under "--Legal Defeasance and Covenant Defeasance") if (i)
a default in the payment of the principal of, premium, if any, interest on,
unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Designated Senior Debt occurs and is
continuing or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of the Designated Senior Debt as
to which such default relates to accelerate its maturity and, in the case of
clause (ii), the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Representative of any Designated Senior Debt.
Payments on the Notes may and shall be resumed (A) in the case of a payment
default described in clause (i) above, upon the date on which such default is
cured or waived and (B) in case of a default described in clause (ii) above,
the earlier of (1) the date on which all such defaults have been cured or
waived, (2) 179 days after the date on which the applicable Payment Blockage
Notice is received, (3) the date such Designated Senior Debt shall have been
paid in full in cash or (4) the date such Payment Blockage Period shall have
been terminated by written notice to the Trustee from the Representative of
the Designated Senior Debt initiating such Payment Blockage Period, after
which, in the case of clauses (1), (2), (3) and (4), the Company shall resume
making any and all required payments in respect of the Notes, including any
payments not made to the Holders of the Notes during the Payment Blockage
Period due to the foregoing prohibitions, unless the provisions described in
clause (i) above or the provisions of the immediately preceding sentence are
then applicable. No new Payment Blockage Period may be commenced unless and
until 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice. No default that existed or was continuing on the date
of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 90 consecutive
days.
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As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the Notes may recover less ratably
than creditors of the Company who are holders of Senior Debt. The Indenture
limits, subject to certain financial tests, the amount of additional Debt,
including Senior Debt, that the Company and its Subsidiaries can incur. See
"--Certain Covenants--Incurrence of Debt and Issuance of Preferred Stock."
GUARANTEES
Each Guarantor, if any, will unconditionally guarantee, on a senior
subordinated basis, jointly and severally to each Holder and the Trustee, the
full and prompt performance of the Company's obligations under the Indenture
and the Notes, including the payment of principal, premium, if any, and
interest on the Notes. The Guarantees will be subordinated to Guarantor Senior
Debt on the same basis as the Notes are subordinated to Senior Debt. The
obligations of each Guarantor will be limited to the maximum amount which
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, will result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in an amount pro rata, based on the net assets of
each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company, another Guarantor that is a Restricted Subsidiary of the Company or a
Restricted Subsidiary that is or in connection therewith becomes a Guarantor
without limitation, or with other Persons upon the terms and conditions set
forth in the Indenture. See "Certain Covenants--Merger, Consolidation or Sale
of Assets." In the event all of the Capital Stock of a Guarantor or the parent
company of a Guarantor are sold and the sale complies with the provisions set
forth in "--Certain Covenants--Asset Sales," the Guarantor's Guarantee will be
released. A Guarantor's Guarantee shall also be released if such Guarantor
becomes an Unrestricted Subsidiary in accordance with the Indenture.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time and from time to time on or after August 1, 2003 upon not
less than 30 nor more than 60 days notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................... 105.000%
2004........................................................... 103.333%
2005........................................................... 101.667%
2006 and thereafter............................................ 100.000%
</TABLE>
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
At any time prior to August 1, 2001, the Company may on any one or more
occasions redeem from the net proceeds of one or more Equity Offerings up to
an aggregate of 35% of the aggregate principal amount of the Notes at a
redemption price of 110.0% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date; provided that at least $97.5
million in aggregate principal amount of the Notes issued under the Indenture
remain outstanding immediately after the occurrence of such redemption.
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If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
the Notes or portions of them called for redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof and accrued and
unpaid interest thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture
and described in such notice.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Trustee an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Trustee will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided, that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant
(including the mailing of the notice referred to above), but in any event
within 90 days following a Change of Control, the Company will either repay in
full in cash all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant and the Company's failure to
comply with this covenant shall constitute an Event of Default under the
Indenture. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Senior Credit Facility restricts the ability of the Company to purchase
any Notes and other senior subordinated or subordinated indebtedness of the
Company, and also provides that certain change of control events with respect
to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event
any such restrictions would prohibit the Company from purchasing Notes upon a
Change of Control, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to
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refinance the borrowings that contain such restrictions. If the Company does
not obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Senior Credit
Facility. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The Change of Control provision of the Notes may in certain circumstances
make it more difficult or discourage a takeover of the Company and, as a
result, may make removal of incumbent management more difficult. The Change of
Control provision is a result of negotiations between the Company and the
Initial Purchasers.
The provisions of the Indenture would not necessarily afford Holders of the
Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect Holders of the Notes.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another person or group may be
uncertain.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other
applicable securities laws and regulations in connection with any 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.
CERTAIN COVENANTS
Incurrence of Debt and Issuance of Preferred Stock.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any Debt
(including Acquired Debt) and that the Company will not issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any
shares of preferred stock; provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence
thereof, the Company may incur Debt (including Acquired Debt) or issue shares
of Disqualified Stock and any Guarantor may incur Debt (including Acquired
Debt) or issue preferred stock if the Consolidated Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
financial statements are available immediately preceding the date on which
such additional Debt is incurred or such Disqualified Stock or preferred stock
is issued would have been at least 2.0 to 1.0, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Debt had been incurred, or the Disqualified Stock or preferred
stock had been issued, as the case may be, at the beginning of such four-
quarter period.
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The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Debt (collectively, "Permitted
Debt"):
(i) the incurrence by the Company or any of the Guarantors of Debt under
the Senior Credit Facility (or if the Senior Credit Facility has matured or
been terminated or repaid in whole or in part, any other Credit Facility)
in an aggregate principal amount at any time outstanding not to exceed
$165.0 million, which amount shall be reduced by (A) any required permanent
repayments pursuant to the provisions of the covenant described under the
caption "--Asset Sales" (which are accompanied by a corresponding permanent
commitment reduction thereunder), (B) the aggregate amount of any Debt
constituting Limited Originator Recourse outstanding pursuant to clause
(xi) below and (C) the principal amount of Debt outstanding pursuant to
clause (x) below;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Debt;
(iii) the incurrence by the Company or any of its Restricted Subsidiaries
of Debt represented by the Notes issued on the Issue Date (or any Notes
issued in exchange therefor) or any Guarantee;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to refund, refinance or replace, Debt that was permitted by the
Indenture to be incurred;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Debt between or among the Company and any of its Restricted
Subsidiaries; provided, however, that (A) if the Company or a Guarantor is
the obligor on such Debt, such Debt is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes or
such Guarantor's Guarantee, as the case may be, and (B) (1) any subsequent
issuance or transfer (other than any bona fide pledge under the Senior
Credit Facility) of Equity Interests that results in any such Debt being
held by a Person other than the Company or a Restricted Subsidiary and (2)
any sale or other transfer (other than any bona fide pledge under the
Senior Credit Facility) of any such Debt to a Person that is not either the
Company or a Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Debt by the Company or such Subsidiary, as
the case may be;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Debt that is
permitted by the terms of the Indenture to be outstanding or for the
purpose of fixing or hedging currency exchange risk with respect to any
currency exchanges;
(vii) Capitalized Lease Obligations and Purchase Money Obligations of the
Company and the Guarantors not to exceed $5.0 million in aggregate
principal amount (or accrued value, as applicable) at any time outstanding;
(viii) Guarantees by the Company of Debt of any Restricted Subsidiaries
otherwise permitted by this covenant and guarantees by any of the Company's
Restricted Subsidiaries of Debt of the Company or any other Restricted
Subsidiary permitted to be incurred under the covenant described under "--
Limitation of Guarantees by Restricted Subsidiaries";
(ix) Debt of the Company or any Restricted Subsidiary in respect of
performance bonds, bankers' acceptances, trade letters of credit, workers'
compensation or self-insurance, surety bonds and guarantees provided by the
Company or any Restricted Subsidiary in the ordinary course of business;
(x) Debt of Foreign Restricted Subsidiaries incurred for working capital
purposes in an aggregate principal amount outstanding at any one time not
to exceed the sum of 85% of the net book value of such Subsidiaries'
accounts receivable determined in accordance with GAAP and 60% of the net
book value of their inventory determined in accordance with GAAP and
guarantees by Foreign Restricted Subsidiaries of such Debt (which Debt
shall reduce the aggregate Debt permitted pursuant to clause (i) above in
the manner contemplated thereby);
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(xi) the incurrence by (A) a Securitization Entity of Debt in a Qualified
Securitization Transaction that is Non-Recourse Debt with respect to the
Company and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings and Limited Originator Recourse) or (B) the
Company or any Restricted Subsidiary of Debt constituting Limited
Originator Recourse (which Debt shall reduce the aggregate Debt permitted
pursuant to clause (i) above in the manner contemplated thereby);
(xii) Debt arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price, earn-out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Debt incurred by any Person acquiring all or any portion of such business,
assets or Restricted Subsidiary for the purpose of financing such
acquisition; and
(xiii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Debt in an aggregate principal amount (or
accrued value, as applicable) at any time outstanding, including all
Permitted Refinancing Debt incurred to refund, refinance or replace any
other Debt incurred pursuant to this clause (xiii), not to exceed $40.0
million (which amount may, but need not, be incurred in whole or in part
under the Senior Credit Facility).
For purposes of determining compliance with this covenant, in the event that
an item of Debt meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xiii) above or is entitled to
be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Debt in any manner that
complies with this covenant and such item of Debt will be treated as having
been incurred pursuant to only one of such clauses or pursuant to the first
paragraph hereof. Accrual of interest, the accretion of accrued value and the
payment of interest in the form of additional Debt will not be deemed to be an
incurrence of Debt for purposes of this covenant.
Restricted Payments.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless, at the time of and after giving effect to such Restricted
Payment:
(i) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(ii) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Debt pursuant to the Consolidated
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Debt and
Issuance of Preferred Stock"; and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (including Restricted Payments
permitted by clauses (i) and (v) of the next succeeding paragraph and
excluding the Restricted Payments permitted by the other clauses therein),
is less than or equal to the sum of (A) 50% of the Consolidated Net Income
of the Company (or if Consolidated Net Income shall be a loss, minus 100%
of such loss) earned during the period beginning on the first day of the
first fiscal quarter immediately following the Issue Date and ending on the
last day of the fiscal quarter immediately preceding the date the
Restricted Payment is made (the "Reference Date") (treating such period as
a single accounting period) plus (B) 100% of the aggregate net proceeds
(including the fair market value of property other than cash (determined in
good faith by the Board of Directors as evidenced by an Officers'
Certificate filed with the Trustee, except that in the event the value of
any non-cash consideration shall be $10.0 million or more, the value shall
be as determined based on an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing)) received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date of Equity Interests of the
Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt
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securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company); plus (C)
without duplication of any amounts included in clause (B) above, 100% of
the aggregate net cash proceeds of any equity contribution received by the
Company from a holder of the Company's Capital Stock (excluding, in the
case of clauses (B) and (C), any net cash proceeds from an Equity Offering
to the extent used to redeem the Notes and any net cash proceeds received
by the Company from the sale of Equity Interests of the Company or equity
contribution which has been financed, directly or indirectly using funds
(1) borrowed from the Company or any of its Subsidiaries, unless and until
and to the extent such borrowing is repaid or (2) contributed, extended,
guaranteed or advanced by the Company or by any of its Subsidiaries), plus
(D) to the extent that any Restricted Investment that was made after the
Issue Date is sold by Company or any Restricted Subsidiary for cash or
otherwise liquidated or repaid for cash, the lesser of (1) the fair market
value of such Restricted Investment as of the date of such Restricted
Investment or (2) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any), to the extent
any such amount was not otherwise included in Consolidated Net Income, plus
(E) 50% of any dividends received by the Company or a Restricted Subsidiary
after the Issue Date from an Unrestricted Subsidiary of the Company, to the
extent that such dividends were not otherwise included in Consolidated Net
Income of the Company for such period, plus (F) to the extent that any
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after
the Issue Date, the fair market value of the Investment made by the Company
or any of its Restricted Subsidiaries in such Subsidiary as of the date of
such redesignation, plus (G) $10.0 million. For purposes of this paragraph,
the fair market value of property other than cash shall be determined in
good faith by the Board of Directors and evidenced by an Officers'
Certificate filed with the Trustee, except that in the event the value of
any non-cash consideration shall be $10.0 million or more, the value shall
be determined based on an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing.
The foregoing provisions will not prohibit (i) the payment of any dividend
or the consummation of any irrevocable redemption within 60 days after the
date of declaration thereof or giving of irrevocable redemption notice, if at
said date of declaration or giving of notice such payment or redemption would
have complied with the provisions of the Indenture; (ii) if no Default or
Event of Default shall have occurred and be continuing, the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company or any Restricted Subsidiary of the Company or any Subordinated Debt
of the Company or any Restricted Subsidiary, in each case in exchange for, or
out of the net proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other Equity Interests of the Company
(other than any Disqualified Stock); provided, however, that the amount of any
such net proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clauses (iii) (B) and
(iii) (C) of the preceding paragraph; (iii) the redemption, repurchase,
refinancing or defeasance of Subordinated Debt in exchange for, or with the
net cash proceeds from, an incurrence of Permitted Refinancing Debt; (iv) the
payment to Globe Holdings of any amounts required under the Tax Sharing
Agreement; (v) if no Default or Event of Default shall have occurred and be
continuing, the payment of dividends to Globe Holdings in an amount up to $1.0
million in any period of four consecutive quarters to fund repurchases by
Globe Holdings (or its successor) of Equity Interests therein or Debt of Globe
Holdings issued in connection with such Equity Interests held by Persons who
have ceased to be bona fide officers or employees of the Company or one of its
Restricted Subsidiaries, provided that any unused amount thereof may be
carried forward to subsequent periods so long as the total amount of such
Restricted Payments shall not exceed $5.0 million in the aggregate (and shall
be increased by the amount of any net cash proceeds (after deducting any
premiums) to the Company from (A) sales of Equity Interests of Globe Holdings
to management employees subsequent to the Issue Date and (B) any "key-man"
life insurance policies which are used to make such redemptions and
repurchases); (vi) the payment of dividends to Globe Holdings in an amount
necessary to fund Globe Holdings' bona fide corporate overhead and similar
fees and expenses relating to the ownership or operation of the Company; (vii)
repurchases of Equity Interests deemed to occur upon the exercise of stock
options if such Equity Interests represent a portion of the exercise price
thereof; and (viii) distributions to Globe Holdings to fund the Transactions
and to pay fees and expenses incurred in connection with the Transactions and
the Discount Note Offering (as described under "Use of Proceeds").
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The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Default or an Event of Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greater of (i) the
net book value of such Investments at the time of such designation and (ii)
the fair market value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Liens.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly create, incur, assume
or suffer to exist any Lien (other than Permitted Liens) that secures Debt or
trade payables unless (i) in the case of Liens securing Subordinated Debt, the
Notes are secured on a senior basis to the obligations so secured until such
time as such obligations are no longer secured by a Lien and (ii) in the case
of Liens securing obligations under Pari Passu Debt, the Notes are equally and
ratably secured with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
Merger, Consolidation or Sale of Assets.
The Indenture provides that the Company may not consolidate or merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless: (i) the Company
is the surviving corporation or the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the Person that
acquires by conveyance, transfer or lease substantially all of the properties
and assets of the Company (the "Surviving Entity") shall be a corporation
organized and validly existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) if the Company is not the
surviving corporation, the Surviving Entity assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; (iv) except in the case of
a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company or a merger entered into solely for the purpose of reincorporating
the Company in another jurisdiction, the Company or the Surviving Entity, as
the case may be, (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Debt pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph
of the covenant described above under the caption "--Incurrence of Debt and
Issuance of Preferred Stock"; and (v) the Company or the Surviving Entity, as
the case may be, shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
The Indenture provides that each Guarantor (other than any Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
the Indenture in connection with any transaction complying with the provisions
of "--Asset Sales") will not, and the Company will not cause or permit any
Guarantor to, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its properties or assets to any Person other than the Company or any other
Guarantor unless: (i) such Guarantor is the surviving corporation or the
Person (if other than a Guarantor) formed by such
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consolidation or into which such Guarantor is merged or the Person that
acquires by conveyance, transfer or lease substantially all of the properties
and assets of such Guarantor shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia; (ii) such entity or Person formed by or surviving any such
consolidation or merger (if other than the Guarantor) or the entity or Person
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all of the obligations of the
Guarantor under the Guarantee pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after giving effect
to such transaction, no Default or Event of Default exists; and (iv)
immediately after giving effect to such transaction, the Company could satisfy
the provisions of clause (iv) of the first paragraph of this covenant. Any
merger or consolidation of a Guarantor with and into the Company (with the
Company being the surviving entity) or another Guarantor need only comply with
clauses (iv)(A) and (v) of the first paragraph of this covenant.
Transactions with Related Persons.
The Company will not, nor will it permit any of its Restricted Subsidiaries
to, directly or indirectly (i) sell, lease, transfer or otherwise dispose of
any of its property to, (ii) purchase any property from, (iii) make any
Investment in, or (iv) enter into or amend any contract, agreement or
understanding with, or for the benefit of, any of its Related Persons (each a
"Related Person Transaction"), other than Related Person Transactions that are
no less favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's length transaction by the Company or
such Restricted Subsidiary from an unrelated party; provided that the Company
delivers to the Trustee (A) with respect to any Related Person Transaction (or
series of Related Person Transactions which are similar or part of a common
plan) involving aggregate payments in excess of $5.0 million, a resolution of
the Board of Directors set forth in an Officers' Certificate certifying that
such Related Person Transaction complies with the preceding sentence and such
Related Person Transaction was approved by a majority of the disinterested
members of the Board of Directors of the Company and (B) with respect to any
Related Person Transaction (or series of Related Person Transactions which are
similar or part of a common plan) involving aggregate payments in excess of
$10.0 million, an affirmative opinion as to the fairness to the Company or
such Restricted Subsidiary, as the case may be, from a financial point of view
issued by a nationally recognized accounting, appraisal, investment banking or
consulting firm that is, in the judgment of the Board of Directors of the
Company, independent and qualified to render such opinion. The foregoing
restrictions shall not apply to: (i) any transactions between Wholly Owned
Restricted Subsidiaries of the Company, or between the Company and any Wholly
Owned Restricted Subsidiary of the Company, if such transaction is not
otherwise prohibited by the terms of the Indenture; (ii) Restricted Payments
permitted under the covenant described above under the caption "--Restricted
Payments"; (iii) customary directors' fees, indemnification and similar
arrangements, employee salaries, bonuses or employment agreements,
compensation or employee benefit arrangements and incentive arrangements with
any officer, director or employee of the Company or any Restricted Subsidiary
entered into in the ordinary course of business (including customary benefits
thereunder); (iv) transactions undertaken pursuant to the Management Agreement
and the Tax Sharing Agreement; (v) the issue and sale by the Company to its
stockholders of Equity Interests other than Disqualified Stock; (vi) the
incurrence of intercompany Debt permitted pursuant to "--Incurrence of Debt
and Issuance of Preferred Stock" above; (vii) customary indemnification and
similar arrangements with any officer, director or employee of Globe Holdings
relating to the business, operations or ownership of the Company; (viii) the
pledge of Equity Interests of Unrestricted Subsidiaries to support the Debt
thereof; (ix) transactions that are permitted by the provisions of the
Indenture described above under the caption "--Merger, Consolidation and Sale
of Assets;" (x) transactions effected as a part of a Qualified Securitization
Transaction; (xi) transactions with customers, clients, suppliers, joint
venture partners or purchasers or sellers of goods and services, in each case
in the ordinary course of business (including, without limitation, pursuant to
joint venture agreements) and otherwise in compliance with the terms of the
Indenture which are on terms at least as favorable as might reasonably have
been obtained at such time from an unaffiliated party; and (xii) transactions
undertaken pursuant to the Asset Drop Down.
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Payment Restrictions Affecting Restricted Subsidiaries.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i) (A) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1)
on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by, its profits, or (B) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii)
transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (A) Existing Debt, (B) the Senior Credit Facility as in
effect on the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive taken as a whole with respect
to such dividend and other payment restrictions than those contained in the
Senior Credit Facility as in effect on the date of the Indenture (as
determined by the Board of Directors of the Company in its reasonable and good
faith judgment), (C) the Indenture and the Notes, (D) applicable law, (E) any
instrument governing Debt or Capital Stock of a Person acquired by the Company
or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Debt was incurred or such encumbrance
or restriction was established in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, provided that, in the case
of Debt, such Debt was permitted by the terms of the Indenture to be incurred,
(F) customary non-assignment provisions in leases and
other agreements entered into in the ordinary course of business and
consistent with past practices, restricting assignment or restricting
transfers of non-cash assets, (G) Purchase Money Obligations for property
acquired in the ordinary course of business and other Liens permitted by the
Indenture, in each case that impose restrictions of the nature described in
clause (iii) above on the property so acquired (or subject to such Liens), (H)
Debt permitted under clause (x) of the second paragraph under the covenant
described above under the caption "--Incurrence of Debt and Issuance of
Preferred Stock," (I) Permitted Refinancing Debt, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Debt are not materially more restrictive taken as a whole than those contained
in the agreements governing the Debt being refinanced (as determined by the
Board of Directors of the Company in its reasonable and good faith judgment),
(J) contracts for the sale of assets or Equity Interests to the extent that
any such contract imposes restrictions of the nature described in clause (iii)
above on the property to be sold, (K) any pledge by the Company or a
Restricted Subsidiary of the Equity Interests of an Unrestricted Subsidiary to
support the Debt thereof, (L) secured Debt otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the caption
"--Liens" that limits the right of the debtor to dispose of the assets
securing such Debt, (M) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other
similar agreements entered into in the ordinary course of business, (N)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business, (O) any Debt or
other contractual requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; provided that such restrictions apply
only to such Securitization Entity, (P) other Debt of a Restricted Subsidiary
that is a Guarantor permitted to be incurred subsequent to the date of the
Indenture pursuant to the provisions of the covenants described above under
the caption "--Incurrence of Debt and Issuance of Preferred Stock"; provided
that any such restrictions are ordinary and customary with respect to the type
of Debt or preferred stock being incurred or issued (under the relevant
circumstances), or (Q) any encumbrances or restrictions imposed by any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (A) through (P) above, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of
the Board of Directors, not materially more restrictive with respect to such
dividend and other payment restrictions than those contained in the dividend
or other payment restrictions prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
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Incurrence of Senior Subordinated Indebtedness.
The Indenture provides that (i) the Company will not, directly or
indirectly, incur, create, issue, assume, guarantee or otherwise become liable
for any Debt that is expressly subordinated or junior in right of payment to
any Senior Debt of the Company and senior in any respect in right of payment
to the Notes, and (ii) the Company will not, directly or indirectly, permit
any Guarantor to incur, create, issue, assume, guarantee or otherwise become
liable for any Debt that is expressly subordinated or junior in right of
payment to its Guarantor Senior Debt and senior in any respect in right of
payment to its Guarantee.
Limitation of Guarantees by Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries, directly or
indirectly, by way of the pledge of any intercompany note or otherwise to
assume, guarantee or in any other manner become liable with respect to any
Debt of the Company or any other Restricted Subsidiary (other than any
guarantee by a Foreign Restricted Subsidiary of Debt of another Foreign
Restricted Subsidiary permitted under "--Incurrence of Debt and Issuance of
Preferred Stock" above) unless, in any such case (i) such Restricted
Subsidiary, if it is not a Guarantor, executes and delivers a supplemental
indenture to the Indenture, providing a Guarantee and (ii) (A) if any such
assumption, guarantee or other liability of such Restricted Subsidiary is
provided in respect of Senior Debt or Guarantor Senior Debt, the guarantee or
other instrument provided by such Restricted Subsidiary in respect of such
Senior Debt or Guarantor Senior Debt may be superior to the Guarantee pursuant
to subordination provisions no less favorable in any material respect to the
Holders than those contained in the Indenture and (B) if such assumption,
guarantee or other liability of such Restricted Subsidiary is provided in
respect of Debt that is expressly subordinated to the Notes, the guarantee or
other instrument provided by such Restricted Subsidiary in respect to such
subordinated Debt shall be subordinated to the Guarantee pursuant to
subordination provisions no less favorable in any material respect to the
Holders than those contained in the Indenture.
Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary
of the Notes pursuant to the foregoing paragraph shall provide by its terms
that it shall be automatically and unconditionally released and discharged,
without any further action required on the part of the Trustee or any Holder,
upon: (i) the unconditional release of such Restricted Subsidiary from its
liability in respect of the Debt in connection with which such Guarantee was
executed and delivered pursuant to the preceding paragraph (including any Debt
in respect of the Senior Credit Facility); or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary or the parent
of such Restricted Subsidiary; provided that (A) such sale or disposition of
such Capital Stock or assets is otherwise in compliance with the terms of the
Indenture and (B) such assumption, guarantee or other liability of such
Restricted Subsidiary has been released by the holders of the other Debt so
guaranteed or (iii) such Guarantor becoming an Unrestricted Subsidiary in
accordance with the Indenture.
Asset Sales.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash, Cash Equivalents or properties and assets to be used
in the Company's business or Equity Interests in a Person that becomes a
Restricted Subsidiary and is received at the time of such disposition;
provided that the amount of any Senior Debt or Guarantor Senior Debt (as shown
on the most recent consolidated balance sheet of the Company) of the Company
or any Guarantor that is assumed by the transferee of any such assets pursuant
to a customary novation agreement or other agreement that releases or
indemnifies the Company or such Guarantor from further liability shall be
deemed to be cash for purposes of this provision.
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Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary may apply such Net Proceeds at its
option, (i) to permanently repay, reduce, or secure letters of credit in
respect of, Senior Debt and/or Guarantor Senior Debt (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings),
and/or (ii) to the acquisition of a controlling interest in another business,
the making of a capital expenditure or Permitted Investment or the acquisition
of other assets, in each case, for use in the same or a similar line of
business as the Company or any Restricted Subsidiary was engaged in on the
date of such Asset Sale or reasonable extensions thereof. Pending the final
application of any such Net Proceeds, the Company or such Restricted
Subsidiary may temporarily reduce indebtedness under the Senior Credit
Facility (or any alternative or subsequent revolving credit agreement where
borrowings thereunder constitute Senior Debt and/or Guarantor Senior Debt) or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company will be required to make an offer (an "Asset Sale Offer") to all
Holders of Notes and holders of any other Pari Passu Debt outstanding with
provisions requiring the Company to make an offer to purchase or redeem such
indebtedness with the proceeds from any Asset Sale as follows: (i) the Company
will make an offer to purchase from all holders of the Notes in accordance
with the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes, and the denominator of which is the sum of the
outstanding principal amount of the Notes and such Pari Passu Debt (subject to
proration in the event such amount is less than the aggregate Asset Sale
Offered Price (as defined herein) of all Notes tendered), and (ii) to the
extent required by such Pari Passu Debt to permanently reduce the principal
amount of such Pari Passu Debt, the Company will make an offer to purchase or
otherwise repurchase or redeem Pari Passu Debt (an "Asset Sale Pari Passu
Offer") in an amount (the "Pari Passu Debt Amount") equal to the excess of the
Excess Proceeds over the Note Amount; provided that in no event will the
Company be required to make an Asset Sale Pari Passu Offer in a Pari Passu
Debt Amount exceeding the principal amount of such Pari Passu Debt plus the
amount of any premium required to be paid to repurchase such Pari Passu Debt.
The offer price for the Notes will be payable in cash in an amount equal to
100% of the principal amount of the Notes, plus accrued and unpaid interest,
if any, to the date (the "Asset Sale Offer Date") such Asset Sale Offer is
consummated (the "Asset Sale Offered Price"), in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate Asset
Sale Offered Price of the Notes tendered pursuant to the Asset Sale Offer is
less than the Note Amount relating thereto or the aggregate amount of Pari
Passu Debt that is purchased in an Asset Sale Pari Passu Offer is less than
the Pari Passu Debt Amount, the Company may use any remaining Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and Pari Passu Debt surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to
be purchased on a pro rata basis. Upon the completion of the purchase of all
the Notes tendered pursuant to an Asset Sale Offer and the completion of a
Pari Passu Offer, the amount of Excess Proceeds, if any, shall be reset at
zero.
The Indenture provides that, if the Company becomes obligated to make an
Asset Sale Offer pursuant to the immediately preceding paragraph, the Notes
and the Pari Passu Debt shall be purchased by the Company, at the option of
the holders thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice of the Asset Sale Offer is given to holders, or such later date as
may be necessary for the Company to comply with the requirements under the
Exchange Act.
The Indenture provides that the Company will comply with the applicable
tender offer rules, including Rule 14e-1 under the Exchange Act, and any other
applicable securities laws or regulations in connection with an Asset Sale
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the "Asset Sale" provisions of the Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under such provisions of the Indenture
by virtue thereof.
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Issuance and Sale of Capital Stock of Restricted Subsidiaries.
The Indenture provides that the Company (i) will not, and will not permit
any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Restricted Subsidiary to any
Person (other than to the Company or a Wholly Owned Restricted Subsidiary) and
(ii) will not permit any Restricted Subsidiary to issue any of its Capital
Stock to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary, in each case unless the Net Proceeds from such transfer, sale or
other disposition are applied in accordance with "--Asset Sales."
Conduct of Business.
The Company and its Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or related to the businesses in
which the Company and its Restricted Subsidiaries are engaged as of the Issue
Date (or any reasonable extension or expansion thereof), except to such extent
as would not be material to the Company and its Restricted Subsidiaries taken
as a whole.
Guarantors.
The Indenture provides that so long as any Notes remain outstanding, any
Restricted Domestic Subsidiary shall (i) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Restricted Domestic Subsidiary shall unconditionally guarantee
all of the Company's obligations under the Notes and the Indenture on the
terms set forth in the Indenture and (ii) deliver to the Trustee an opinion of
counsel that such supplemental indenture has been duly authorized, executed
and delivered by such Restricted Domestic Subsidiary and constitutes a legal,
valid, binding and enforceable obligation of such Restricted Domestic
Subsidiary. Thereafter, such Restricted Domestic Subsidiary shall be a
Guarantor for all purposes of the Indenture.
If all the Capital Stock of any Guarantor is sold to a Person (other than
the Company or any of its Restricted Subsidiaries) and the Net Proceeds from
such Asset Sale are used in accordance with the terms of the covenant
described under "--Asset Sales," then such Guarantor will be released and
discharged from all of its obligations under its Guarantee of the Notes and
the Indenture.
Limitation on Sale and Lease-Back Transactions.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any Sale and Lease-Back
Transaction; provided that the Company or any Guarantor may enter into a Sale
and Lease-Back Transaction if: (i) the Company could have (A) incurred Debt in
an amount equal to the Attributable Debt relating to such Sale and Lease-Back
Transaction pursuant to the Consolidated Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"--Incurrence of Debt and Issuance of Preferred Stock" and (B) incurred a Lien
to secure such Debt pursuant to the covenant described above under the caption
"--Liens;" (ii) the gross cash proceeds of such Sale and Lease-Back
Transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors pursuant to a Board Resolution) of the
property that is the subject of such Sale and Lease-Back Transaction; and
(iii) the transfer of assets in such Sale and Lease-Back Transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Asset
Sales."
Rule 144A Information Requirement.
The Company will furnish to the Holders or beneficial holders of the Notes
and prospective purchasers of Notes designated by the Holders, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act for so long as is required for an offer or sale of
the Notes to qualify for an exemption under Rule 144A.
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Reports.
The Company will deliver to the Trustee within 15 days after the filing of
the same with the Commission, copies of the quarterly and annual reports and
of the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the
Trustee and the Holders with such quarterly and annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of
Section 314(a) of the Trust Indenture Act.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Subsidiary" means any Subsidiary of the Company that
is, directly or indirectly, wholly owned by the Company (other than director
qualifying shares) and organized solely for the purpose of and engaged in (i)
purchasing, financing and collecting accounts receivable obligations of
customers of the Company or its Subsidiaries, (ii) the sale or financing or
such accounts receivable or interest therein and (iii) other activities
incident thereto.
"Acquired Debt" means, with respect to any specified Person, (i) Debt of any
other Person existing at the time such other Person is merged with or into or
became a Restricted Subsidiary of such specified Person, including, without
limitation, Debt incurred in connection with, or in contemplation of, such
other Person merging with or into or becoming a Restricted Subsidiary of such
specified Person, and (ii) Debt secured by a Lien encumbering any asset
acquired by such specified Person which, in each case, is not repaid at or
within five days following the date of such acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise.
Notwithstanding the foregoing, no Person (other than the Company or any
Subsidiary of the Company) in whom a Securitization Entity makes an Investment
in connection with a Qualified Securitization Transaction shall be deemed to
be an Affiliate of the Company or any of its Subsidiaries solely by reason of
such Investment.
"Asset Sale" means (i) the sale, lease (other than operating leases entered
into in the ordinary course of business), conveyance or other disposition of
any assets or rights (including, without limitation, by way of a Sale and
Lease-Back Transaction) other than in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "Repurchase at the Option of Holders Upon Change of
Control" and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by the Company or any
of its Restricted Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries (to the extent such Equity Interests are held by the
Company or another Restricted Subsidiary of the Company), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions that (x) have a fair market value in excess of $1.0
million or (y) generate net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following shall not be deemed to constitute
Asset Sales: (i) sales of accounts receivable, equipment and related assets
(including
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contract rights) of the type specified in the definition of "Qualified
Securitization Transaction" to a Securitization Entity for the fair market
value thereof, including cash in an amount at least equal to 75% of the fair
market value thereof as determined in accordance with GAAP; (ii) transfers of
accounts receivable, equipment and related assets (including contract rights)
of the type specified in the definition of "Qualified Securitization
Transaction" (or a fractional undivided interest therein) by a Securitization
Entity in a Qualified Securitization Transaction (for the purposes of this
clause (ii), Purchase Money Notes shall be deemed to be cash); (iii) a
transfer of assets by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (iv)
a disposition of inventory held for sale in the ordinary course of business or
obsolete, worn out or damaged property or equipment in the ordinary course of
business; (v) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary; (vi) a Restricted Payment or
Permitted Investment that is permitted by the covenant described above under
the caption "--Certain Covenants--Restricted Payments"; (vii) the sale or
discount, in each case without recourse, of accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof; (viii) the grant in the ordinary course of business of any
non-exclusive license of patents, trademarks, registrations therefor and other
similar intellectual property and (ix) sales of accounts receivable for cash
at fair market value, and any sale, conveyance or transfer of accounts
receivable in the ordinary course of business to an Accounts Receivable
Subsidiary or to third parties that are not Affiliates of the Company or any
Subsidiary of the Company.
"Asset Sale Offer" shall have the definition set forth under "--Certain
Covenants--Asset Sales."
"Asset Sale Offer Date" shall have the definition set forth under "--Certain
Covenants--Asset Sales."
"Asset Sale Offered Price" shall have the definition set forth under "--
Certain Covenants--Asset Sales."
"Asset Sale Pari Passu Offer" shall have the definition set forth under "--
Certain Covenants--Asset Sales."
"Attributable Debt" in respect of a Sale and Lease-Back Transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Lease-Back Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"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 or a Restricted Subsidiary of the Company, as appropriate, and to
be in full force and effect, and delivered to the Trustee.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any lender party to the Senior
Credit Facility or with
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any domestic commercial bank having capital and surplus in excess of $500.0
million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within one year after the date of acquisition, (vi) marketable direct
obligations issued by any state of the United States or any political
subdivision, or public instrumentality of such state, in each case having
maturities of not more than one year from the date of acquisition and, at the
time of acquisition thereof, having one of the two highest ratings obtainable
from either Moody's Investors Service, Inc. or Standard & Poor's Corporation,
and (vii) money market, mutual or similar funds which invest substantially all
of their assets in securities of the type described in clauses (i) through
(vi) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), or group of related persons, together with any Affiliates
thereof (other than Permitted Holders), (ii) the adoption by the Company of a
plan relating to the liquidation or dissolution of the Company, (iii) the
first day on which a majority of the members of the Board of Directors of the
Company or Globe Holdings (for so long as Globe Holdings beneficially owns a
majority of any class of the Voting Stock of the Company) are not Continuing
Directors, or (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) or group of related persons, together with any
Affiliates thereof (other than Permitted Holders) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act), directly or indirectly, of more than 50% (measured by voting
power rather than number of shares) of the Voting Stock of the Company or
Globe Holdings (for so long as Globe Holdings beneficially owns a majority of
any class of the Voting Stock of the Company).
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income and without regard to the
$1.0 million threshold in the definition thereof), plus (ii) provision for
taxes based on income or profits of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations) to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) the consolidated
net interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (v) depreciation,
amortization (including amortization of goodwill and other intangibles) and
other non-cash expenses (excluding any such non-cash expense to the extent
that it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (vi) other non-
recurring non-cash items increasing such Consolidated Net Income for such
period (which will be added back to Consolidated Cash Flow in any subsequent
period to the extent cash is received in respect of such item in such
subsequent period), in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, "Consolidated Cash Flow"
shall be calculated without giving effect to amortization or depreciation of
any amounts required or permitted by Accounting Principles Board Opinion Nos.
16 (including non-cash write-ups and non-cash charges relating to
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inventory and fixed assets, in each case arising in connection with any
acquisition permitted under the Indenture) and 17 (including non-cash charges
relating to intangibles and goodwill arising in connection with any such
acquisition).
"Consolidated Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for
such period to the Consolidated Fixed Charges of such Person for such period.
In the event that the Company or any of its Restricted Subsidiaries incurs,
assumes, guarantees, repays or redeems any Debt (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Consolidated Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which
the calculation of the Consolidated Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Fixed Charge Coverage Ratio shall
be calculated giving pro forma effect to such incurrence, assumption,
guarantee, repayment or redemption of Debt, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. In addition, for purposes of making
the computation referred to above, (i) acquisitions or Asset Sales that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded,
and (iii) the Consolidated Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Consolidated Fixed
Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date. 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 Debt determined on a fluctuating basis as of the Calculation 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 Debt
in effect on the Calculation Date; (ii) if interest on any Debt actually
incurred on the Calculation Date may be optionally 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
Calculation Date will be deemed to have been in effect during the relevant
four-quarter period reference; and (iii) notwithstanding the foregoing,
interest on Debt determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, 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) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid
or accrued (including, without limitation, amortization of debt issuance costs
(other than those debt issuance costs incurred on the Issue Date in connection
with the Transactions) and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Debt of another Person that is guaranteed by such Person
or one of its Restricted Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such guarantee or Lien is
called upon) and (iv) all dividend payments, whether or not in cash, on any
series of preferred stock of such Person or any of its Restricted Subsidiaries
(other than dividend payments on Equity Interests payable solely in Equity
Interests (other than Disqualified Stock) of the Company) paid or accrued
during such period.
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"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or
its stockholders, (iii) the Net Income (or loss) of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles adopted after the Issue Date shall be excluded, (v) any
restoration to Net Income of any contingency reserve of an extraordinary,
nonrecurring or unusual nature, except to the extent that provision for such
reserve was made out of Consolidated Net Income accrued at any time following
the Issue Date, shall be excluded, (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, (vii) non-cash
compensation charges arising upon the issuance or exercise of employee stock
options or Capital Stock (other than Disqualified Stock) shall be excluded and
(viii) all extraordinary gains and extraordinary losses and any unusual or
non-recurring charges recorded or accrued in connection with the Transactions
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the ordinary shareholders of such
Person and its consolidated Subsidiaries as of such date and (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (A) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, (B) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (C) all unamortized debt discount
and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any member of
the Board of Directors of the Company or Globe Holdings, as the case may be,
who (i) was a member of such Board of Directors on the date of the Indenture,
(ii) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election or (iii) was nominated for
election or elected to such Board of Directors by or with the approval of the
Permitted Holders.
"Credit Facilities" means, with respect to the Company or any Subsidiary,
one or more debt facilities (including, without limitation, the Senior Credit
Facility) or commercial paper facilities with banks or other lenders providing
for revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables), bankers
acceptance or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to
time. Debt under Credit Facilities outstanding on the date on which Notes are
first issued and authenticated under the Indenture shall be deemed to have
been incurred on such date in reliance on the exception provided by clause (i)
of the definition of Permitted Debt.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
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"Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, as well as all Debt of
others secured by a Lien on any asset of such Person (whether or not such Debt
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any Debt of any other Person (but excluding, with
respect to Debt of a Securitization Entity, any Standard Securitization
Undertakings that might be deemed to constitute guarantees). The amount of any
Debt outstanding as of any date shall be (i) the accrued or accreted value
thereof, in the case of any Debt that does not require current payments of
interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other Debt. For
purposes of calculating the amount of Debt of a Securitization Entity
outstanding as of any date, the face or notional amount of any interest in
receivables or equipment that is outstanding as of such date shall be deemed
to be Debt but any such interests held by Affiliates of such Securitization
Entity shall be excluded for purposes of such calculation.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Debt under the Senior Credit Facility
and (ii) any other Senior Debt or Guarantor Senior Debt permitted under the
Indenture the principal amount of which is $10.0 million or more and that has
been expressly designated by the Company in such Senior Debt or Guarantor
Senior Debt instrument as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
first anniversary of the Stated Maturity of the Notes; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--
Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a bona fide underwritten sale to the public of
Equity Interests (other than Disqualified Stock) of the Company or of Globe
Holdings (to the extent the net proceeds thereof are contributed to the
Company as common equity) pursuant to a registration statement (other than on
Form S-8 or any other form relating to securities issuable under any benefit
plan of the Company or Globe Holdings, as the case may be) that is declared
effective by the Commission.
"Existing Debt" means up to $500,000 in aggregate principal amount of Debt
of the Company and its Restricted Subsidiaries (other than Debt under the
Senior Credit Facility) in existence on the date of the Indenture, until such
amounts are repaid.
"Foreign Subsidiary" means any Subsidiary not organized or validly existing
under the laws of the United States or any state thereof or the District of
Columbia.
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"Foreign Restricted Subsidiary" means any Foreign Subsidiary that is a
Restricted Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Globe Holdings" means Globe Holdings, Inc., a Massachusetts corporation,
and its successors and assigns.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any Debt.
"Guarantor Senior Debt" means, with respect to any Guarantor, (i) all Debt
of such Guarantor under the Senior Credit Facility and all Hedging Obligations
with respect thereto (including, but not limited to, the principal of,
premium, if any, interest (including any interest accruing subsequent to a
filing of a petition of bankruptcy at the rate provided for in documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, reimbursement obligations under letters of credit issued
under, and fees, expenses, indemnities and other amounts owing in respect of,
the foregoing Debt); (ii) any other Debt permitted to be incurred by such
Guarantor under the terms of the Indenture, unless the instrument under which
such Debt is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Guarantee of such Guarantor and (iii)
all Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Guarantor Senior Debt will not include (v) Debt
represented by Disqualified Stock, (w) any liability for federal, state, local
or other taxes owed or owing by any Guarantor, (x) any Debt of a Guarantor to
any of its Subsidiaries or other Affiliates, (y) any trade payables or (z)
that portion of any Debt that is incurred in violation of the Indenture.
"Guarantor" means each of the Company's Restricted Domestic Subsidiaries
that executes a supplemental indenture in which such Restricted Domestic
Subsidiaries agree to be bound by the terms of the Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under Interest Swap Agreements and Currency Agreements.
"Interest Swap Agreements" means any interest rate swap agreement, interest
rate cap agreement, interest rate floor agreement, interest rate collar
agreement, treasury rate-lock agreement or other similar agreement or
arrangement designed to protect the Company or any Restricted Subsidiary of
the Company from fluctuations in interest rates.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any Interest Swap Agreement with any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations), advances
or capital contributions (excluding commission, travel and similar advances to
officers and employees and extensions of trade credit made in the ordinary
course of business), purchases or other acquisitions for consideration of
Debt, Equity Interests or other securities, together with all items that are
or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Issue Date" means July 31, 1998, the date of original issuance of the
Notes.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Limited Originator Recourse" means a reimbursement obligation of the
Company or a Restricted Subsidiary in connection with a drawing on a letter of
credit, revolving loan commitment, cash collateral account or other such
credit enhancement issue to support Debt of a Securitization Entity under a
facility for the financing of trade receivables and the warehousing of
equipment loans and leases; provided that the available amount of any such
form of credit enhancement at any time shall not exceed 10.0% of the principal
amount of such Debt at such time.
"Management Agreement" means the Management Agreement between the Company
and CHS Management III, L.P., dated as of July 31, 1998, as in effect on the
date of the Indenture or as thereafter amended in a manner that is not adverse
to the Company or the Holders of the Notes.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Lease-Back Transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Debt of such Person or any of its
Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash and Cash Equivalents received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale),
net of (i) the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, (ii)
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), (iii)
any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP, or against any liabilities
associated with the Asset Sale, or the assets subject thereto, and retained by
the Company or any Restricted Subsidiary, and (iv) amounts required to be
applied to the repayment of Debt secured by a Lien on the asset or assets that
were the subject of such Asset Sale, or to the satisfaction of contractual
obligations either existing at the date of the Indenture, or entered into
after the date of the Indenture in connection with the payment of deferred
purchase price of the properties or assets that were the subject of such Asset
Sale.
"Non-Recourse Debt" means Debt (i) as to which neither the Company nor any
of its Restricted Subsidiaries (A) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Debt), (B) is directly or indirectly liable (as guarantor or otherwise), or
(C) constitutes the lender; and (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt (other than the Notes being offered
hereby) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Debt or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
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"Officers' Certificate" means with respect to any Person, a certificate
signed by the Chairman, Vice Chairman, Chief Executive Officer, the President
or any Vice President and the Chief Financial Officer, Controller or the
Treasurer of such Person that shall comply with applicable provisions of the
Indenture.
"Pari Passu Debt" shall mean (i) any Debt of the Company that is pari passu
in right of payment to the Notes and (ii) with respect to any Guarantee of the
Notes, Debt which ranks pari passu in right of payment to such Guarantee.
"Pari Passu Debt Amount" shall have the definition set forth under "--
Certain Covenants--Asset Sales."
"Permitted Holders" means (i) Code, Hennessy & Simmons, Inc., (ii) Code
Hennessy & Simmons LLC, (iii) Code, Hennessy & Simmons III, L.P. and (iv)
their respective affiliates.
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries (or reasonable
extensions or expansions thereof); (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (A) such Person becomes
a Restricted Subsidiary of the Company that is engaged in the same or a
similar line of business as the Company and its Restricted Subsidiaries (or
reasonable extensions or expansions thereof) 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
Restricted Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries (or reasonable
extensions or expansions thereof); (iv) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption "--
Certain Covenants--Asset Sales"; (v) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (vi) Investments made in exchange for accounts receivable
arising in the ordinary course of business which have not been collected for
180 days and which are, in the good faith of the Company, substantially
uncollectible, provided that any such Investments in excess of $500,000 shall
be approved by the Board of Directors (evidenced by a Board Resolution set
forth in an Officers' Certificate delivered to the Trustee), (vii) loans and
advances to employees of the Company and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes not to exceed $1.0
million in the aggregate at any one time outstanding; (viii) Investments in
Permitted Joint Ventures and Investments in suppliers to the Company and its
Restricted Subsidiaries in an aggregate amount when taken together with all
other Investments pursuant to this clause (viii) does not exceed the greater
of $10.0 million or 10% of Total Assets at any one time outstanding; (ix)
Hedging Obligations entered into in the ordinary course of business and
otherwise in compliance with the Indenture, (x) other Investments in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause
(x) that are at the time outstanding, not to exceed $10.0 million, (xi)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers, (xii) guarantees (A) by the
Company of Debt otherwise permitted to be incurred by Restricted Subsidiaries
of the Company under the Indenture or (B) permitted by the "Limitations on
Guarantees by Subsidiaries" covenant, (xiii) any Investment by the Company or
a Wholly Owned Subsidiary of the Company in a Securitization Entity or any
Investment by a Securitization Entity in any other Person in connection with a
Qualified Securitization Transaction; provided that any Investment in a
Securitization Entity is in the form of a Purchase Money Note or an Equity
Interest and (xiv) Investments received by the Company or its Restricted
Subsidiaries as consideration for asset sales, including Asset Sales; provided
that in the case of an Asset Sale, such Asset Sale is effected in compliance
with the "Limitations on Asset Sales" covenant. For purposes of calculating
the aggregate amount of Permitted Investments permitted to be outstanding at
any one time pursuant to clauses (viii) and (x) of the preceding sentence, (i)
to the extent the consideration for any such Investment consists of Equity
Interests (other than Disqualified Stock) of the Company, the value of the
Equity Interests so issued will be ignored in determining the amount of such
Investment and (ii) the aggregate amount
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of such Investments made by the Company and its Restricted Subsidiaries on or
after the date of the Indenture will be decreased (but not below zero) by an
amount equal to the lesser of (A) the cash return of capital to the Company or
a Restricted Subsidiary with respect to such Investment that is sold for cash
or otherwise liquidated or repaid for cash (less the cost of disposition,
including applicable taxes, if any) and (B) the initial amount of such
Investment.
"Permitted Joint Venture" means any Person which is, directly or indirectly
through its Subsidiaries or otherwise, engaged principally in the principal
business of the Company, or a reasonably related business, and the Capital
Stock of which is owned by the Company and one or more Persons other than the
Company or any Affiliate of the Company.
"Permitted Junior Securities" means (i) Equity Interests in Globe Holdings,
for so long as Globe Holdings owns all of the outstanding Capital Stock of the
Company, or, in all other cases, Equity Interests in the Company or (ii) debt
securities of the Company that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to the same extent as, or
to a greater extent than, the Notes are subordinated to Senior Debt pursuant
to the Indenture and which, in the case of clauses (i) and (ii), do not mature
or become subject to a mandatory redemption obligation prior to the maturity
of the Notes and do not cause the Notes to be treated in any case or
proceeding or similar event under any bankruptcy or insolvency law as part of
the same class of claims as the Senior Debt.
"Permitted Liens" means (i) Liens to secure obligations in respect of
workers compensation, unemployment, social security, statutory obligations,
surety or appeal bonds or other obligations of a like nature incurred in the
ordinary course of business, (ii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, (iii) Liens in favor of the Company and any Restricted Subsidiary,
(iv) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations not overdue for a period in excess of 30 days or which
are being contested in good faith by appropriate proceedings promptly
instituted and diligently prosecuted, provided that any reserve or other
appropriate provision as shall be required to conform with GAAP shall have
been made therefor, (v) Liens securing Senior Debt (including the Senior
Credit Facility), (vi) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary, (vii) Liens on property existing at the
time of acquisition thereof by the Company or any Restricted Subsidiary of the
Company, provided that such liens were in existence prior to the contemplation
of such acquisition, (viii) purchase money Liens to finance property or assets
of the Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related Purchase
Money Obligations shall not exceed the cost of such property or assets and
shall not be secured by any property or assets of the Company or any
Restricted Subsidiary of the Company other than the property or assets so
acquired and (B) the Lien securing such Debt shall be created within 90 days
of such acquisition, (ix) Liens existing on the date of the Indenture, (x)
judgment Liens not giving rise to an Event of Default, (xi) easements, rights-
of-way, zoning and similar restrictions and other similar encumbrances or
title defects incurred or imposed, as applicable, in the ordinary course of
business and consistent with industry practices which, in the aggregate, are
not substantial in amount, and which do not in any case materially detract
from the value of the property subject thereto (as such property is used by
the Company or its Subsidiaries) or interfere with the ordinary conduct of
business of the Company or such Subsidiaries; provided, however, that any such
Liens are not incurred in connection with any borrowing of money or commitment
to loan any money to or to extend any credit, (xii) Liens on assets
transferred to a Securitization Entity or on assets of a Securitization
Entity, in either case incurred in connection with a Qualified Securitization
Transaction, (xiii) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (A) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit
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in the ordinary course of business) and (B) do not in the aggregate materially
detract from the value of property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary, (xiv) Liens on assets
of Guarantors to secure Guarantor Senior Debt of such Guarantors that were
permitted by the Indenture to be incurred, (xv) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries, (xvi) any interest or title of a lessor under any Capital Lease
Obligation, (xvii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods,
(xviii) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof, (xix) Liens encumbering
deposits made to secure obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off, (xx) Liens securing
Hedging Obligations, (xxi) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, (xxii) Liens arising from filing Uniform
Commercial Code financing statements regarding operating leases entered into
in the ordinary course of business, (xxiii) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payments of customer
duties in connection with the importation of goods and (xxiv) Liens securing
Debt of Foreign Restricted Subsidiaries incurred in reliance on clause (x) of
the second paragraph of the covenant described above under the caption "--
Incurrence of Debt and Issuance of Preferred Stock."
"Permitted Refinancing Debt" means any Debt of the Company or any of its
Restricted Subsidiaries or any Disqualified Stock issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Debt of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal amount (or accrued value, if
applicable) of such Permitted Refinancing Debt does not exceed the principal
amount of (or accrued value, if applicable), plus accrued interest on, the
Debt so extended, refinanced, renewed, replaced, defeased or refunded (plus
the amount of reasonable fees and expenses incurred in connection therewith);
(ii) such Permitted Refinancing Debt has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Debt being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Debt being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes or any Guarantee, such Permitted
Refinancing Debt has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to the Notes on terms at least as
favorable to the Holders of Notes or the Guarantees, as applicable, as those
contained in the documentation governing the Debt being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Debt is incurred either
by the Company or by the Restricted Subsidiary who is the obligor on the Debt
being extended, refinanced, renewed, replaced, defeased or refunded or is
Disqualified Stock.
"Purchase Money Notes" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment.
"Purchase Money Obligations" of a Person means Debt of such Person incurred
in connection with the purchase, construction or improvement of property,
plant or equipment used in the business of such Person (whether through the
direct purchase of the assets or the Equity Interests of any Person owning
such assets).
"Qualified Securitization Transaction" means any transaction or series of
transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Securitization Entity), or may grant a security interest in, any receivables
or
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equipment loans (whether now existing or arising or acquired in the future) of
the Company or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such
receivables and equipment loans, all contracts and contract rights and all
guarantees or other obligations in respect of such receivables and equipment
loans, proceeds of such receivables and equipment loans and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transaction involving receivables and equipment (collectively,
"transferred assets"); provided that in the case of any such transfer by the
Company or any of its Restricted Subsidiaries, the transferor receives cash or
Purchase Money Notes in an amount which (when aggregated with the cash and
Purchase Money Notes received by the Company and its Restricted Subsidiaries
upon all other such transfers of transferred assets during the ninety days
preceding such transfer) is at least equal to 75.0% of the aggregate face
amount of all receivables so transferred during such day and the ninety
preceding days.
"Related Person" means with respect to any Person (i) any Affiliate of such
Person, (ii) any individual or other Person who directly or indirectly is the
registered or beneficial owner of 5% or more of any class of Capital Stock of
such Person or warrants, rights, options or other rights to acquire more than
5% of any class of Capital Stock of such Person, (iii) any relative of such
individual by blood, marriage or adoption not more remote than first cousin
and (iv) any officer or director of such Person.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt.
"Restricted Domestic Subsidiary" means a Restricted Subsidiary organized and
validly existing under the laws of the United States or any state thereof or
the District of Columbia.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means: (i) any dividend or any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or dividends or distributions payable to the Company or any Wholly
Owned Restricted Subsidiary); (ii) any payment to purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company, any
direct or indirect parent of the Company or any Restricted Subsidiary of the
Company (other than any Equity Interests owned by the Company or any Wholly
Owned Restricted Subsidiary); (iii) any payment to purchase, redeem, defease
or otherwise acquire or retire for value any Subordinated Debt of the Company
or a Restricted Subsidiary, except a payment of interest or principal at
Stated Maturity; and (iv) any Restricted Investment.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted 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 Restricted Subsidiary to
such Person in contemplation of such leasing.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Restricted Subsidiary of the
Company makes an Investment and to which the Company or any Restricted
Subsidiary of the Company transfers receivables or equipment and related
assets) that engages in no activities other than in connection with the
financing of receivables or equipment and that is designated by
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the Board of Directors of the Company (as provided below) as a Securitization
Entity (i) no portion of the Debt or any other Obligations (contingent or
otherwise) of which (A) is guaranteed by the Company or any Restricted
Subsidiary of the Company (other than the Securitization Entity) in any way
other than pursuant to Standard Securitization Undertakings or Limited
Originator Recourse, (B) is recourse to or obligates the Company or any
Restricted Subsidiary of the Company (other than the Securitization Entity) in
any way other than pursuant to Standard Securitization Undertakings or Limited
Originator Recourse or (C) subjects any property or asset of the Company or
any Restricted Subsidiary of the Company (other than the Securitization
Entity), directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings or Limited Originator Recourse, (ii) with which neither the
Company nor any Restricted Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Restricted Subsidiary than those that might
be obtained at the time from Persons that are not Affiliates of the Company,
other than fees payable in the ordinary course of business in connection with
servicing receivables of such entity and (iii) to which neither the Company
nor any Restricted Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results. Any such designation by the Board of
Directors of the Company shall be evidenced by the filing with the Trustee a
Board Resolution of the Company giving effect to such designation and an
Officer's Certificate certifying that such designation complied with the
foregoing conditions.
"Senior Credit Facility" means, the Credit Agreement dated as of July 31,
1998, among the Company, Globe Holdings, the lenders party thereto in their
capacity as such, Bank of America National Trust and Savings Association, as
administrative agent, Merrill Lynch, Pierce, Fenner & Smith, Inc., as
syndication agent, and BancAmerica Robertson Stephens, as arranger, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be 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,
without limitation, increasing the amount of available borrowings thereunder
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, whether by the same or any other agent,
lender or group of lenders, whether contained in one or more agreements.
"Senior Debt" means (i) all Debt of the Company outstanding under the Senior
Credit Facility and all Hedging Obligations with respect thereto (including,
but not limited to, the principal of, premium, if any, interest (including any
interest accruing subsequent to a filing of a petition of bankruptcy at the
rate provided for in documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, reimbursement
obligations under letters of credit issued under, and fees, expenses,
indemnities and other amounts owing in respect of, the foregoing Debt); (ii)
any other Debt permitted to be incurred by the Company under the terms of the
Indenture, unless the instrument under which such Debt is incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include (i) Debt represented by Disqualified Stock, (ii) any liability for
federal, state, local or other taxes owed or owing by the Company, (iii) any
Debt of the Company to any of its Subsidiaries or other Affiliates, (iv) any
trade payables or (v) that portion of any Debt that is incurred in violation
of the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in
effect on the Issue Date.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnitees entered into by the Company or any Subsidiary of the
Company that are reasonably customary in receivables or equipment loan
transactions.
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"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Debt, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing
such Debt, and shall not include any contingent obligations to repay, redeem
or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Subordinated Debt" means any Debt of the Company or any Guarantor which is
by its terms subordinated in right of payment to the Notes or any Guarantee.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (A) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (B) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Tax Sharing Agreement" means the Tax Sharing Agreement between the Company
and Globe Holdings as in effect on the date of the Indenture or as thereafter
amended in a manner that is not adverse to the Company or the Holders of
Notes.
"Total Assets" means, with respect to any date of determination, the total
assets of the Company and its Restricted Subsidiaries shown on the Company's
consolidated balance sheet prepared in accordance with GAAP on the last day of
the fiscal quarter prior to the date of determination.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that as of the time of determination shall be or continue to be
designated an Unrestricted Subsidiary in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of the Company or any Restricted Subsidiary or holds any Lien on
any property of the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (i) the
Company certifies to the Trustee that such designation complies with the
provisions of the covenant described under the caption "--Certain Covenants--
Restricted Payments" and (ii) each Subsidiary to be so designated and each of
its Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to, any indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (i) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio set
forth in the first paragraph of the covenant described under the caption "--
Incurrence of Debt and Issuance of Preferred Stock" and (ii) immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors, managers, trustees or other governing body, as applicable, of such
Person.
"Weighted Average Life to Maturity" means, when applied to any Debt at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (A) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal
including payment at final
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maturity, in respect thereof, by (B) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such Debt.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person that is a Wholly Owned Subsidiary of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person, by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium,
if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Restricted Subsidiaries for 30 days after notice from either the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
to comply with the provisions described under the captions "--Repurchase at
the Option of Holders Upon Change of Control", "--Certain Covenants--Asset
Sales", or "--Certain Covenants--Merger, Consolidation or Sale of Assets";
(iv) failure by the Company or any of its Restricted Subsidiaries for 60 days
after notice from either the Trustee or the Holders of at least 25% in
principal amount of the then-outstanding Notes to comply with any of its other
agreements or covenants in the Indenture or the Notes; (v) any Guarantee of a
Significant Subsidiary ceases to be in full force and effect or any such
Guarantor denies its liability under its Guarantee (other than by reason of a
release of a Guarantee in accordance with the terms of the Indenture); (vi) a
default under any mortgage, indenture, agreement or instrument under which
there may be issued or by which there may be secured or evidenced any Debt for
money borrowed by the Company or any of its Restricted Subsidiaries (other
than a Securitization Entity) (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries (other than a Securitization
Entity)) whether such Debt or guarantee now exists, or is created after the
date of the Indenture, which default (A) is caused by a failure to pay at
final Stated Maturity (giving effect to any applicable grace periods and any
extensions thereof) the principal amount of such Debt (a "Payment Default") or
(B) results in the acceleration of such Debt prior to its final Stated
Maturity and, in the case of either clause (A) or (B), the principal amount of
any such Debt, together with the principal amount of any other such Debt under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $7.5 million or more; (vii) failure by the Company or
any of its Significant Subsidiaries to pay final judgments aggregating in
excess of $7.5 million (to the extent not covered by third party insurance as
to which the insurance company has acknowledged coverage), which judgments are
not paid, discharged or stayed for a period of 60 days; and (viii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable by notice in writing to the Company and
the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice") and the same (i) shall
become immediately due and payable or (ii) if there are any amounts
outstanding under the Senior Credit Facility, shall become due and payable
upon the first to occur of an acceleration under the Senior Credit Facility,
or five business days after receipt by the Company and the Representative
under the Senior Credit Facility of such Acceleration Notice (but only if such
Event of Default is then continuing). In the event of a declaration of
acceleration because an Event of Default set forth in clause (vi) of the
preceding paragraph has occurred and is continuing, such declaration of
acceleration shall be automatically annulled if (i) the missed payments in
respect of the applicable Debt have been paid or if the holders of the Debt
that is subject to acceleration have rescinded their declaration of
acceleration, in each case within 30 days thereof and (ii) all existing Events
of Default, except non-payment of principal or interest which have become due
solely
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because of the acceleration of the Notes, have been cured or waived.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes
will become due and payable without further action or notice. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Notes, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to August 1,
2003, by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the amount payable for
purposes of this paragraph will be 110.0%, expressed as a percentage of the
amount that would otherwise be due but for the provisions of this sentence,
plus accrued interest, if any, to the date of payment.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
All references herein to payments of principal, premium, if any, and
interest on the Notes shall be deemed to include any applicable Additional
Interest that may become payable in respect of the Notes.
MODIFICATION OF THE INDENTURE
Except as provided in the two succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenant described above
under the caption "Certain Covenants-Repurchase at the Option of Holders Upon
Change of Control"), (iii) reduce the rate of or change the time for payment
of interest on any Note, (iv) waive a Default or Event of Default in the
payment of principal, premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration), (v) make any Note payable in money
other than that stated in the Notes, (vi) make any change in the provisions of
the Indenture relating to waivers of past
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Defaults or the rights of Holders of Notes to receive payments of principal of
or premium, if any, or interest on the Notes, (vii) waive a redemption payment
with respect to any Note (other than a payment required by the covenant
described above under the caption "--Change of Control"), (viii) modify or
change any provision of the Indenture or the related definitions, affecting
the subordination or ranking of the Notes or any Guarantee in any manner that
adversely affects the Holders, (ix) release any Guarantor from any of its
obligations under its Guarantee or the Indenture otherwise than in accordance
with the terms of the Indenture or (x) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement, which solicitation documents must be mailed
to all Holders of the Notes a reasonable length of time prior to the
expiration of the solicitation.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance") except for (i) the rights of
Holders of outstanding Notes to receive payments in respect of the principal,
premium, if any, and interest on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal, premium, if any, and interest on the
outstanding Notes at their Stated Maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance,
the Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
GOVERNING LAW
The Indenture, the Notes and the Registration Rights Agreement are governed
by, and construed in accordance with, the laws of the State of New York,
without giving effect to the conflicts of law principles thereof.
CONCERNING THE TRUSTEE
Norwest Bank Minnesota, National Association is the Trustee under the
Indenture. Its address is Sixth & Marquette, Minneapolis, Minnesota 55479-
0069. The Company has also approved the Trustee as the initial Registrar and
Paying Agent under the Indenture.
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The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into a registration rights
agreement (the "Registration Rights Agreement") on July 31, 1998 pursuant to
which the Company agreed, for the benefit of Holders of the Notes, that it
will, at its expense for the benefit of the Holders, (i) within 60 days after
the Issue Date, file the Exchange Offer Registration Statement with the
Commission with respect to the Exchange Offer and (ii) use its best effort to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the Issue Date. Upon the Exchange
Offer Registration Statement being declared effective, the Company and the
Guarantors will offer to all holders of the Notes an opportunity to exchange
their securities for a like principal amount of the New Notes (and the related
Guarantees). The Company and the Guarantors will keep the Exchange Offer open
for acceptance for not less than 20 business days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
Holders. For each Note surrendered to the Company for exchange pursuant to the
Exchange Offer, the Holder of such Note will receive a New Note having a
principal amount at maturity equal to that of the surrendered Note. Interest
on each New Note will accrue (i) from the last interest payment date on which
interest was paid on the Note surrendered in exchange therefor or (ii) if no
interest has been paid on such Note, from the Issue Date.
Under existing interpretations of the Commission contained in several no-
action letters to third parties, the New Notes (and any related Guarantees)
will be freely transferable by holders thereof (other than affiliates of the
Company) after the Exchange Offer without further registration under the
Securities Act; provided, however, that each Holder that wishes to exchange
its Notes for New Notes will be required to represent (i) that any New Notes
to be received by it will be acquired in the ordinary course of its business,
(ii) that at the time of the consummation of the Exchange Offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the New Notes in
violation of the Securities Act, (iii) that it is not an "affiliate" (as
defined in Rule 405 promulgated under the Securities Act) of the Company, (iv)
if such Holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of New Notes and (v) if such Holder is a
broker-dealer (a "Participating Broker-Dealer") that will receive New Notes
for its own account in exchange for Notes that were acquired as a result of
market-making or other trading activities, that it will deliver a prospectus
in connection with any resale of such New Notes. The Commission has taken the
position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the New Notes (other than a resale of an
unsold allotment from the original sale of the Notes) with the prospectus
contained in the Exchange Offer Registration Statement. The Company and any
Guarantors will agree to make available, during the period required by the
Securities Act, a prospectus meeting the requirements of the Securities Act
for use by Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements for use in connection with any resale
of New Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company and any Guarantors
are not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
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consummated within 180 days of the Issue Date, (iii) in certain circumstances,
certain holders of unregistered New Notes so request, or (iv) in the case of
any Holder that participates in the Exchange Offer, such Holder does not
receive New Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Company or any Guarantor
within the meaning of the Securities Act), then in each case, the Company and
any Guarantors will (x) promptly deliver to the Holders and the Trustee
written notice thereof and (y) at their sole expense, (1) as promptly as
practicable, file a shelf registration statement covering resales of the Notes
and the Guarantees (the "Shelf Registration Statement"), (2) use their best
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act and (3) use their best efforts to keep effective the
Shelf Registration Statement until the earlier of two years after the date
such Shelf Registration Statement is declared effective or such time as all of
the applicable Notes have been sold thereunder. The Company will, in the event
that a Shelf Registration Statement is filed, provide to each Holder copies of
the prospectus that is a part of the Shelf Registration Statement, notify each
such Holder when the Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit
unrestricted resales of the Notes. A Holder that sells Old Notes pursuant to
the Shelf Registration Statement will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
Holder (including certain indemnification rights and obligations).
If the Company or any Guarantor fails to comply with the above provision or
if the Exchange Offer Registration Statement or the Shelf Registration
Statement fails to become effective, then, as liquidated damages, additional
interest (the "Additional Interest") shall become payable in respect of the
Notes as follows:
(i) if the Exchange Offer Registration Statement or any Shelf
Registration Statement is not filed with the Commission on or prior to the
applicable Filing Date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of .50% per annum for the first 90 days
immediately following such Filing Date, such Additional Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period; or
(ii) if the Exchange Offer Registration Statement is not declared
effective by the Commission within 150 days following the Issue Date or,
whether or not the Company and the Guarantors have consummated or will
consummate an Exchange Offer, the Company and the Guarantors are required
to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the
90th day following the applicable Filing Date with respect to such Shelf
Registration Statement, then, commencing on the day after either such
required effective date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of .50% per annum for the first 90 days
immediately following such date, such Additional Interest rate increasing
by an additional .25% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged New Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 180th day after the Issue Date, (B) the Exchange Offer
Registration Statement ceases to be effective for at least 30 days (or
longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of the date such Shelf Registration Statement was
declared effective (other than after such time as all Notes have been
disposed of thereunder), then Additional Interest shall accrue on the
principal amount of the Notes at a rate of .50% per annum for the first 90
days commencing on (x) the 181st day after the Issue Date, in the case of
(A) above, (y) the day the Exchange Offer Registration Statement ceases to
be effective in the case of (B) above or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest rate increasing by an additional .25% per annum at
the beginning of each subsequent 90-day period;
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provided, however, that the Additional Interest rate on the Notes as a result
of the provisions of clauses (i), (ii) and (iii) above may not exceed in the
aggregate 2.0% per annum; provided, further, however, that (x) upon the filing
of the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of clause (i) above), (y) upon the effectiveness of the Exchange
Offer Registration or a Shelf Registration Statement (in the case of clause
(ii) above), or (z) upon the exchange of New Notes for all Notes tendered (in
the case of clause (iii) (A) above), upon the effectiveness of the Exchange
Offer Registration Statement which had ceased to remain effective (in the case
of clause (iii) (B) above) or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause (iii)
(C) above), Additional Interest on the Notes as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue.
As used herein, "Filing Date" means (i) in the case of an Exchange Offer
Registration Statement, the 60th day after the Issue Date; or (ii) in the case
of a Shelf Registration Statement (which may be applicable notwithstanding the
consummation of the Exchange Offer), the 60th day after a notice regarding the
obligation to file a Shelf Registration Statement is required to be delivered.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment
dates as the Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the 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 the denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which will be available upon request to the Company.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to the Trustee.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on July 31, 1998 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in
reliance on Rule 144A under the Securities Act. As a condition to the Purchase
Agreement, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on the date of the Initial Offering (the "Issue
Date").
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
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The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the New Notes will
not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange
Offer, all of which rights will terminate when the Exchange Offer is
consummated. The New Notes will evidence the same debt as the Old Notes and
will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Alabama, or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
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INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
February 1, 1999. Interest on the Old Notes accepted for exchange will cease
to accrue upon issuance of the New Notes.
Interest on the New Notes is payable semi-annually on each February 1 and
August 1, commencing on February 1, 1999.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal or submit an Agent's
Message (as defined below) in connection with a book-entry transfer, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, or Agent's
Message, together with the Old Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Old Notes, Letter of Transmittal or Agent's
Message and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Old
Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and
(iii) that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal (or transmitting an Agent's Message
in lieu thereof), each holder will make to the Company the representations set
forth above in the third paragraph under the heading "--Purpose and Effect of
the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
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Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee (or, in the
case of book-entry transfer, an Agent's Message in lieu thereof) and all other
required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in their sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal (or, in the case of book-entry transfer, an Agent's
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Message) or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) representing all tendered Old Notes
in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent upon three New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old 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 with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Registered or Certified Mail: Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
P.O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue
Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Services
By Hand: Facsimile Transmission:
Norwest Bank Minnesota, National (For Eligible Institutions Only)
Association (612) 667-4927
NorthStar East, 12th Floor Confirm by Telephone:
608 Second Avenue South, North Star (612) 667-9764
East
Minneapolis, Minnesota 55479-0113
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a
person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, will be allowed to resell the New Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the New Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires New Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that
receives New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes.
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As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution
of the New Notes, (iii) the holder or any such other person has no arrangement
or understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action letters. As indicated above, each
Participating Broker-Dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
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CERTAIN UNITED STATES
FEDERAL TAX CONSIDERATIONS
The following is a discussion of certain material U.S. Federal income and
estate tax consequences of an exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes. Unless otherwise stated, this
discussion is limited to the tax consequences to those persons who are
original owners of the Notes and who hold such Notes as capital assets
("Holders"). The discussion does not purport to address specific tax
consequences that may be relevant to particular persons (including, for
example, financial institutions, broker-dealers, insurance companies, tax-
exempt organizations, and persons in special situations, such as those who
hold Notes as part of a straddle, hedge, conversion transaction, or other
integrated investment). In addition, this discussion does not address U.S.
Federal alternative minimum tax consequences or any aspect of state, local or
foreign taxation. This discussion is based upon the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury Department regulations promulgated
thereunder (the "Treasury Regulations"), and administrative and judicial
interpretations thereof, all of which are subject to change, possibly with
retroactive effect. The Company will treat the Notes as indebtedness for
Federal income tax purposes, and the following discussion assumes that such
treatment is correct.
For purposes of this discussion, a "U.S. Holder" is a Holder of a Note who
is a United States citizen or resident, a corporation or partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
U.S. Federal income taxation regardless of its source, or a trust if a United
States court exercises primary jurisdiction over its administration and one or
more United States persons have the authority to control all of its
substantial decisions. A "Non-U.S. Holder" is a Holder of a Note who is not a
U.S. Holder.
EXCHANGE OF NOTES
The Company believes that the exchange of Old Notes for New Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for federal income
tax purposes because the New Notes will not be considered to differ materially
in kind or extent from the Old Notes. Rather, the New Notes received by a
holder will be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to
holders exchanging Old Notes for New Notes pursuant to the Exchange Offer.
PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF ACQUIRING, OWNING AND DISPOSING OF THE NOTES, AS WELL AS THE
APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
TAX CONSEQUENCES TO U.S. HOLDERS
Taxation of Interest
Interest paid on the Notes will be includible in the income of a U.S. Holder
in accordance with the U.S. Holder's regular method of tax accounting. A U.S.
Holder may be entitled to treat interest income on the Notes as "investment
income" for purposes of computing certain limitations concerning the
deductibility of investment interest expense.
In the event of a Change of Control, a Holder of a Note will have the right
to require the Company to purchase such Note at a price equal to 101% of the
principal amount thereof. The Treasury Regulations provide that the right of a
Holder of a Note to require redemption of such Note upon the occurrence of a
Change of Control will not affect the yield or maturity date of the Note
unless, based on all the facts and circumstances as of the issue date, it is
more likely than not that a Change of Control giving rise to the redemption
right will occur. The Company believes that the redemption provisions of the
Notes will not affect the computation of the yield to maturity of the Notes
and intends to report in a manner consistent with this belief.
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The Company may redeem the Notes at any time on or after August 1, 2003, and
in certain circumstances, may redeem a portion of the Notes at any time prior
to August 1, 2001. Under the Treasury Regulations, the Company is deemed to
exercise any option to redeem if the exercise of such option would lower the
yield of the debt instrument. The Company believes that it will not be treated
as having exercised an option to redeem under these rules and intends to
report in a manner consistent with this belief.
The Company believes that it is significantly more likely than not that no
Additional Interest will be payable by the Company to Holders of Notes.
Accordingly, the Company intends to take the position (which generally will be
binding upon Holders of Notes) that the possible payment of Additional
Interest will not affect the computation of the yield to maturity of the Notes
and any Additional Interest will be recognized by a Holder of Notes in
accordance with such Holder's method of accounting.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of the Notes, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized
upon the sale, exchange or retirement (less a portion allocable to any accrued
and unpaid interest, which will be taxable as ordinary income) and the U.S.
Holder's adjusted tax basis in the Notes. A U.S. Holder's adjusted tax basis
in the Notes generally will be the U.S. Holder's cost therefor, less any
principal payments received by such Holder.
Gain or loss recognized by a U.S. Holder on the sale, exchange or retirement
of the Notes will be capital gain or loss. The gain or loss will be long-term
capital gain or loss if the Notes have been held by the U.S. Holder for more
than 18 months, and mid-term gain or loss if the Notes have been held by the
U.S. Holder for more than 12 months but not more than 18 months. The
deductibility of capital losses by U.S. Holders is subject to limitation.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Taxation of Interest
A Non-U.S. Holder generally will not be subject to U.S. Federal income or
withholding tax on interest paid on the Notes so long as such interest is not
effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States, and the Non-U.S. Holder (i) does not
actually or constructively own 10% or more of the total combined voting power
of all classes of stock of the Company, (ii) is not a "controlled foreign
corporation" with respect to which the Company is a "related person" within
the meaning of the Code, and (iii) satisfies the requirements of Sections
871(h) or 881(c) of the Code, as set forth below under "Owner Statement
Requirement." If the foregoing conditions are not satisfied, then interest
paid on the Notes will be subject to U.S. withholding tax at a rate of 30%,
unless such rate is reduced or eliminated pursuant to an applicable tax
treaty.
Sale, Exchange or Retirement of the Notes
Any capital gain a Non-U.S. Holder realizes on the sale, exchange,
retirement or other taxable disposition of a Note will be exempt from U.S.
Federal income and withholding tax, provided that (i) the gain is not
effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States, and (ii) in the case of a Non-U.S. Holder
that is an individual, the Non-U.S. Holder is not present in the United States
for 183 days or more during the taxable year.
Effectively Connected Income
If the interest, gain or other income a Non-U.S. Holder recognizes on a Note
is effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States, the Non-U.S. Holder (although exempt from
the withholding tax previously discussed if an appropriate statement is
furnished) generally will be subject to U.S. Federal income tax on the
interest, gain or other income at regular Federal income tax rates. In
addition, if the Non-U.S. Holder is a corporation, it may be subject to a
branch profits tax equal to 30% of its "effectively connected earnings and
profits," as adjusted for certain items, unless it qualifies for a lower rate
under an applicable tax treaty.
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Federal Estate Taxes
A Note held by an individual who at the time of death is not a citizen or
resident of the United States will not be subject to United States Federal
estate tax as a result of such individual's death, provided that the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and that the interest accrued on such Notes was not effectively connected with
a United States trade or business.
Owner Statement Requirement
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution") and that holds a Note on behalf
of such owner files a statement with the Company or its agent to the effect
that the beneficial owner is not a United States person in order to avoid
withholding of United States Federal income tax. Under current regulations,
this requirement will be satisfied if the Company or its agent receives (i) a
statement (an "Owner Statement") from the beneficial owner of a Note in which
such owner certifies, under penalties of perjury, that such owner is not a
United States person and provides such owner's name and address, or (ii) a
statement from the Financial Institution holding the Note on behalf of the
beneficial owner in which the Financial Institution certifies, under penalties
of perjury, that it has received the Owner Statement together with a copy of
the Owner Statement. The beneficial owner must inform the Company or its agent
(or, in the case of a statement described in clause (ii) of the immediately
preceding sentence, the Financial Institution) within 30 days of any change in
information on the Owner Statement. The Internal Revenue Service has amended
the transition period relating to recently issued Treasury Regulations
governing backup withholding and information reporting requirements.
Withholding certificates or statements that are valid on December 31, 1999,
may be treated as valid until the earlier of their expiration or December 31,
2000. Certificates or statements received under the currently effective rules
will fail to be effective after December 31, 2000.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the Holders of Notes and the
Internal Revenue Service the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments. A noncorporate U.S. Holder may be subject to information reporting
and to backup withholding at a rate of 31% with respect to payments of
principal and interest made on a Note, or on proceeds of the disposition of a
Note before maturity, unless such U.S. Holder provides a correct taxpayer
identification number or proof of an applicable exemption, and otherwise
complies with applicable requirements of the information reporting and backup
withholding rules.
In the case of payments of interest to Non-U.S. Holders, current Treasury
Regulations provide that the 31% backup withholding tax and certain
information reporting requirements will not apply to such payments with
respect to which either the requisite certification, as described above, has
been received or an exemption has otherwise been established, provided that
neither the Company nor its payment agent has actual knowledge that the Holder
is a United States person or that the conditions of any other exemption are
not in fact satisfied. Under current Treasury Regulations, these information
reporting and backup withholding requirements will apply, however, to the
gross proceeds paid to a Non-U.S. Holder on the disposition of the Notes by or
through a United States office of a United States or foreign broker, unless
the Non-U.S. Holder otherwise establishes an exemption. Information reporting
requirements, but not backup withholding, will also apply to payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the Holder of the Notes is not a United States person and such broker has no
actual knowledge to the contrary, or the Holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to
payment of the proceeds of a disposition of the Notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
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The Treasury Department has released new Treasury Regulations governing the
backup withholding and information reporting requirements. The new regulations
would not generally alter the treatment of a Non-U.S. Holder who furnishes an
Owner Statement to the payor. The new regulations may change certain
procedures applicable to the foreign office of a United States broker or
foreign brokers with certain types of relationships to the United States. The
new regulations are generally effective for payments made after December 31,
1999. Non-U.S. Holders should consult their own tax advisors with respect to
the impact, if any, of the new final regulations.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Holder's
United States Federal income tax liability, provided that the required
information is furnished to the Internal Revenue Service.
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BOOK-ENTRY PROCEDURES AND TRANSFER
GENERAL
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one or more Global Notes
(each, a "Global Note"). Each Global Note will be deposited on the date of the
closing of the sale of the Notes offered hereby (the "Closing Date") with, or
on behalf of, The Depository Trust Company (the "Depository") and registered
in the name of Cede & Co., as nominee of the Depository (such nominee being
referred to herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depository's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depository's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depository's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository only thorough the Depository's
Participants or the Depository's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depository ownership of the Notes evidenced by the Global Note will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depository (with respect to the interests of the
Depository's Participants), the Depository's Participants and the Depository's
Indirect Participants. Note holders are advised that 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 Notes
evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced
by the Global Note will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depository or for maintaining, supervising or
reviewing any records of the Depository relating to the Notes.
Payments in respect of the principal, premium, if any, and interest on any
Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the
Global Note Holder in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the
policy of the Depository to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depository. Payments by the Depository's Participants and the
Depository's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depository's Participants or the Depository's Indirect
Participants.
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Certificated Securities.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depository is no longer willing or able to act as
a depository and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in the form of Certificated
Securities under the Indenture, then, upon surrender by the Global Note Holder
of its Global Note, Notes in such form will be issued to each person that the
Global Note Holder and the Depository identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depository in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depository for all purposes.
Next Day Settlement and Payment.
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, and interest) be
made by wire transfer of immediately available next day funds to the accounts
specified by the Global Note Holder. With respect to Certificated Securities,
the Company will make all payments of principal, premium, if any, and
interest, if any, by wire transfer of immediately available next day funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address. The
Company expects that secondary trading in the Certificated Securities will
also be settled in immediately available funds.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating Broker-
Dealer for use in connection with any such resale. In addition, until
, 1998 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sales of the New Notes by
Participating Broker-Dealers. New Notes received by Participating Broker-
Dealers for their own account pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the New Notes
that were received by it for its own account pursuant to the Exchange Offer
and any broker or dealer that participates in a distribution of such New Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such
documents in the Letter of Transmittal.
LEGAL MATTERS
The validity of the New Notes offered hereby and certain other legal matters
will be passed upon on behalf of the Company by Kirkland & Ellis, Chicago,
Illinois.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1997 and for each of the three years in the period ended December 31, 1997
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Notes remain outstanding, it will
furnish to the holders of the Notes and file with the Commission, copies of
the financial and other information that would be contained in the annual
reports and quarterly reports that the Company would be required to file with
the Commission if it were subject
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to such requirements of the Exchange Act. The Company will also make such
reports available to prospective purchasers of the Old Notes and the New
Notes, as applicable, and to securities analysts and broker-dealers upon their
request. In addition, the Company has agreed to furnish to holders of the
Notes, and prospective purchasers of the Notes, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as the Company has exchanged the Notes for the
New Notes and which have been registered under the Securities Act or the Shelf
Registration Statement has been declared effective by the Commission.
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GLOBE MANUFACTURING CO.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets at December 31, 1996 and 1997 and Unaudited
June 30, 1998............................................................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1995,
1996 and 1997 and the Unaudited Six Months Ended June 30, 1997 and 1998... F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1995, 1996 and 1997 and the Unaudited Six Months Ended
June 30, 1998............................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997 and the Unaudited Six Months Ended June 30, 1997 and
1998...................................................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Globe Manufacturing Co.
We have audited the accompanying consolidated balance sheets of Globe
Manufacturing Co. as of December 31, 1996 and 1997, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Globe
Manufacturing Co. at December 31, 1996 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Providence, Rhode Island
March 24, 1998
except for Note 12, as to which
the date is August 6, 1998
F-2
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
------------------ JUNE 30,
ASSETS 1996 1997 1998
------ -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $ 3,101 $ 1,947 $ 2,466
Accounts receivable, net...................... 20,517 23,953 29,659
Receivable from joint venture................. -- 213 210
Inventories................................... 11,812 13,764 11,825
Prepaid expenses and other assets............. 445 484 1,207
Deferred income taxes......................... 1,395 2,449 2,449
-------- -------- --------
Total current assets........................ 37,270 42,810 47,816
Property, plant and equipment:
Land and land improvements.................... 942 942 942
Building and building improvements............ 31,575 33,122 33,122
Manufacturing equipment....................... 66,359 79,202 79,265
Furniture and equipment....................... 1,826 2,087 2,087
Autos and trucks.............................. 319 319 319
Construction in progress...................... 3,460 5,959 23,086
-------- -------- --------
104,481 121,631 138,821
Less accumulated depreciation................. (54,359) (63,681) (69,007)
-------- -------- --------
Net property, plant and equipment........... 50,122 57,950 69,814
Deferred income taxes.......................... 1,421 2,822 2,694
Cash surrender value of life insurance, net of
loans......................................... 1,523 927 927
Intangible assets.............................. 214 -- --
Investment in joint venture.................... -- -- --
Notes receivable from officers................. 264 278 286
Other Assets................................... -- -- 10
Deferred financing costs, net of amortization.. 515 346 306
-------- -------- --------
Total assets................................ $ 91,329 $105,133 $121,853
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable.............................. $ 7,177 $ 7,440 $ 8,883
Accrued expenses.............................. 5,183 4,827 5,900
Payable to joint venture...................... 1,481 -- --
Dividend payable.............................. 872 50 --
Note payable.................................. 2,750 2,475 10,000
Taxes payable................................. 2,206 1,028 --
Long-term lease obligations due within one
year......................................... 88 37 31
Long-term debt obligations due within one
year......................................... 13,250 7,500 8,125
-------- -------- --------
Total current liabilities................... 33,007 23,357 32,939
Long-term debt................................. 34,500 46,875 42,500
Long-term lease obligation..................... 27 30 60
Other long-term postretirement liability....... 3,521 3,762 4,205
Minimum pension liability...................... 214 -- --
Commitments and contingencies (Note 7)......... -- -- --
Redeemable cumulative preferred stock, Series
A, redeemable at $8,000; 30,000 shares
authorized, 8,000 issued and outstanding at
December 31, 1996............................. 6,466 -- --
Shareholders' equity...........................
Common stock, Class A, voting, $.01 par
value........................................ 2 2 2
Common stock, Class B, nonvoting, $.01 par
value........................................ 16 16 16
Paid in capital............................... 5,700 10,785 10,785
Retained earnings............................. 41,744 56,468 67,508
-------- -------- --------
47,462 67,271 78,311
Less treasury stock, at cost:
Common, Class A, 99,000 shares................ (4,187) (4,187) (4,187)
Common, Class B, 683,314 shares............... (28,657) (28,657) (28,657)
-------- -------- --------
(32,844) (32,844) (32,844)
Unearned compensation.......................... (1,024) (3,318) (3,318)
-------- -------- --------
Total shareholders' equity.................. 13,594 31,109 42,149
-------- -------- --------
Total liabilities & shareholders' equity.... $ 91,329 $105,133 $121,853
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER SIX MONTHS
31, ENDED JUNE 30,
---------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $128,319 $152,603 $170,941 $84,283 $92,490
Cost of sales.................. 97,182 110,609 115,099 56,450 59,556
-------- -------- -------- ------- -------
Gross margin............... 31,137 41,994 55,842 27,833 32,934
Selling, general and
administrative expenses....... 18,515 21,705 24,381 10,616 12,083
Research and development costs. 2,260 2,533 2,633 1,190 2,040
-------- -------- -------- ------- -------
Operating income........... 10,362 17,756 28,828 16,027 18,811
Other Income/(Expense)
Interest..................... (6,030) (5,285) (3,968) (2,097) (1,788)
Loss in investment in joint
venture..................... (643) -- -- -- --
Other income, net............ 438 875 372 86 655
-------- -------- -------- ------- -------
Income before income taxes
and extraordinary items... 4,127 13,346 25,232 14,016 17,678
Provision for income taxes..... 1,718 4,784 8,383 5,255 6,638
-------- -------- -------- ------- -------
Income before extraordinary
item...................... 2,409 8,562 16,849 8,761 11,040
Loss from write-off of deferred
financing costs, net of
applicable income taxes of
$822 in 1995 and $176 in 1997. 1,294 -- 301 301 --
-------- -------- -------- ------- -------
Net income................. $ 1,115 $ 8,562 $ 16,548 $ 8,460 $11,040
======== ======== ======== ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES
OUTSTANDING TREASURY STOCK
--------------- -----------------
COMMON STOCK COMMON STOCK COMMON STOCK TOTAL
--------------- --------------- PAID-IN RETAINED ----------------- UNEARNED SHAREHOLDERS'
CLASS A CLASS B CLASS A CLASS B CAPITAL EARNINGS CLASS A CLASS B COMPENSATION EQUITY
------- ------- ------- ------- ------- -------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1994................... 100,000 931,404 $ 2 $16 $ 4,965 $33,789 $(4,187) $(28,657) $ (630) $ 5,298
Dividends............. -- -- -- -- -- (850) -- -- -- (850)
Net income............ -- -- -- -- -- 1,115 -- -- -- 1,115
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, December 31,
1995................... 100,000 931,404 2 16 4,965 34,054 (4,187) (28,657) (630) 5,563
Dividends............. -- -- -- -- -- (872) -- -- -- (872)
Unearned compensation
relating to the grant
of stock options...... -- -- -- -- 735 -- -- -- (735) 0
Amortization of
unearned compensation. -- -- -- -- -- -- -- -- 341 341
Net income............ -- -- -- -- -- 8,562 -- -- -- 8,562
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, December 31,
1996................... 100,000 931,404 2 16 5,700 41,744 (4,187) (28,657) (1,024) 13,594
Dividends............. -- -- -- -- -- (290) -- -- -- (290)
Redemption of
Preferred Stock....... -- -- -- -- -- (1,534) -- -- -- (1,534)
Unearned compensation
relating to the grant
of stock options...... -- -- -- -- 5,085 -- -- -- (5,085) 0
Amortization of
unearned compensation. -- -- -- -- -- -- -- -- 2,791 2,791
Net income............ -- -- -- -- -- 16,548 -- -- -- 16,548
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, December 31,
1997................... 100,000 931,404 2 16 10,785 56,468 (4,187) (28,657) (3,318) 31,109
Net income
(unaudited)........... -- -- -- -- -- 11,040 -- -- -- 11,040
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, June 30, 1998
(unaudited)............ 100,000 931,404 $ 2 $16 $10,785 $67,508 $(4,187) $(28,657) $(3,318) $42,149
======= ======= === === ======= ======= ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income.................... $ 1,115 $ 8,562 $16,548 $ 8,460 $11,040
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization............... 10,688 9,335 9,417 4,562 5,366
Amortization of unearned
compensation............... -- 341 2,791 -- --
Extraordinary charge--write-
off of deferred finance
cost....................... 1,801 -- 478 478 --
Provision for losses on
accounts receivable........ 336 1,093 691 185 879
Loss in joint venture....... 643 -- -- -- --
Deferred income tax
provision (benefit)........ (606) (958) (2,455) 128 128
Other post-retirement
benefits charge............ 992 652 515 395 442
Increase (decrease) in cash
from changes in assets and
liabilities:
Accounts receivable....... (1,296) (7,122) (4,127) (4,116) (6,585)
Inventories............... (4,008) 4,132 (1,952) (1,708) 1,939
Prepaid expenses and other
assets................... 381 12 (38) (403) (584)
Refundable income taxes... 1,414 61 -- -- --
Accounts payable.......... (214) 2,459 263 502 1,443
Accrued expenses.......... 840 2,203 (357) 400 1,073
Taxes payable............. 772 1,434 (1,178) (1,719) (1,177)
Other long-term
postretirement liability. (175) (306) (274) -- --
-------- -------- ------- ------- -------
Net cash provided by
operating activities... 12,683 21,898 20,322 7,164 13,964
Investing Activities
Capital expenditures.......... (8,640) (5,806) (17,101) (6,913) (17,127)
Payable to (receivable from)
joint venture................ 1,259 293 (1,694) (345) 3
Note receivable collected from
(issued to) shareholders..... 669 (14) (15) -- (7)
-------- -------- ------- ------- -------
Net cash used in
investing activities... (6,712) (5,527) (18,810) (7,258) (17,131)
Financing Activities
Net change in note payable.... 3,000 (4,750) (275) (1,750) 7,525
Borrowing on long-term debt... 62,000 -- 15,000 15,000 --
Principal payments on long-
term debt.................... (67,500) (11,250) (8,375) (4,625) (3,750)
Principal payments on capital
lease obligation............. (75) (85) (97) (51) (39)
Redemption of preferred stock. -- -- (8,000) (8,000) --
Deferred financing costs...... (754) -- (403) (350) --
Cash surrender value of life
insurance, net............... 16 522 596 257 --
Payment of dividends.......... (850) (850) (1,112) (1,112) (50)
-------- -------- ------- ------- -------
Net cash provided by
(used in) financing
activities............. (4,163) (16,413) (2,666) (631) 3,686
Net decrease in cash and cash
equivalents.................. 1,808 (42) (1,154) (725) 519
Cash and cash equivalents at
beginning of year............ 1,335 3,143 3,101 3,101 1,947
-------- -------- ------- ------- -------
Cash and cash equivalents at
end of period................ $ 3,143 $ 3,101 $ 1,947 $ 2,376 $ 2,466
======== ======== ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Globe
Manufacturing Co. and its wholly-owned subsidiaries, Globe Elastic Co. and
Globe Manufacturing FSC, Ltd. (collectively, the Company). All significant
intercompany accounts have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid, short-term investments with an
original maturity of three months or less to be cash equivalents.
RISKS AND UNCERTAINTIES
Segment Information and Concentration of Credit Risk
The Company operates in one dominant industry segment encompassing the
manufacture and sale of elastomeric fibers. These fibers, which consist of
spandex fibers and latex thread, are sold to customers in the textile and
apparel industries that are geographically diversified throughout the United
States and in various foreign countries. The Company performs credit
evaluations on all new customers and requires collateral in certain
circumstances.
For the years ended December 31, 1995, 1996 and 1997, respectively, sales to
foreign customers totaled 24%, 27% and 28%. Historically, transfers of product
between geographic areas have not been significant. Sales to one customer
represented 11%, 9% and 10% of total sales for the years ended December 31,
1995, 1996 and 1997, respectively. Also for the years ended December 31, 1995,
1996 and 1997, respectively, sales to five customers totaled 32%, 34% and 36%.
At December 31, 1996 and 1997, 48% and 47%, respectively, of total
receivables were from foreign customers. Balances owed from one customer
totaled 9% and 8% of total receivables at December 31, 1996 and 1997,
respectively. Also at December 31, 1996 and 1997, 33% and 39%, respectively,
of total receivables were from five customers of which 21% and 24% represented
receivables from foreign customers.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1996 and 1997 are shown net of an
allowance for doubtful accounts of $1,346 and $1,870, respectively. At
December 31, 1994 and 1995, the Company's allowance for doubtful accounts was
$314 and $416, respectively. Additions to the allowance for doubtful accounts
charged to costs and expenses were $333, $1,085 and $684 during each of the
years in the three-year period ended December 31, 1997. Deductions to the
allowance for doubtful accounts were $231, $155, and $160 during each of the
years in the three-year period ended December 31, 1997.
F-7
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE RECOGNITION
Revenue is recognized when products are shipped to customers.
INVENTORIES
Inventories are valued at lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for latex and certain spandex inventories and
the first-in, first out (FIFO) method for the other inventories. Management
utilizes LIFO for those product lines that have exhibited increasing costs to
better match costs with revenues.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
using an accelerated method over estimated useful lives of the assets for
financial statement purposes, which range from 3 to 39.5 years. For the years
ended December 31, 1995, 1996 and 1997, the Company recorded depreciation
expense of $10,390, $9,183 and $9,322, respectively. The Company capitalizes
direct materials, labor and certain overhead costs for self-constructed
assets. In 1996 and 1997, the Company capitalized $0 and $506,007,
respectively, of interest costs incurred in connection with the expansion of
the manufacturing plant in Alabama. Total interest costs in 1996 and 1997
amounted to $5,347 and $4,573, respectively.
INTANGIBLE ASSET
The intangible asset (and minimum pension liability) represents the
adjustment required to record the Company's minimum pension liability for a
defined benefit pension plan covering salaried employees of the Company at
December 31, 1996.
INVESTMENT IN JOINT VENTURE
The Company accounts for its 40% investment in a joint venture using the
equity method of accounting (see Note 10).
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the term of the facility using
the straight line method of amortization.
STOCK BASED COMPENSATION
The Company accounts for its stock based compensation arrangements under the
provisions of APB 25, Accounting for Stock Issued to Employees.
The Company recognizes as compensation expense the excess of the deemed fair
value of the common stock issuable upon exercise of compensatory stock options
over the aggregate exercise price of such options. The expense is amortized
over the vesting period of each option.
INCOME TAXES
The liability method is used in accounting for income taxes. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and income tax bases of assets and liabilities and
F-8
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
are measured using the currently enacted tax rates and laws that are in effect
for the period when the differences are expected to reverse.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable, accounts payable, long term
debt, notes payable and other current and long-term liabilities approximate
their respective fair values.
INTEREST RATE SWAP AGREEMENTS
The differential to be paid or received on interest rate swap agreements is
accrued as an interest rate charge and is recognized over the life of the
agreements (see Note 3).
UNAUDITED INTERIM FINANCIAL DATA
The interim financial data relating to the six months ended June 30, 1997
and 1998 are unaudited; however, in the opinion of the Company's management,
the interim data includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. The results for the six months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year or any
other interim period.
RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as incurred.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (Statement 130), which establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. Statement 130 is effective for fiscal years
beginning after December 15, 1997. Disclosure of total comprehensive income is
required in interim period financial statements. Management does not believe
that comprehensive income for prior periods will differ significantly from net
income in those periods.
In June, 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(Statement 131), which is effective for years beginning after December 15,
1997. However, Statement 131 need not be applied to interim financial
statements in the initial year of application. Statement 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. Since Statement 131 is effective for financial statements for
fiscal years beginning after December 15, 1997, the Company will adopt the new
requirements retroactively in 1998. Management has not yet determined the
impact it will have on disclosures of the Company's reported segments.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits (Statement 132), that revises and improves
F-9
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
disclosure requirements of FASB Statements No. 87, Employers' Accounting for
Pensions, and No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions. The Statement is effective for fiscal years beginning after
December 15, 1997. Statement 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits,
eliminates unnecessary disclosures and requires additional information.
Management does not anticipate that the adoption of Statement 132 will have a
material impact on the Company's financial position or the results of its
operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and for Hedging Activities
(Statement 133). Statement 133 is effective for years beginning after June 15,
1999. Statement 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. Management
does not anticipate that the adoption of Statement 133 will have a material
impact on the Company's financial position or the results of its operations.
2. INVENTORIES
At December 31, 1996 and 1997, inventories totaling approximately $5,452 and
$6,465, respectively, were valued using the LIFO method. Had the FIFO method
of inventory valuation been used, inventories and income before taxes would
have increased (decreased) by approximately $786 and $(687) in 1995; $1,149
and $363 in 1996; and, $1,247 and $98 in 1997.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1996 1997
------- -------
<S> <C> <C>
Raw materials........................................... $ 2,233 $ 2,460
Finished goods.......................................... 10,728 12,551
------- -------
12,961 15,011
Less LIFO reserve....................................... (1,149) (1,247)
------- -------
$11,812 $13,764
======= =======
</TABLE>
3. DEBT
On June 9, 1995, the Company refinanced its existing debt by entering into a
new debt agreement with a group of banks consisting of a $62,000 term loan and
a $12,000 working capital facility. As a result of the refinancing, the
unamortized deferred financing costs totaling $1,801, relating to the prior
debt facility, and a fee associated with terminating the prior debt agreement
of $315, were charged to expense as an extraordinary item in 1995.
On April 16, 1997, the Company amended and restated its existing credit
agreement (as amended, the "Credit Agreement"). The Credit Agreement consists
of a new $60,000 term loan, extension of the $12,000 working capital facility
to March 31, 2002, and a reduction in interest rates and other fees charged on
the loans. The Credit Agreement allows for letters of credit to the extent of
the unused portion of the working capital facility up to a maximum of $3,000.
At December 31, 1996 and 1997, respectively, the Company had $2,750
F-10
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
and $2,475 outstanding under the working capital facility and $1,200 and
$1,000 outstanding under letters of credit to secure the Company's workers'
compensation self-insurance program (see Note 11).
In connection with the Credit Agreement, a portion of the additional
proceeds from the term note ($15,000) were used to redeem all outstanding
shares of Series A Cumulative Preferred Stock for $8,000 (see Note 5). As a
result of the amendment, the unamortized deferred financing costs totaling
$477, relating to the original term note, were charged to expense as an
extraordinary item in 1997.
Borrowings under the term loan bear interest at either the bank's prime rate
plus a margin ranging from .25% to 1.00% (.0% to .75% for advances under the
working capital facility) or the applicable Eurodollar rate plus a margin
ranging from 1.25% to 2.00% (1.125% to 1.875% for advances under the working
capital facility), as determined by the borrower. At December 31, 1996 and
1997, the weighted average interest rates on the working capital facility were
9.75% and 8.75%, respectively.
In February 1998, the Credit Agreement was modified so as to provide an
additional $14,000 in term loans beginning on June 30, 1998.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1996 1997
------- -------
<S> <C> <C>
Term note, principal due in variable quarterly installments
through 2003; variable interest rates based on the base rate
(see above) (7.3125%-8.75% at December 31, 1997; 8.3789%-
8.5938% at December 31, 1996)................................. $47,750 $54,375
Less current maturities........................................ 13,250 7,500
------- -------
$34,500 $46,875
======= =======
</TABLE>
The Credit Agreement contains certain covenants that limit, among other
things, capital expenditures, investments, debt, and dividends declared and
distributed. The Credit Agreement also limits net extraordinary losses and
requires the maintenance of a minimum fixed charge coverage, leverage ratio,
and earnings before interest, income taxes, depreciation and amortization as
defined in the Credit Agreement. All of the Company's assets are pledged under
the Credit Agreement.
The Company uses interest-rate swap agreements to effectively convert a
portion of its floating rate debt to a fixed rate basis, thus reducing the
impact of interest-rate changes on future income. At December 31, 1997, the
Company had outstanding interest rate swap agreements with a commercial bank,
having a total notional principal amount of $15 million. These agreements
effectively change the Company's interest rate exposure on $15 million of its
variable rate term notes to a fixed rate of 6.29%. The interest rate swap
agreements in effect at December 31, 1997 matured on March 18, 1998. The
Company is obligated to maintain such agreements during the first two years
that the term note is outstanding. While the Company is exposed to credit loss
for the periodic settlement of amounts due under the agreements in the event
of nonperformance by the counterparty, the Company does not anticipate
nonperformance by this party. The fair value of these agreements representing
the estimated amount that the Company would receive from a third party
assuming the Company's obligations under the interest rate agreements ceased
at December 31, 1997, is approximately $187. The fair value of the agreements
was determined by independent commercial bankers and represents the fair value
based on pricing models or formulas using current assumptions.
F-11
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The term loan matures on a quarterly basis during the following years:
<TABLE>
<S> <C>
December 31
1998........................... $ 7,500
1999........................... 9,375
2000........................... 10,000
2001........................... 11,875
2002........................... 12,500
2003........................... 3,125
-------
$54,375
=======
</TABLE>
Cash paid for interest, net of amounts capitalized amounted to $6,182,
$5,469 and $4,192 in 1995, 1996 and 1997, respectively.
4. LEASE COMMITMENTS
The Company leases certain assets under capital leases. At December 31, 1996
and 1997, leased assets, with a cost of approximately $316 and $366, have been
included in property, plant and equipment. Accumulated amortization was
approximately $256 and $302 at December 31, 1996 and 1997, respectively.
Future minimum lease payments relating to the equipment under the capital
lease are as follows:
<TABLE>
<S> <C>
1998............................................................... $40
1999............................................................... 15
2000............................................................... 9
2001............................................................... 6
2002............................................................... 4
---
Total minimum lease payments....................................... 74
Less amount representing interest.................................. 7
---
Present value of net minimum lease payments........................ 67
Lease payments due within one year................................. 37
---
Lease obligations due after one year............................... $30
===
</TABLE>
5. REDEEMABLE CUMULATIVE PREFERRED STOCK AND WARRANTS
At December 31, 1996, the Company had authorized 30 shares of Series A
Cumulative Preferred Stock with a redemption price of $1,000 per share.
Dividends were payable on December 22 of each year at a rate of 10% per annum,
to the extent that such dividends were paid in cash and 15% per annum, to the
extent that dividends were paid in additional shares of Series A Cumulative
Preferred Stock. In 1997, the Company redeemed all outstanding shares of
Series A Cumulative Preferred Stock at a price of $1,000 per share, plus
unpaid dividends at the time of redemption. In connection with the redemption,
the Company terminated any future vesting associated with its agreement to
issue warrants to purchase shares of Class B Common Stock at a price of $.01
per share. At December 31, 1996 and 1997, the Company had 59 and 50 of such
warrants issued and outstanding.
During the years ended December 31, 1995, 1996 and 1997, the Company paid
cash dividends on the preferred stock of $800, $822 and $240, respectively.
The preferred stock required redemption on the earlier of December 21, 1999 or
consummation of certain transactions.
F-12
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. SHAREHOLDERS' EQUITY
COMMON STOCK
The Company has authorized 2,000 shares of Class A Common Stock and 2,000
shares of Class B Common Stock. Class B Common Stock automatically converts
into Class A Common Stock if the Company sells stock pursuant to a registered
public offering and Class A Common Stock automatically converts into Class B
Common Stock upon certain transfers of Class A Common Stock. The Company paid
cash dividends of $0.05 per share in 1995, 1996 and 1997.
STOCK OPTIONS
The Company has a Management Incentive Plan ("the Plan") which authorizes
the grant of incentive stock options and nonqualified stock options including
performance options based on the financial performance of the Company to
employees. A total of 103 shares has been reserved for issuance under the
Plan.
The exercise price of incentive stock options granted under the Plan may not
be less than 100% of the fair market value of the common stock as of the grant
date, as determined by the Board of Directors. The exercise price of
nonqualified stock options may not be less than $1.00 per share. Options
issued under the Plan generally have a five year vesting period, unless
otherwise determined by the Board of Directors. The term of stock options
granted under the Plan may not exceed ten years.
The following table presents the activity under the Plan for the years ended
December 31, as follows:
<TABLE>
<CAPTION>
1996 1997
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Outstanding at January 1......... 22,500 $30.00 22,500 $30.00
Granted........................ -- -- 22,500 30.00
Canceled....................... -- -- -- --
------ ------ ------ ------
Outstanding at December 31....... 22,500 $30.00 45,000 $30.00
====== ====== ====== ======
Options exercisable at December
31............................ 9,000 $30.00 22,500 $30.00
====== ====== ====== ======
</TABLE>
In connection with the grant of performance options, the Company recorded a
total of $5,820 of unearned compensation ($735 and $5,085 in 1996 and 1997,
respectively) of which $341 and $2,791 was earned and recognized as
compensation expense in 1996 and 1997, respectively. Options that did not vest
in the years 1994 and 1995 were vested in the current year since cumulative
five-year performance measurements were achieved for the option granted in
1993.
The weighted average remaining contractual life of options outstanding at
December 31, 1996 and 1997, is six and eight years, respectively.
FAS 123 DISCLOSURES
The Company has only adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("Statement 123"). If the compensation cost for the option plans
had been determined based on the fair value at the grant date for grants in
1997, consistent with the provisions of Statement 123, the pro forma net
income for 1997, would not have differed materially from reported amounts.
F-13
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The weighted average fair value per share of options granted during 1997 was
$219.44. The fair value of options issued at the date of grant were estimated
using the Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
OPTIONS
GRANTED
1997
-------
<S> <C>
Expected life (years)............ 5.0
Interest rate.................... 5.7%
</TABLE>
STOCK RESERVED
As of December 31, 1997, a total of 1,668,383 shares of Class A Common Stock
and 258,383 shares of Class B Common Stock are reserved for issuance under the
various capital stock conversion and warrant arrangements.
7. COMMITMENTS AND CONTINGENCIES
The Company is a party to an agreement with a utility company, under the
terms of which, the Company is obligated to purchase power generated from a
co-generation power plant through 2006. The Company receives a portion of the
savings generated by the plant and profits on excess supply generated. The co-
generation power plant began operations in January 1991.
From time to time, the Company has been and is involved in various legal and
environmental proceedings, all of which management believes are routine in
nature and incidental to the conduct of its business. The ultimate legal and
financial liability of the Company with respect to such proceedings cannot be
estimated with certainty, but the Company believes, based on its examination
of such matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the Company's results of
operations, or financial condition.
8. PENSION AND OTHER BENEFITS
The Company sponsors three noncontributory defined benefit pension plans
covering substantially all employees. The Plan assets are invested in a group
annuity contract with an insurance company and in a trust that holds a
balanced portfolio of corporate stocks and bonds, U.S. Government bonds and
money market investments. The plan covering salaried employees at the
Massachusetts, North Carolina and Alabama locations provides pension benefits
based on the employee's average monthly compensation during a defined period.
The plans covering hourly employees at the Massachusetts, North Carolina and
Alabama locations provide benefits based on years of service. The Company's
funding policy is to contribute annually the maximum deductible amount
allowable under applicable tax regulations.
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1996 1997
------- ----- -------
<S> <C> <C> <C>
Service cost..................................... $ 258 $ 257 $ 303
Interest cost on projected benefit obligations... 471 427 477
Actual return on plan assets..................... (1,103) (669) (1,102)
Net amortization and deferral.................... 798 337 697
------- ----- -------
Net periodic pension cost........................ $ 424 $ 352 $ 375
======= ===== =======
</TABLE>
F-14
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summarizes the funded status of the Company's pension plans,
measured as of:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------
1996 1997
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACTUARIAL PRESENT VALUE OF ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFIT OBLIGATIONS BENEFITS ASSETS BENEFITS ASSETS
-------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Vested benefit obligations..... $2,010 $3,856 $2,250 $3,631
====== ====== ====== ======
Accumulated benefit
obligations................... $2,071 $3,925 $2,309 $3,736
====== ====== ====== ======
Projected benefit obligations.. $2,071 $4,268 $2,309 $4,282
Less: Plan assets at fair
value, mutual funds........... 2,313 3,770 2,699 3,981
------ ------ ------ ------
Projected benefit obligations
(in excess of) less than plan
assets........................ 242 (498) 390 (301)
Unrecognized actuarial net
losses (gains)................ 123 159 (5) (13)
Prior service cost to be
recognized in future periods.. 14 204 12 179
Unrecognized initial net
(asset) obligation............ (123) 193 (104) 152
Adjustment required to
recognize minimum liability... -- (213) -- --
------ ------ ------ ------
Prepaid (accrued) pension cost
at end of period.............. $ 256 $ (155) $ 293 $ 17
====== ====== ====== ======
</TABLE>
In 1996 and 1997, the salaried and Massachusetts hourly plans had
distribution of $502 and $602, respectively. Inasmuch as the 1996 settlements
exceeded the 1996 service and interest cost components of the net periodic
pension cost, an additional loss of $89 has been recognized in the
accompanying statement of income.
Assumptions used in calculating the pension expense and the accumulated
benefit obligation, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.5% 7.5% 7.5%
Rate of increase in compensation levels.................... 5.5% 5.5% 5.5%
Expected long-term rate of return on assets................ 7.5% 7.5% 7.5%
</TABLE>
The Company has instituted a tax deferred savings plan covering all
employees of the Company under Section 401(k) of the Internal Revenue Code.
Under the Plan, subject to certain limitations, each eligible employee may
contribute up to 10% of gross wages per year to the maximum amount set by law.
The Company matches one third of the first 6% of employee contributions.
Company contributions to the Plan for employees were approximately $345 in
1995; $356 in 1996; and $384 in 1997.
In addition to the Company's defined benefit plans, the Company currently
provides postretirement medical and life insurance benefits (postretirement
benefits) to eligible full-time employees. The Company is recognizing the
initial accumulated benefit obligation over a 20-year period.
F-15
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table provides information on the status of the postretirement
benefit plan as of December 31:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................. $ 1,675 $ 1,505
Fully eligible plan participants..................... 1,077 1,186
Other active plan participants....................... 2,324 2,968
------- -------
Total.............................................. 5,076 5,659
Unrecognized net gain.................................. 1,594 1,055
Unrecognized transition obligation..................... (3,149) (2,952)
------- -------
Accrued postretirement benefit cost................ $ 3,521 $ 3,762
======= =======
</TABLE>
Net periodic postretirement benefit cost consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- ----
<S> <C> <C> <C>
Service cost--benefits attributed to service during
the period......................................... $ 442 $284 $273
Interest cost on accumulated postretirement benefit
obligation......................................... 550 347 366
Amortization of unrecognized net (gain) or loss..... (379) (175) (192)
Amortization of unrecognized transition obligation.. 379 196 197
----- ----- ----
Net periodic postretirement benefit cost.......... $ 992 $ 652 $644
===== ===== ====
</TABLE>
At December 31, 1995, 1996 and 1997, respectively, 951, 908 and 833 active
employees and 176, 185 and 181 retired employees are covered by the Plan.
The Company's policy is to fund postretirement benefits as claims are paid.
The accumulated postretirement benefit obligation was determined using a
discount rate of 7% in 1996 and 7.5% in 1997 and a health care cost trend rate
of 9.5%, declining each year to 4% in the year 2007 and thereafter. The effect
of a 1% annual increase in these assumed cost trend rates would increase the
accumulated postretirement benefit obligation by approximately $481 and the
annual net periodic postretirement benefit cost by approximately $74.
F-16
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
as of December 31, are as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Deferred tax liabilities:
Pension................................................. $ 125 $ 126
Depreciation............................................ 235 249
------ ------
Total deferred tax liabilities........................ 360 375
Deferred tax assets:
Other postretirement benefits........................... 1,390 1,519
Joint venture........................................... 428 --
Professional fees, primarily financing fees............. 84 279
Inventories............................................. 231 639
Bad debts............................................... 534 759
Workers' compensation accrued........................... 344 491
Deferred compensation................................... 198 1,330
Vacation accrued........................................ 221 241
Other, net.............................................. 174 388
------ ------
Total deferred tax assets............................. 3,604 5,646
Valuation allowance for deferred tax assets............... (428) --
------ ------
Net deferred tax assets............................... $2,816 $5,271
====== ======
</TABLE>
The following table sets forth selected data with respect to the Company's
provision for income taxes from continuing operations for the years ended:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Current:
Federal....................................... $1,819 $4,683 $ 9,090
State......................................... 505 1,059 1,748
------ ------ -------
2,324 5,742 10,838
Deferred:
Federal....................................... (448) (820) (2,034)
State......................................... (158) (138) (421)
------ ------ -------
(606) (958) (2,455)
------ ------ -------
Total....................................... $1,718 $4,784 $ 8,383
====== ====== =======
</TABLE>
F-17
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The reconciliation of income taxes computed at the U.S. federal statutory
tax rate to income tax expense for continuing operations is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate................ $1,403 34.0 $4,538 34.0 $8,831 35.0
State income tax expense, less
federal tax benefit................. 351 8.5 601 4.5 858 3.4
Foreign sales corporation............ (187) (4.5) (203) (1.5) (775) (3.0)
Change in valuation allowance........ 219 5.3 -- -- (428) (1.7)
Other, net........................... (68) (1.7) (152) (1.1) (103) (0.5)
------ ---- ------ ---- ------ ----
Total.............................. $1,718 41.6 $4,784 35.9 $8,383 33.2
====== ==== ====== ==== ====== ====
</TABLE>
Cash paid for income taxes amounted to $1,150, $4,247 and $11,833 in 1995,
1996 and 1997, respectively.
10. INVESTMENT IN JOINT VENTURE
On November 23, 1990, the Company entered into a joint venture agreement
(Joint Venture) with PT Bakrie Nusantara Corporation ("Bakrie"), an Indonesian
company, to engage in the business of the manufacturer of rubber thread and
its related products. During 1997, the Company took steps to terminate its
Joint Venture relationship. However, the Company continues to acquire and sell
the entire production of the Joint Venture other than production sold in
Indonesia. During the years ended December 31, 1996 and 1997, respectively,
the Company purchased inventory totaling $5,912 and $9,854 from the Joint
Venture.
11. SELF-INSURANCE
The Company has a self-insurance program for its workers' compensation. The
plan, which is administered by an insurance company, contains certain stop
loss clauses that limit the Company's liability in the event of catastrophic
losses ($200 per incident, $580 in the aggregate per year). Claims are accrued
as incurred based on available claim information and management's estimate of
claims incurred but not yet reported.
At December 31, 1996 and 1997, the Company had outstanding letters of credit
of $1,200 and $1,000, respectively, to secure the Company's workers'
compensation self-insurance program.
12. SUBSEQUENT EVENTS
On June 23, 1998, the Company entered into an Agreement and Plan of Merger
(the Agreement) with an affiliate of Code, Hennessy & Simmons III, L.P. The
Agreement provides for the obtaining of additional debt and equity to be used
in a recapitalization transaction whereby Code, Hennessy & Simmons III, L.P.
will obtain a majority interest in the Company and certain continuing
shareholders will retain a minority interest. The recapitalization transaction
will be financed with $50,000 of equity and $295,000 of debt. Prior to the
closing of the merger, substantially all of the assets and liabilities of
Globe Manufacturing Co. will be contributed to its wholly owned subsidiary,
Globe Elastic Co., Inc., which will be renamed Globe Manufacturing Corp.
On July 31, 1998, Globe Manufacturing Corp. issued $150,000 of 10% Senior
Subordinated Notes due 2008 (the "Notes"). The proceeds of these Notes were
used to (i) pay consideration under the Agreement to certain shareholders of
the Company (ii) repay certain indebtedness of the Company and (iii) repay
related fees and expenses of the recapitalization and refinancing.
On August 6, 1998 the Company issued and sold 49,086 units (the "Units"),
each consisting of one 14% Senior Discount Note due 2009 (the "Senior Discount
Notes") and one warrant (a "Warrant") to purchase 1.4155 shares of Class A
Common Stock, $.01 par value, of the Company. The aggregate purchase price of
the Units was $25,000 and the net proceeds to the Company were $24,562 after
deducting underwriting discounts and commissions and other expenses payable by
the Company. The proceeds of these Units were used to repay a $25,000 loan
made by Code, Hennessy & Simmons, III, L.P. to the Company pursuant to the
recapitalization transaction.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 12
Use of Proceeds........................................................... 21
Capitalization............................................................ 22
Selected Consolidated Financial Data...................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 30
Business.................................................................. 35
Management................................................................ 45
Certain Relationships and Related Transactions............................ 48
Security Ownership of Certain Beneficial Owners and Management............ 52
Description of Senior Credit Facility..................................... 53
Description of the New Notes.............................................. 55
Certain United States Federal Tax Considerations.......................... 97
Book-Entry Procedures and Transfer........................................ 101
Plan of Distribution...................................................... 103
Legal Matters............................................................. 103
Experts................................................................... 103
Available Information..................................................... 103
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
GLOBE MANUFACTURING CORP.
$150,000,000
OFFER TO EXCHANGE ITS
10% SENIOR SUBORDINATED NOTES
DUE 2008, SERIES B FOR ANY AND ALL OF ITS OUTSTANDING 10% SENIOR SUBORDINATED
NOTES DUE 2008
--------------------
PROSPECTUS
, 1998
--------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 10-2B-8.50 through 10-2B-8.58 of the Code of Alabama, 1975, give a
corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, penalties, fines and amounts
paid in settlement 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 the best interests of the corporation, when acting in his or
her official capacity with the corporation, or, in all other cases, not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The same Sections also give a corporation power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding 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, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees) 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 the best interests of the
corporation, when acting in his or her official capacity with the corporation
or, in all other cases, not opposed to the best interest of the corporation.
No indemnification may be made, however, in respect of any claim, issue or
matter as to which such person shall have not met the applicable standard of
conduct, shall have been adjudged to be liable to the corporation or, in
connection with any other action, suit or proceeding charging improper
personal benefit to such person, if such person was adjudged liable on the
basis that personal benefit was improperly received by him, unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the relevant circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Also, Section 10-2B-8.52 states that, to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits
or otherwise in defense of any such action, suit or proceeding, or in defense
of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) reasonably incurred by him in connection
therewith, notwithstanding that he has not been successful on any other claim,
issue or matter in any such action, suit or proceeding.
Section 11.1 of the Bylaws of the Company (the "Bylaws") provides that the
Company shall indemnify the officers and members of the board of directors of
the Company and former officers and former members of the board of directors
to the maximum extent permitted by the Alabama Business Corporation Act.
Section 11.2 of the Bylaws provides that the Company shall indemnify any
person who is or was a party or who is threatened to be made a party to any
threatened, pending, or completed claim, action, lawsuit, or proceeding,
whether civil, criminal, administrative or investigative, by reason that he is
or was an officer or director of the Company or that he is or was serving at
the request of the Company as a director, manager, member, partner, officer,
employee, trustee, fiduciary or agent of another corporation, limited
liability company, partnership, joint venture, trust, plan or other
enterprise, against expenses (including attorneys' fees), judgments, costs,
fines and amounts paid in settlement, actually and reasonably incurred by him
in connection with such claim, action, lawsuit 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 Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct unlawful.
Determination of any claim, action, lawsuit, proceeding, or prosecution by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent shall not, in and of itself, create a presumption that the
person did not act in good faith and in a manner in which he
II-1
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful; except that no indemnification
shall be made with respect at any claim, issue, or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the Company unless, and only to the extent
that, a court of equity or the court in which such claim, action, lawsuit, or
proceeding was brought shall determine upon application that, despite the
adjudication of liability, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court of equity or other court shall deem proper.
Section 11.3 of the Bylaws provides that expenses, including, but not
limited to, attorneys' fees, incurred in defending a civil or criminal claim,
action, lawsuit, or proceeding may be paid by the corporation in advance of
the final disposition of such claim, action, lawsuit or proceeding upon
receipt of an undertaking by or on behalf of the officer or director to repay
such amount if such advance is made in accordance with Section 10-2B-8.53 of
the Alabama Business Corporation Act, as in effect from time to time.
Section 11.4 of the Bylaws provides that the indemnification provided by
these Bylaws shall not be exclusive of any other rights to which those
indemnified may be otherwise entitled under any statute, rule of law,
provision of certificate or articles of incorporation or bylaws, agreement,
vote of shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity, while
holding such office, and shall continue as to a person who has ceased to be an
officer or director and shall inure to the benefit of his personal
representatives, legatees, distributees, heirs, next-of-kin, successors, and
assigns. If such other provisions provide broader rights of indemnification
than these Bylaws, such other provisions shall control and take precedence.
Section 11.5 of the Bylaws further provides that the Company shall have the
power to purchase and maintain insurance on behalf of any person who is or was
an officer, director, employee or agent of the Company or is or was an
officer, director, employee or agent of the Company or is or was serving at
the request of the corporation as a director, manager, member, partner,
officer, employee, trustee, fiduciary, or agent of another corporation,
limited liability company, partnership, joint venture, trust, plan, or other
enterprise against any liability asserted against him and incurred by him any
such capacity, or arising out of his status as such, whether or not the
Company would otherwise have the power to indemnify him against such liability
under the provisions of these Bylaws.
All of the directors and officers of the Company are covered by insurance
policies maintained and held in effect by the Company against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of June 23, 1998 between Globe
Holdings and Globe Acquisition Company.
Asset Transfer Agreement dated as of July 29, 1998 between the Company
2.2 and Globe Holdings.
2.3 Amendment No. 1 dated as of July 17, 1998 to the Agreement and Plan of
Merger dated as of June 23, 1998 between Globe Holdings and Globe
Acquisition Company.
2.4 Amendment No. 2 dated as of July 30, 1998 to the Agreement and Plan of
Merger dated as of June 23, 1998 between Globe Holdings and Globe
Acquisition Company.
2.5 Purchase Agreement dated as of July 31, 1998 by and among Globe
Acquisition Company, Code, Hennessy & Simmons III, L.P. and certain
other purchasers to purchase shares of Globe Acquisition Company's
stock.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Indenture dated as of July 31, 1998 by and between the Company and
Norwest Bank Minnesota, National Association.
4.2 Purchase Agreement dated as of July 28, 1998 by and among the Company,
BancAmerica Robertson Stephens and Merrill Lynch & Co.
4.3 Registration Rights Agreement dated as of July 31, 1998 by and among
the Company, BancAmerica Robertson Stephens and Merrill Lynch & Co.
4.4 Securityholders Agreement dated as of July 31, 1998 by and among the
shareholders of Globe Holdings.
4.5 Registration Agreement dated as of July 31, 1998 by and among the
shareholders of Globe Holdings.
5.1* Opinion and Consent of Kirkland & Ellis.
10.1 Employment Agreement dated as of December 31, 1997 between Globe
Holdings and Thomas A. Rodgers, III.
10.2 Employment Agreement dated as of December 31, 1997 between Globe
Holdings and Americo Reis.
10.3 Employment Agreement dated as of December 31, 1997 between Globe
Holdings and Lawrence R. Walsh.
10.4 Employment Agreement dated as of December 31, 1997 between Globe
Holdings and Robert L. Bailey.
10.5 Form of Executive Securities Agreement dated as of July 31, 1998 by
and among Globe Holdings, Code Hennessy & Simmons and each of Messrs.
Walsh, Reis and Bailey.
10.6 Form of Non-Competition Agreement dated as of July 31, 1998 between
Globe Holdings and each of Messrs. Rodgers, III, Walsh, Reis and
Bailey. Mr. Bailey's non-competition restriction terminates on
December 31, 2000, compared to July 31, 2001 for the other executives.
10.7 Management Agreement, dated as of July 31, 1998 between the Company
and CHS Management III, L.P.
10.8 Tax Sharing Agreement dated as of July 31, 1998 between the Company
and Globe Holdings.
10.9 Credit Agreement dated as of July 31, 1998 by and among the Company,
Globe Holdings, various banks, Bank of America National Trust and
Savings Association, BancAmerica Robertson Stephens and Merrill Lynch,
Pierce, Fenner & Smith, Inc.
10.10 Pledge Agreement dated as of July 31, 1998 by the Company and Globe
Holdings in favor of Bank of America Trust and Savings Association.
10.11 Security Agreement dated as of July 31, 1998 by the Company and Globe
Holdings in favor of Bank of America National Trust and Savings
Association.
10.12 Form of Amended and Restated Performance Option Agreement by and
between Globe Holdings and each of Messrs. Walsh, Reis, and Bailey.
10.13 Globe Holdings Management Incentive Plan.
10.14* Consulting Agreement dated as of July 31, 1998 between the Company and
Thomas A. Rodgers, Jr.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
12.1 Statement of Computation of Ratios.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Kirkland & Ellis (included in Exhibit 5-1).
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- --------
*To be filed by amendment
+The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule to such agreement upon the request of the Commission in
accordance with Item 601(b)(2) of Regulation S-K.
(b) FINANCIAL STATEMENT SCHEDULE.
Note: All financial statement schedules have been omitted because the
required information is not present or is not present in amounts sufficient to
require submission of the schedules, or because the information required is
included in the consolidated financial statements and notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY DULY
CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CITY OF FALL RIVER, STATE OF
MASSACHUSETTS, ON THE 28TH DAY OF SEPTEMBER, 1998.
Globe Manufacturing Corp.
/s/ Thomas A. Rodgers, III
By: _________________________________
Thomas A. Rodgers, III
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS THOMAS A. RODGERS, III, LAWRENCE R. WALSH AND
EDWARD M. LHEE, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS
NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL
INTENDS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR
OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.
* * * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 28TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Thomas A. Rodgers, Jr. Chairman
___________________________________________
Thomas A. Rodgers, Jr.
/s/ Thomas A. Rodgers, III President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Thomas A. Rodgers, III
/s/ Lawrence R. Walsh Vice President, Finance and Administration
___________________________________________ (Principal Financial Officer)
Lawrence R. Walsh
/s/ Kevin T. Cardullo Director of Finance and Accounting
___________________________________________ (Principal Accounting Officer)
Kevin T. Cardullo
/s/ Andrew W. Code Director
___________________________________________
Andrew W. Code
/s/ Peter M. Gotsch Director
___________________________________________
Peter M. Gotsch
/s/ Edward M. Lhee Director
___________________________________________
Edward M. Lhee
</TABLE>
II-6
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and between
GLOBE MANUFACTURING CO.
and
GLOBE ACQUISITION COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Articles Page
- -------- ----
<S> <C>
ARTICLE I
THE MERGER.............................................................................. 1
1.01 The Merger..................................................................... 1
1.02 Effective Time................................................................. 2
1.03 Closing........................................................................ 2
1.04 Articles of Organization; By-Laws.............................................. 2
1.05 Directors and Officers of the Surviving Corporation............................ 2
ARTICLE II
CONVERSION OF SHARES.................................................................... 3
2.01 Conversion of Capital Stock.................................................... 3
2.02 Exchange of Certificates....................................................... 5
2.03 Options and Warrants........................................................... 6
2.04 Dissenting Shares.............................................................. 7
2.05 Escrow......................................................................... 7
2.06 Closing Adjustment............................................................. 8
2.07 Stockholders Representatives.................................................. 10
ARTICLE III
REPRESENTATIONS OF THE COMPANY......................................................... 12
3.01 Organization.................................................................. 12
3.02 Capitalization................................................................ 13
3.03 Authorization................................................................. 14
3.04 Noncontravention.............................................................. 14
3.05 Subsidiaries, Investments..................................................... 15
3.06 Financial Statements; Indebtedness............................................ 15
3.07 Absence of Certain Changes.................................................... 16
3.08 Undisclosed Liabilities....................................................... 18
3.09 Tax Matters................................................................... 18
3.10 Tangible Assets............................................................... 19
3.11 Leased and Owned Real Property................................................ 20
3.12 Intellectual Property......................................................... 21
3.13 Contracts..................................................................... 21
3.14 Litigation.................................................................... 23
3.15 Labor Matters................................................................. 23
3.16 Employee Benefits............................................................. 23
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C>
3.17 Environmental Matters......................................................... 25
3.18 Legal Compliance.............................................................. 26
3.19 Permits....................................................................... 26
3.20 Insurance..................................................................... 27
3.21 Brokers' Fees................................................................. 27
3.22 Indebtedness to and from Officers, Directors and Stockholders:
Other Affiliate Transactions.................................................. 27
3.23 Notes and Accounts Receivable................................................. 27
3.24 Powers of Attorney; Guaranties................................................ 27
3.25 Product Warranty and Returns.................................................. 27
3.26 Customer and Supplier Relations............................................... 28
3.27 Teoh Kooi Weng................................................................ 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO............................................. 28
4.01 Organization.................................................................. 28
4.02 Authorization................................................................. 28
4.03 Noncontravention.............................................................. 29
4.04 Broker's Fees................................................................. 29
4.05 Litigation.................................................................... 29
4.06 Financing..................................................................... 30
4.07 Formation of MergerCo; No Prior Activities.................................... 30
ARTICLE V
PRE-CLOSING COVENANTS.................................................................. 30
5.01 Efforts....................................................................... 30
5.02 Hart-Scott-Rodino Act......................................................... 30
5.03 Operation of Business......................................................... 31
5.04 Access........................................................................ 31
5.05 Notification.................................................................. 32
5.06 Exclusivity................................................................... 32
5.07 Bakrie Sale and Release....................................................... 32
5.08 Authorization of Class C Stock................................................ 33
ARTICLE VI
TRANSFER OF ASSETS..................................................................... 33
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C>
6.01 Asset Transfer................................................................ 33
6.02 Covenant of Company........................................................... 33
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF MERGERCO AND
THE COMPANY............................................................................ 34
7.01 Conditions to Obligations of MergerCo......................................... 34
7.02 Conditions to Obligations of the Company...................................... 36
ARTICLE VIII
PRESS RELEASES AND ANNOUNCEMENTS....................................................... 38
ARTICLE IX
TERMINATION............................................................................ 38
9.01 Termination of Agreement...................................................... 38
9.02 Effect of Termination......................................................... 39
ARTICLE X
FURTHER AGREEMENTS..................................................................... 39
10.01 Director and Officer Indemnification.......................................... 39
10.02 Disclosure Generally.......................................................... 39
10.03 Further Assurances............................................................ 40
ARTICLE XI
INDEMNIFICATION........................................................................ 40
11.01 By the Stockholders........................................................... 40
11.02 Method of Asserting Claims.................................................... 41
11.03 Survival...................................................................... 43
11.04 Limitations................................................................... 43
11.05 Dispute Resolution............................................................ 44
11.06 Indemnification for Pre-Closing Taxes......................................... 45
ARTICLE XII
MISCELLANEOUS.......................................................................... 45
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C>
12.01 Third Party Beneficiaries..................................................... 45
12.02 Action to be Taken by Affiliates.............................................. 45
12.03 Entire Agreement.............................................................. 45
12.04 Succession and Assignment..................................................... 46
12.05 Counterparts.................................................................. 46
12.06 Headings...................................................................... 46
12.07 Notices....................................................................... 46
12.08 Governing Law................................................................. 48
12.09 Amendments and Waivers........................................................ 48
12.10 Severability.................................................................. 49
12.11 Expenses...................................................................... 49
12.12 Specific Performance.......................................................... 49
12.13 Submission to Jurisdiction.................................................... 49
12.14 Construction.................................................................. 49
12.15 Acknowledgements by MergerCo.................................................. 50
12.16 Incorporation of Exhibits and Schedules....................................... 50
12.17 Facsimile Signature........................................................... 50
</TABLE>
-iv-
<PAGE>
Schedules and Exhibits
Schedule I Stockholders
Schedule II Outstanding Options and Warrants
Exhibit A Articles of Organization of the Surviving Corporation
Exhibit B Escrow Agreement
Exhibit C Form of Noncompetition and Confidentiality Agreement
for Thomas A. Rodgers, Jr., Thomas A. Rodgers, III,
Americo Reis, Lawrence R. Walsh and Robert L. Bailey
Attachment 5.04 MergerCo's Representatives
Disclosure Schedule
-v-
<PAGE>
Definition Section
---------- -------
Adjustment Escrow Fund Section 2.05(a)
Affiliate Section 3.13(a)(7)
Affiliates Section 3.13(a)(7)
Alabama Facility Section 3.11
Arbitrator Section 11.05(b)
Articles of Merger Section 1.02
Asset Transfer ARTICLE VI
Bank Commitment Letter Section 4.06
Basket Section 11.04
BRI Section 11.01(d)
Bring-Down Certificate Section 7.01(d)
British Subsidiary Section 7.01(l)
Business Day Section 2.06(c)
Cash Merger Consideration Section 2.01(c)
CERCLA Section 3.17(e)
Certificate of Merger Section 1.02
Certificates Section 2.02(a)
Class A Stock Section 2.01
Class B Stock Section 2.01
Class C Merger Consideration Section 2.01(c)
Closing Section 1.03
Closing Balance Sheet Section 2.06(a)
Closing Date Section 1.03
Closing Net Asset Value Section 2.06(a)
Code Section 3.16(a)
-vi-
<PAGE>
Company Introduction
Company Common Stock Section 2.01
Company Intellectual Property Section 3.12(a)
Company Material Adverse Effect Section 3.01(a)
Company Plans Section 3.16(a)
Company Stock Option Section 2.03(b)
Company Stock Options Section 2.03(b)
Company Warrant Section 2.03(a)
Company Warrants Section 2.03(a)
Confidentiality Agreement Section 5.04
Construction Section 3.11
Contingent Merger Consideration Section 2.01(c)
Current Balance Sheet Section 3.06(a)
Damages Section 11.01
Delaware Secretary of State Section 1.02
Disclosure Schedule ARTICLE III
Dissenting Shares Section 2.04
DGCL Introduction
Effective Time Section 1.02
Elastic Section 3.01(b)
Employee Benefit Plan Section 3.16(a)
Environmental Law Section 3.17(e)
Environmental Matters Section 3.17(g)
ERISA Section 3.16(a)
ERISA Affiliate Section 3.16(a)
Escrow Agreement Section 2.05(a)
-vii-
<PAGE>
Escrow Fund Section 2.05(a)
Estimated Closing Net Asset Value Section 2.01(c)
Final Closing Net Asset Value Section 2.06(a)
Financial Statements Section 3.06(a)
Financing Section 7.01(h)
Fund Introduction
GAAP Section 3.06(a)
Governmental Entity Section 3.04
Hart-Scott-Rodino Act Section 3.04
Indebtedness Section 3.06(b)
Indemnification Dispute Section 11.05(a)
Indemnification Escrow Fund Section 2.05(a)
Indemnified Persons Section 11.01
Knowing Breach Section 5.05(a)
Leased Real Property Section 3.11
Massachusetts Secretary of State Section 1.02
Material Customers Section 3.26
Material Suppliers Section 3.26
Materials of Environmental Concern Section 3.17(f)
MBCL Introduction
Merger Section 1.01
Merger Consideration Section 2.01(c)
MergerCo Introduction
MergerCo Common Stock Section 2.01
MIP Section 2.03(b)
Most Recent Fiscal Year End Section 3.06(a)
-viii-
<PAGE>
Optional Termination Date Section 9.01(f)
Ordinary Course of Business Section 3.04
Other Subsidiaries Section 3.01(b)
Owned Real Proper Section 3.11
Permits Section 3.19(a)
Person Section 3.05
Prime Rate Section 2.06(c)
Proposed Closing Net Asset Value Section 2.06(a)
RCRA Section 3.17(f)
Recapitalized Common Stock Section 2.01(b)
Release Section 5.07
Second Request Section 5.02
Securities Act Section 3.02(a)
Security Interest Section 3.04
Shares Section 2.01
Stockholders Section 2.05(a)
Stockholders Representatives Section 2.07(a)
Subsidiary Section 3.01(b)
Surviving Corporation Section 1.01
Tax Returns Section 3.09
Taxes Section 3.09
Third Party Claim Section 11.02(b)
Transfer Related Breach ARTICLE VI
-ix-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 23, 1998, by and between
Globe Manufacturing Co., a Massachusetts corporation (the "Company"), and Globe
Acquisition Company, a Delaware corporation ("MergerCo") formed by Code Hennessy
& Simmons III, L.P. ("Fund").
WHEREAS, the Board of Directors of MergerCo has approved, and deems it
advisable and in the best interests of the stockholders of MergerCo to
participate in the recapitalization of the Company, upon the terms and subject
to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company and the members of the Board
of Directors of the Company who are not employees of the Company have approved,
and deem it advisable and in the best interests of the shareholders of the
Company to consummate, the recapitalization of the Company, upon the terms and
subject to the conditions set forth herein; and
WHEREAS, in furtherance of such recapitalization, the Board of Directors of
MergerCo and the Board of Directors of the Company have each approved this
Agreement and the merger of MergerCo with and into the Company in accordance
with the terms of this Agreement, the Business Corporation Law of The
Commonwealth of Massachusetts (the "MBCL") and the Delaware General Corporation
Law (the "DGCL");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. (a) Upon the terms and subject to the conditions
of this Agreement and in accordance with the applicable provisions of the MBCL,
at the Effective Time (as defined in Section 1.02 hereof), MergerCo shall be
merged (the "Merger") with and into the Company and the separate corporate
existence of MergerCo shall cease. After the Merger, the Company shall continue
as the surviving corporation (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
Commonwealth of Massachusetts. The Merger shall have the effect as provided in
the applicable provisions of the MBCL and the DGCL. Without limiting the
generality of the foregoing, upon the Merger, all the rights, privileges,
immunities, powers and franchises of the Company and MergerCo shall vest in the
Surviving Corporation and all restrictions, obligations, duties, debts and
liabilities of the Company and MergerCo shall be the restrictions, obligations,
duties, debts and liabilities of the Surviving Corporation.
<PAGE>
1.02 Effective Time. On or as promptly as practicable following the
Closing (as defined in Section 1.03), MergerCo and the Company will cause the
appropriate articles of merger (the "Articles of Merger") to be executed and
filed with the Secretary of State of the Commonwealth of Massachusetts (the
"Massachusetts Secretary of State") in such form and executed as provided in
Section 79 of the MBCL and the appropriate certificate of merger (the
"Certificate of Merger") to be executed and filed with the Secretary of State of
the State of Delaware (the "Delaware Secretary of State") in such form and
executed as provided in Section 252(c) of the DGCL. The Merger shall become
effective on the date on which the Articles of Merger and the Certificate of
Merger have been duly filed with the Massachusetts Secretary of State and the
Delaware Secretary of State, respectively, or such time as is agreed upon by the
parties and specified in the Articles of Merger and the Certificate of Merger,
but not later than 30 days after such filings, and such time is hereinafter
referred to as the "Effective Time."
1.03 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., Boston time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VII hereof (the "Closing
Date"), at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, unless another date or place is agreed to by the parties
hereto.
1.04 Articles of Organization; By-Laws. Pursuant to the Merger,
(x) the articles of organization, as amended, of the Company in the form
attached as Exhibit A hereto, shall be the articles of organization of the
Surviving Corporation until thereafter amended as provided by applicable law and
such articles of organization and (y) the By-laws of the Company, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by applicable law, the articles
of organization of the Surviving Corporation and such By-laws.
1.05 Directors and Officers of the Surviving Corporation.
(a) The directors of MergerCo immediately prior to the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's articles of organization and By-
laws.
(b) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
-2-
<PAGE>
2.01 Conversion of Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares of
(i) Class A Common Stock, par value $0.01 per share, of the Company ("Class A
Stock"), (ii) Class B Common Stock, par value $0.01 per share, of the Company
("Class B Stock") (the Class A Stock and the Class B Stock are referred to
herein as the "Shares" or "Company Common Stock"), (iii) Class C Common Stock,
par value $0.01 per share, of the Company ("Class C Stock") that the Company
anticipates authorizing and issuing in exchange for certain shares of Company
Common Stock prior to the Effective Time or (iv) or the Common Stock, par value
$.01 per share, of MergerCo (the "MergerCo Common Stock"):
(a) Each issued and outstanding share of Company Common Stock (other
than (i) Shares to be cancelled in accordance with Section 2.01(c) and (ii)
Dissenting Shares covered by Section 2.04) shall be converted into the right to
receive the Merger Consideration (as defined below), of which the Cash Merger
Consideration (as defined below) shall be payable in cash to the holder thereof,
without interest, upon surrender of the certificate formerly representing such
share of Company Common Stock in the manner provided in and otherwise in
accordance with Section 2.02. Each share of Class C Stock that is issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the Merger Consideration, of which the Class C Merger
Consideration (as defined below) shall be delivered to the holder thereof upon
surrender of the certificate formerly representing such share of Class C Stock
in the manner provided and otherwise in accordance with Section 2.02. All such
shares of Company Common Stock and Class C Stock, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration therefor upon the surrender of such certificate in the
manner provided in and in accordance with Section 2.02.
(b) Each issued and outstanding share of MergerCo Common Stock shall
be converted into and become one fully paid and nonassessable share of common
stock, $0.01 par value per share, of the Surviving Corporation (the
"Recapitalized Common Stock").
(c) All shares of Company Common Stock that are held by the Company as
treasury stock shall be cancelled and retired and shall cease to exist and no
Merger Consideration shall be delivered in exchange therefor.
For purposes of this Agreement "Cash Merger Consideration" shall equal the
amount per share determined as of the Closing Date in accordance with the
following formula:
($330,000,000-$15,000,000-Debt-ECNAVA-SHFEES)
-------------------------------------------
Cash Merger Consideration = OSCS
where:
Debt equals the Indebtedness (as defined in Section 3.06(b) below) of the
Company as of the opening of business on the Closing Date plus all
accrued interest thereon and
-3-
<PAGE>
any prepayment premiums or penalties associated therewith (assuming
such Indebtedness is repaid as of the Closing Date);
ECNAVA equals $100,000,000 minus an estimate of the Final Closing Net Asset
Value (as defined below) as determined by the Company five days prior
to the Closing Date and subject to approval by MergerCo; provided,
however, that if MergerCo and the Company do not agree on the ECNAVA
by the close of business on the date prior to the Closing Date, ECNAVA
shall be equal to $100,000,000 minus the Closing Net Asset Value based
on the balance sheet as of June 30, 1998 as prepared by the Company;
SHFEES equals the sum of all fees and expenses incurred by the Company on
behalf of the Stockholders, including without limitation the amounts
payable to each of Goldman Sachs & Co., Hale and Dorr LLP and Ernst &
Young, LLP, any transaction bonuses paid or to be paid to officers of
the Company and one-half of audit fees payable to Ernst & Young, LLP
for the preparation of the Closing Balance Sheet, in connection with
this Agreement and the transactions contemplated hereby other than
amounts payable in connection with the transfer of assets and
liabilities from the Company to one of its Subsidiaries which shall be
the obligation of the Surviving Corporation; and
OSCS equals the number of shares of Company Common Stock and Class C Stock
issued and outstanding immediately prior to the Closing.
For purposes of this Agreement, "Merger Consideration" shall equal (i) with
respect to the Company Common Stock, the Cash Merger Consideration plus the
Contingent Merger Consideration, and (ii) with respect to the Class C Stock, the
Class C Merger Consideration plus the Contingent Merger Consideration. For
purposes of this Agreement, "Contingent Merger Consideration" shall equal (i)
any amounts when, as and if released from the Escrow Fund (as defined below), or
paid by the Surviving Corporation pursuant to Section 2.06(c) below, to the
Stockholders Representatives for distribution to the Stockholders divided by
(ii) OSCS. For purposes of this Agreement, "Class C Merger Consideration" shall
equal 100 shares of Recapitalized Common Stock and a junior subordinated note in
an aggregate principal amount equal to the product of (i) the Cash Merger
Consideration and (ii) a fraction, the numerator of which is 35 and the
denominator of which is 55 and with terms and conditions identical to the junior
subordinated notes issued immediately prior to the Effective Time by MergerCo to
the Fund (it being understood that the securities constituting the Class C
Merger Consideration will be issued at the same price and in the same proportion
or "strip" as the comparable securities are issued to the Fund). For purposes of
this Agreement, "Estimated Closing Net Asset Value" shall equal the estimate of
the Final Closing Net Asset Value used to determine ECNAVA.
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2.02 Exchange of Certificates.
(a) With respect to any certificate or certificates, which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock or Class C Stock (other than Dissenting Shares and shares
held by the Company) (the "Certificates") and are delivered at the Closing, the
Surviving Corporation will, with respect to Certificates representing shares of
Company Common Stock, pay by check or by wire transfer immediately after the
Effective Time the Cash Merger Consideration per share to the holder thereof
and, with respect to Certificates representing shares of Class C Stock, deliver
the Class C Merger Consideration per share. With respect to any Certificates not
delivered at the Closing, the Surviving Corporation will promptly, and in any
event not later than one business day following the Effective Time, mail (and to
make available for collection by hand) to each holder of record of such
Certificate, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Surviving Corporation and shall be
in such form and have such other provisions as MergerCo and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration (which shall provide
that at the election of the surrendering holder, Certificates may be
surrendered, and payment therefor collected, by hand delivery). Upon surrender
of a Certificate for cancellation to the Surviving Corporation or to such other
agent or agents as may be appointed by the Surviving Corporation, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for each
share of Company Common Stock formerly represented by such Certificate, with the
Cash Merger Consideration or the Class C Merger Consideration (as the case may
be) to be mailed (or made available for collection by hand if so elected by the
surrendering holder) within three business days of receipt thereof, and the
Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer. Until surrendered as contemplated by
this Section 2.02, each Certificate (other than Certificates representing
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration as contemplated by
this Section 2.02.
(b) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Surviving Corporation will
issue in exchange for such lost, stolen or destroyed Certificate the Cash Merger
Consideration or the Class C Merger Consideration (as the case may be)
deliverable in respect thereof as determined in accordance with this Article II,
provided that the Person (as defined below) to whom the Cash Merger
Consideration or the Class C Merger Consideration (as the case may be) is paid
shall, as a condition precedent to the payment thereof, indemnify the Surviving
Corporation in a manner satisfactory to it against any claim that may be made
against the Surviving Corporation with respect to the Certificate claimed to
have been lost, stolen or destroyed.
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(c) After the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no transfers on the stock transfer books of
the Surviving Corporation of shares of Company Common Stock or Class C Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration as provided in
this Article II.
(d) None of MergerCo, the Company, the Surviving Corporation, or any
other person shall be liable to any former holder of shares of Company Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(e) Any payment made pursuant to this Section 2.02 shall be subject
to and made net of applicable withholding taxes.
2.03 Options and Warrants.
(a) The Company shall take all actions necessary or appropriate
to cause all of the warrants to purchase Company Common Stock (individually, a
"Company Warrant" and collectively, the "Company Warrants") to be exercised
prior to the Closing Date by the respective holder of the Company Warrants set
forth on Schedule II attached hereto. Any Company Warrants not so exercised
prior to the Closing will represent the right to receive the Merger
Consideration upon exercise and will be included for the purposes of determining
OSCS.
(b) The Company shall cause all of the options to purchase Company
Common Stock (individually, a "Company Stock Option" and collectively, the
"Company Stock Options") granted to any current employee of the Company under
the Company's Management Incentive Plan not assumed by the Surviving Corporation
with the consent of MergerCo to be exercised prior to the Closing Date by the
respective holder of the Company Stock Options set forth on Schedule II attached
hereto. With the consent of MergerCo and the affected optionees, prior to the
Effective Time, the Company anticipates amending certain of the Company Stock
Options to provide for the issuance of Class C Stock in lieu of Class B Stock.
Any Company Stock Options so amended shall not be exercised prior to the Closing
and, upon exercise thereof, shall represent the right to receive the Merger
Consideration otherwise payable to a holder of Class C Stock immediately prior
to the Effective Time. Shares of Class C Stock issuable upon exercise of
Company Stock Options shall be included for the purposes of determining OSCS.
To the extent any Contingent Merger Consideration is distributed by the
Stockholders Representatives with respect to any such shares after the Effective
Time, such amount shall be delivered by the Surviving Corporation until the
exercise of such Company Stock Option, at which time such amounts shall be
delivered to the person exercising such Company Stock Option.
2.04 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and
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which are held by shareholders who have validly demanded payment of the fair
value for such shareholders' shares as determined by appraisal in accordance
with the MBCL (the "Dissenting Shares"), shall not be converted into or be
exchangeable for the right to receive the Merger Consideration provided in
Section 2.01(a) of this Agreement, unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to appraisal and payment under the MBCL. If such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to receive the
consideration provided for in Section 2.01 of this Agreement, without any
interest thereon.
2.05 Escrow
(a) At the Closing the Surviving Corporation, the Stockholders
Representatives (as defined below) and the Escrow Agent (as defined therein)
shall execute and deliver the Escrow Agreement attached hereto as Exhibit B (the
"Escrow Agreement"). At the Effective Time the Surviving Corporation shall
deposit with the Escrow Agent $15,000,000 (the "Escrow Fund"), of which
$5,000,000 shall be for the purpose of securing the obligations of the holders
of capital stock of the Company or Company Stock Options immediately prior to
the Effective Time (the "Stockholders") set forth in Section 2.06 below with
respect to the post-closing adjustment (the "Adjustment Escrow Fund") and
$10,000,000 of which shall be for the purpose of satisfying indemnification
obligations of the Stockholders under Article XI hereof (the "Indemnification
Escrow Fund"). Amounts in the Adjustment Escrow Fund shall only be available
for the purpose of satisfying the Stockholders' obligations set forth in Section
2.06 below and amounts in the Indemnification Escrow Fund shall only be
available for the purpose of satisfying the Stockholders' indemnification
obligations under Article XI hereof. The Escrow Fund shall be held by the
Escrow Agent under the Escrow Agreement pursuant to the terms thereof. The
Escrow Fund shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party, and shall be held and disbursed solely for the purpose and in accordance
with the terms of the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the
Merger by the Stockholders entitled to vote thereon shall constitute approval of
the Escrow Agreement and of all of the arrangements relating thereto, including
without limitation the establishment of the Escrow Fund, the indemnification
obligations of Article XI hereof and the appointment of the Stockholders
Representatives.
2.06 Closing Adjustment.
(a) Promptly following the Effective Time, but in no event later
than 60 days after the Effective Time, the Stockholders Representatives (as
defined below) shall with the cooperation of the Surviving Corporation prepare
and submit to the Surviving Corporation an audited consolidated balance sheet of
the Company and its subsidiaries as of the close of business on the date prior
to the Closing Date (the "Closing Balance Sheet") and a certificate
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setting forth, in reasonable detail, the Stockholders Representatives'
calculation of the Closing Net Asset Value (as defined below) of the Company and
its Subsidiaries as of the close of business on the date prior to the Closing
Date (the "Proposed Closing Net Asset Value"). In the event the Surviving
Corporation disputes the correctness of the Proposed Closing Net Asset Value,
the Surviving Corporation shall notify the Stockholders Representatives of its
objections within 20 days after receipt of the calculation of the Proposed
Closing Net Asset Value and shall set forth, in writing and reasonable detail,
the reasons for the Surviving Corporation's objections. To the extent the
Surviving Corporation does not object, in writing and in reasonable detail as
required and within the time period contemplated by this Section 2.06(a), the
Surviving Corporation shall be deemed to have accepted the Proposed Closing Net
Asset Value and the matter shall not be considered to be in dispute. If the
Surviving Corporation submits a notice of objection, the Stockholders
Representatives and the Surviving Corporation shall discuss in good faith the
matters in dispute. If the Surviving Corporation and the Stockholders
Representatives are unable to resolve such disputes within 20 days after the
submission of the Surviving Corporation's notice of objection, the Stockholders
Representatives and the Surviving Corporation shall select a nationally known
independent accounting firm (other than Ernst & Young LLP) to resolve the
matters in dispute (in a manner consistent with Section 2.06(b)), and the
determination of such firm in respect of the correctness of each matter
remaining in dispute shall be conclusive and binding on the Stockholders, the
Stockholders Representatives and the Surviving Corporation. If the Stockholders
Representatives and the Surviving Corporation are unable to agree on such an
accounting firm, a "Big Six" firm (other than Ernst & Young LLP) will be
selected by lot. The Closing Net Asset Value of the Company as of the close of
business on the day prior to the Closing Date, as finally determined pursuant to
this Section 2.06(a) (whether by failure of the Surviving Corporation to deliver
notice of objection, by agreement of the Stockholders Representatives and the
Surviving Corporation or by determination of the independent accountants
selected as set forth above) and as adjusted, if applicable, in accordance with
Section 2.06(e) below, is referred to herein as the "Final Closing Net Asset
Value." For purposes hereof "Closing Net Asset Value" shall mean the assets of
the Company on the Closing Balance Sheet less the liabilities of the Company on
the Closing Balance Sheet (other than the Indebtedness (as defined in Section
3.06(b) below) of the Company on the Closing Balance Sheet).
(b) The Proposed Closing Net Asset Value, the Final Closing Net Asset
Value and the Closing Balance Sheet shall be determined in accordance with
generally accepted accounting principles, applied in a manner consistent with
those used in the preparation of the audited financial statements of the Company
and its subsidiaries for the year ended December 31, 1997, as disclosed in the
notes thereto.
(c) If the Final Closing Net Asset Value is greater than the
Estimated Closing Net Asset Value, the excess shall be paid by the Surviving
Corporation to the Stockholders Representatives (for distribution to the
Stockholders in accordance with Schedule I) with simple interest thereon from
the Closing Date to the date of payment at a floating rate per annum equal to
the per annum interest rate announced from time to time by BankBoston, N.A. as
its prime rate in effect ("Prime Rate"). If the Final Closing Net Asset Value is
less than the Estimated Closing Net Asset Value, the difference shall be paid to
the Surviving Corporation by
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the Stockholders with simple interest thereon from the Closing Date to the date
of payment at the Prime Rate; provided that such amount shall, to the extent of
available funds in the Adjustment Escrow Fund, be paid to the Surviving
Corporation by the Escrow Agent from the Adjustment Escrow Fund. Any payment
required under this Section 2.06(c) shall be made in immediately available funds
not later than six Business Days after the determination of the Final Closing
Net Asset Value by wire transfer to a bank account designated in writing by the
party entitled to receive the payment. Not later than three Business Days after
determination of the Final Closing Net Asset Value, the Surviving Corporation
and the Stockholders Representatives shall jointly instruct the Escrow Agent in
writing to make any payment from the Adjustment Escrow Fund required to be made
to the Surviving Corporation pursuant to this Section 2.06(c) and distribute the
balance of the Adjustment Escrow Fund (including interest thereon), if any, to
the Stockholders Representatives for distribution to the Stockholders in
accordance with Schedule I. "Business Day" shall mean any day except a Saturday,
Sunday or other day on which the New York Stock Exchange is authorized by law to
close.
(d) The Stockholders Representatives and the Surviving
Corporation shall make available and shall cause Ernst & Young LLP to make
available, in accordance with reasonable and customary practices and
professional standards, the books, records, documents and work papers underlying
the preparation and review of the financial statements of the Company for the
year ended December 31, 1997 and the calculation of the Proposed Closing Net
Asset Value. The Surviving Corporation shall make available and shall cause its
independent accountants to make available, in accordance with reasonable and
customary practices and professional standards, the books, records, documents
and work papers created or prepared by or for MergerCo in connection with the
review of the Proposed Closing Net Asset Value and the other matters
contemplated by Section 2.06(a).
(e) The fees and expenses, if any, of the accounting firm
selected to resolve any disputes between the Stockholders Representatives and
the Surviving Corporation in accordance with Section 2.06(a) shall be paid by
the Surviving Corporation and one-half of such amount shall be deducted from the
Final Closing Net Asset Value.
2.07 Stockholders Representatives.
(a) In order to efficiently administer or effect the waiver of
any condition to the obligations of the Stockholders to consummate the
transactions contemplated hereby, the preparation of the Proposed Closing Net
Asset Value and Final Closing Net Asset Value, and any amendment to this
Agreement, the Stockholders hereby designate John Bu and Thomas A. Rodgers, III
as their representatives (the "Stockholders Representatives").
(b) The Stockholders hereby authorize the Stockholders
Representatives acting jointly but not singly (i) to take all action necessary
in connection with the waiver of any condition to the obligations of the
Stockholders to consummate the transactions contemplated hereby, (ii) to give
and receive all notices required to be given under the Agreement, and (iii) to
take any and all additional action as is contemplated to be taken by or on
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behalf of the Stockholders by the terms of this Agreement, including, without
limitation, Article XI hereof.
(c) In the event that a Stockholders Representative dies, becomes
unable to perform his responsibilities hereunder or resigns from such position,
Stockholders holding, prior to the Closing, a majority of the Company Shares as
set forth on Schedule I attached hereto shall select another representative to
fill such vacancy and such substituted representative shall be deemed to be a
Stockholders Representative for all purposes of this Agreement.
(d) All decisions and actions by the Stockholders Representatives
hereunder shall be binding upon all of the Stockholders, and no Stockholder
shall have the right to object, dissent, protest or otherwise contest the same.
(e) By their adoption of this Agreement and the approval of the
Merger, the Stockholders agree that:
(i) the Surviving Corporation shall be able to rely
conclusively on the instructions and decisions of the Stockholders
Representatives as to any actions required to be taken by the Stockholders
Representatives hereunder, and no party hereunder shall have any cause of action
against the Surviving Corporation for any action taken by the Surviving
Corporation in reliance upon the instructions or decisions of the Stockholders
Representatives;
(ii) all actions, decisions and instructions of the
Stockholders Representatives shall be conclusive and binding upon all of the
Stockholders and no Stockholder shall have any cause of action against the
Stockholders Representatives for any action taken, decision made or instruction
given by the Stockholders Representatives under this Agreement, except for fraud
or willful breach of this Agreement by the Stockholders Representatives;
(iii) the provisions of this Section 2.07 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Stockholder may have in
connection with the transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the provisions
of this Section 2.07 are inadequate; therefore, the Surviving Corporation and
the Company shall be entitled to temporary and permanent injunctive relief
without the necessity of proving damages if either the Surviving Corporation or
the Company brings an action to enforce the provisions of this Section 2.07; and
(v) the provisions of this Section 2.07 shall be binding upon
the executors, heirs, legal representatives and successors of each Stockholder,
and any references in this Agreement to a Stockholder or the Stockholders shall
mean and include the successors to the Stockholders' rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
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(f) All fees and expenses incurred by the Stockholders
Representatives after the Closing shall be the responsibility of the
Stockholders and the Stockholders Representatives shall have the right to
reimbursement of such fees and expenses from any amounts distributed to the
Stockholders Representatives under this Agreement for distribution to the
Stockholders and shall have the right to defer the distribution of all or a
portion of any such amounts in reasonable anticipation of any fees or expenses
incurred by them in the performance of their duties hereunder.
(g) The Stockholders Representatives shall not be liable for any act
done or omitted hereunder as Stockholders Representatives without bad faith or
gross negligence and any act done or omitted pursuant to the advice of counsel
shall be conclusive evidence of good faith. The Stockholders shall severally
indemnify the Stockholders Representatives and hold them harmless against any
loss, liability or expense incurred without gross negligence or bad faith on the
part of the Stockholders Representatives and arising out of or in connection
with the acceptance or administration of their duties hereunder. Any amounts
payable to the Stockholders Representatives hereunder shall be the
responsibility of the Stockholders and shall not be paid out of the Escrow Funds
unless and until distributed to the Stockholders Representatives for
distribution to the Stockholders.
ARTICLE III
REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to MergerCo that, except as set
forth in the disclosure schedule attached hereto (the "Disclosure Schedule") or
contemplated hereby in connection with the authorization and issuance of Class C
Stock, the statements contained in this Article III are correct and complete as
of the date of this Agreement. The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article III.
3.01 Organization.
(a) The Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. The Company is duly qualified to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
necessary. The Company has all requisite corporate power and authority to carry
on the business in which it is now engaged and to own and use the properties now
owned and used by it. Section 3.01(a) of the Disclosure Schedule lists the
directors and officers of each of the Company and its Subsidiaries. The Company
has delivered to MergerCo correct and complete copies of the charter and bylaws
of each of the Company and its Subsidiaries (each as amended to date). The
minute books (containing the records of meetings of the stockholders, the board
of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of each of the Company and each of
its Subsidiaries are correct and complete. None of the Company or its
Subsidiaries (as defined below) is in default under or in violation of any
provision of its charter or bylaws. For
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purposes of this Agreement, "Company Material Adverse Effect" means any change,
effect or circumstance that individually or in the aggregate with all other such
changes, effects or circumstances (a) is materially adverse to the assets,
business, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole (other than changes that are the result of
economic factors affecting the economy as a whole or changes that are the result
of factors generally affecting the specific markets in which the Company and its
subsidiaries compete) or (b) materially impairs the ability of the Company to
consummate the Merger; provided, however, that a Company Material Adverse Effect
shall not include any adverse change, effect or circumstance to the extent that
it arises out of or results from actions contemplated by the Parties in
connection with this Agreement, or to the extent that it is attributable to the
announcement or performance of this Agreement or the transactions contemplated
by this Agreement.
(b) Subsidiaries. Each of the Subsidiaries of the Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization as set forth on Section 3.01(b) of the
Disclosure Schedule. Each such Subsidiary is duly qualified to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is necessary. Each such Subsidiary has all requisite corporate
power and authority to carry on its business in which it is now engaged and to
own and use the properties now owned and used by it. For purposes of this
Agreement, "Subsidiary" means any corporation, limited liability company,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by the Company or one or more of the other Subsidiaries of the
Company or a combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of the partnership
or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by the Company or one or more Subsidiaries of the
Company or a combination thereof. For purposes hereof, the Company shall be
deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if the Company shall be
allocated, directly or through one or more of its Subsidiaries, a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any general partner of such limited
liability company, partnership, association or other business entity. A
materially adverse change, effect or circumstance with respect to the assets,
business, financial condition, operations, results of operations or future
prospects of any of the Subsidiaries of the Company other than Globe Elastic Co.
Inc. ("Elastic") (collectively, the "Other Subsidiaries"), individually or in
the aggregate, could not cause a Company Material Adverse Effect.
3.02 Capitalization.
(a) The Company. As of the date hereof, the entire authorized
capital stock of the Company consists of (i) 2,000,000 shares of Class A Common
Stock, par value $0.01 per share, of which 100,000 shares are issued and
outstanding and 99,000 are held in treasury, (ii) 2,000,000 shares of Class B
Common Stock, par value $0.01 per share, of which
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931,404 shares are issued and outstanding and 683,314 are held in treasury, and
(iii) 30,000 shares of Series A Cumulative Preferred Stock, par value $0.01 per
share, none of which shares are issued and outstanding and none of which are
held in treasury. All of the issued and outstanding shares of capital stock of
the Company are and as of the Closing will be duly authorized, validly issued,
fully paid, and nonassessable. Schedule I sets forth a true and correct
description of the ownership of all issued and outstanding shares of capital
stock of the Company. Except as set forth on the Disclosure Schedule, there are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company is a party or which are binding upon the
Company providing for the issuance, disposition or acquisition of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to the
Company. There are no agreements, voting trusts, proxies or understandings with
respect to the voting, or registration under the Securities Act of 1933, as
amended (the "Securities Act") of any Company Shares .
(b) Subsidiaries. The authorized, issued and outstanding capital
stock of each of the Company's Subsidiaries is set forth in Section 3.02(b) of
the Disclosure Schedule. All of the issued and outstanding capital stock of
each such Subsidiary is validly issued, fully paid and nonassessable. There are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which any such Subsidiary is a party or which are binding upon
such Subsidiary providing for the issuance, disposition or acquisition of any of
its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to any such Subsidiary. There are
no agreements, voting trusts, proxies or understandings with respect to the
voting, or registration under the Securities Act, of any shares of capital stock
of any such Subsidiary. All of the issued and outstanding shares of capital
stock of each such Subsidiary are owned of record and beneficially by the
Company, free and clear of any mortgage, pledge, Security Interest (as defined
below), encumbrances, charge or other lien, contractual restriction or covenant,
tax, option, warrant, purchase rights, equities, demand, or other claim (whether
arising by contract or by operation of law), other than applicable federal and
state securities law restrictions.
3.03 Authorization. The execution and delivery by the Company of
this Agreement and the agreements provided for herein and the consummation by
the Company of all transactions contemplated hereunder and thereunder by the
Company, have been duly authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by the Company. This Agreement
and all other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby to which the Company is a
party constitute the valid and legally binding obligations of the Company,
enforceable against it in accordance with their respective terms.
3.04 Noncontravention. Subject to compliance with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act"), neither the execution and delivery of
this Agreement by the Company, nor the consummation by the Company and its
Subsidiaries of the transactions contemplated hereby, will (a) conflict with or
violate any provision of the charter or bylaws of the Company or its
Subsidiaries, (b) require on the part of the Company or its Subsidiaries any
filing with, or any
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permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"), (c) conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any material contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other material arrangement to
which the Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries is bound or to which any of their assets is subject, (d) result in
the imposition of any Security Interest upon the Company Shares or any assets of
the Company or its Subsidiaries or (e) violate any constitution, statute, order,
injunction, decree, judgment, ruling, charge, rule, regulation or other
restriction of any government, governmental agency or court applicable to the
Company, its Subsidiaries or any of their respective properties or assets.
For purposes of this Agreement, "Security Interest" means any mortgage,
pledge, security interest, encumbrance, charge, or other lien (whether arising
by contract or by operation of law), other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens arising under workers' compensation, unemployment
insurance, social security, retirement, and similar legislation, and (iii) liens
on goods in transit incurred pursuant to documentary letters of credit, in each
case arising in the ordinary course of business consistent with the past custom
and practice (as determined by reference to, among other things, quantity and
frequency) of the Company and its Subsidiaries, taken as a whole ("Ordinary
Course of Business"). For purposes of this Agreement, actions taken by the
Company or its Subsidiaries, including the execution of contracts, the borrowing
of money, or the making of capital expenditures or commitments therefor, in
connection with the Company's ongoing 56-cell expansion of its plant in
Tuscaloosa, Alabama shall be deemed to be in the Ordinary Course of Business.
3.05 Subsidiaries, Investments. Except as set forth on the
Disclosure Schedule, neither the Company nor any of its Subsidiaries controls,
directly or indirectly, any corporation, limited liability company, partnership,
trust or other business association, or owns or holds the rights to acquire any
shares of stock or any other security or interest in any other Person. For
purposes of this Agreement, "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
3.06 Financial Statements; Indebtedness.
(a) The Company has provided to MergerCo copies of (a) the
audited consolidated balance sheets and consolidated statements of income and
cash flows for the Company and its Subsidiaries as of and for each of the years
ended December 31, 1997 (the "Most Recent Fiscal Year End"), 1996 and 1995 and
(b) the unaudited consolidated balance sheet (the "Current Balance Sheet") and
consolidated statements of income and cash flows for the Company and its
Subsidiaries as of and for the four-month period ended April 30, 1998. Except
as disclosed in the notes thereto, such financial statements (collectively, the
"Financial
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Statements") have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods covered thereby and fairly present, in all material
respects, the consolidated financial condition and the results of operations and
cash flows of the Company and its Subsidiaries as of the respective dates
thereof and for the periods referred to therein, and are consistent with the
books and records of the Company and its Subsidiaries; provided, however, that
the Financial Statements referred to in clause (b) above are subject to normal
year end adjustments (which will not be material individually or in the
aggregate) and do not include footnotes.
(b) Except as set forth in Section 3.06(b) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any Indebtedness.
For purposes of this Agreement, "Indebtedness" means, without duplication, (i)
all indebtedness (and accrued interest thereon) for borrowed money (including,
without limitation, purchase money obligations and all indebtedness under
revolving credit arrangements), (ii) any obligation evidenced by any note, bond,
debenture or similar instrument, (iii) all capitalized lease obligations, (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit) and (v) all guarantees of any of the foregoing.
3.07 Absence of Certain Changes. Except as contemplated or
permitted by this Agreement, since the Most Recent Fiscal Year End, there have
not been any material adverse changes in the business, assets, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole. Without limiting the generality of the foregoing, except as
contemplated or permitted by this Agreement, since the Most Recent Fiscal Year
End, neither the Company nor any of its Subsidiaries has taken any of the
following actions or permitted any of the following events to occur, and none of
them have occurred:
(a) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the Ordinary Course of Business (as
defined in Section 3.04), liabilities under contracts entered into in the
Ordinary Course of Business and in the case of the Subsidiaries, borrowings from
the Company;
(b) subjected to any Security Interest any of its assets, except
liens for current Taxes (as defined in Section 3.09) not yet due and payable and
liens for current Taxes that are being contested in good faith;
(c) sold, assigned, leased or transferred any of its assets in a
single transaction or series of related transactions in an amount in excess of
$100,000, other than sales of inventory for fair consideration in the Ordinary
Course of Business;
(d) suffered any extraordinary losses material to the Company
and its Subsidiaries, taken as a whole, or waived any rights of material value
to the Company and its Subsidiaries, taken as a whole;
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(e) issued, sold or transferred any of its capital stock or other
equity securities, securities convertible into its capital stock or other equity
securities or warrants, options or other rights to acquire its capital stock or
other equity securities;
(f) declared or paid any dividends or made any distributions on the
Company's capital stock or other equity securities or redeemed or purchased any
shares of the Company's capital stock or other equity securities;
(g) made any capital expenditures or commitments therefor in an amount
in excess of $300,000 in the aggregate;
(h) entered into any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) either involving more
than $500,000 (other than purchase orders for the purchase or sale of inventory
or raw materials in the Ordinary Course of Business) or outside the Ordinary
Course of Business;
(i) no party (including any of the Company and its Subsidiaries) has
accelerated, terminated, or canceled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $100,000 to which any of the Company or its Subsidiaries is a party or
by which any of them is bound;
(j) made any capital investment in, any loan to, or any acquisition of
the securities or assets of any other person (or series of related capital
investments, loans, and acquisitions) either involving more than $100,000 or
outside the Ordinary Course of Business;
(k) delayed or postponed the payment of accounts payable and other
liabilities outside the Ordinary Course of Business;
(l) granted any license or sublicense of any rights under or with
respect to any Company Intellectual Property (as defined in Section 3.12) (other
than trademark licenses granted in connection with the sale of inventory in the
Ordinary Course of Business);
(m) made any loan to, or entered into any other transaction with, any
of its directors, officers, and employees outside the Ordinary Course of
Business;
(n) made or authorized any change in the charter or bylaws of the
Company and its Subsidiaries, except for those changes contemplated hereby;
(o) experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property in excess of $250,000 in the aggregate;
(p) entered into any collective bargaining agreement, written or oral,
or modified the terms of any such agreement;
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(q) entered into any employment contract, written or oral, or modified
the terms of any such existing employment contract under which the employee is
paid an annual base salary of $100,000 or more;
(r) granted any increase in the base compensation of any of its
directors, officers, and employees outside the Ordinary Course of Business;
(s) adopted, amended, modified, or terminated any bonus, profit-
sharing, incentive, severance, or other plan, contract or commitment for the
benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(t) made any other change in employment terms for any of its
directors, officers, and employees whose annual base salary is $100,000 or more
or outside the Ordinary Course of Business; or
(u) made or pledged to make any charitable contribution in excess of
$125,000 in the aggregate.
3.08 Undisclosed Liabilities. None of the Company and its
Subsidiaries has any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, due or to become due,
including any, liability for Taxes), except for (a) liabilities shown on the
Current Balance Sheet, (b) liabilities which have arisen since April 30, 1998 in
the Ordinary Course of Business and (c) contractual liabilities incurred in the
Ordinary Course of Business.
3.09 Tax Matters. Each of the Company and its Subsidiaries has
filed all material Tax Returns (as defined below) that it was required to file
and all such Tax Returns were correct and complete, except for any error or
omission that would not reasonably be expected to have a Company Material
Adverse Effect. Each of the Company and its Subsidiaries has paid (or accrued
on the Closing Balance Sheet) all Taxes (as defined below) (whether or not shown
to be due on any such Tax Returns). The accrual for Taxes on the Closing Balance
Sheet would be adequate to pay all Tax liabilities of the Company and its
Subsidiaries if its current tax year were treated as ending on the Closing Date.
All Taxes that the Company or its Subsidiaries are or were required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity, except for any such
Taxes with respect to which the failure to withhold, collect or pay would not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth on the Section 3.09 of the Disclosure Schedule, there are no audits of any
Company Tax Returns pending, and the Company has not received notice of any
potential audits, that would reasonably be expected to have a Company Material
Adverse Effect. Except as set forth on Section 3.09 of the Disclosure Schedule,
none of the Company or its Subsidiaries has consented to extend the time, nor is
the beneficiary of any extension of time, in which any Tax any be assessed or
collected by any taxing authority. None of the Company or its Subsidiaries is a
party to or bound by any Tax allocation or Tax sharing agreement with any other
Person, and neither the Company nor its
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Subsidiaries has any current or potential contractual obligation to indemnify
any other Person with respect to Taxes. None of the Company or its Subsidiaries
(i) has been a member of an affiliated group filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company) or (ii) has any liability for the Taxes of any Person (other than any
of the Company or its Subsidiaries) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. No claim has been made during the last
three taxable years by a taxing authority in a jurisdiction where the Company or
its Subsidiaries do not file Tax Returns that such Person is or may be subject
to taxation by such jurisdiction. None of the Company or its Subsidiaries has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Except as set forth in Section 3.09 of the
Disclosure Schedule, none of the Company or its Subsidiaries has made any
payments, is obligated to make any payments, or is party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code. None of the Company or its
Subsidiaries will be required (i) as a result of a change in method of
accounting for a Tax period, to include any adjustment under Section 481(c) of
the Code (or any corresponding provision of state, local, or foreign Tax law) in
taxable income for any such Tax Period, or (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provisions of state, local or foreign Tax law), to include any item of income or
exclude any item of deduction from any Tax period. The Company has provided to
MergerCo copies of all material Tax Returns that it was required to file for
each of the taxable years 1997, 1996 and 1995. Except as set forth in Section
3.09 of the Disclosure Schedule, none of the Company nor its Subsidiaries will
be required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of (i) any deferred intercompany gain or any excess
loss account described in Treasury Regulations under Section 1502 of the Code
(or any corresponding or similar provision or administrative rule of federal,
state, local or foreign tax law) arising prior to the Closing Date, other than
transactions contemplated or required by this Agreement, or (ii) any installment
sale made prior to the Closing Date. For purposes of this Agreement, "Taxes"
means all taxes, including without limitation income, gross receipts, ad
valorem, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any Tax or any
contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means
all reports, returns, declarations, statements, forms or other information
required to be supplied to a taxing authority in connection with Taxes.
3.10 Tangible Assets. The Company or Elastic has good title to, or a
valid leasehold interest in, all of the buildings, machinery, equipment and
other tangible assets reflected on the Current Balance Sheet or necessary for
the conduct of the business of the Company or any of its Subsidiaries (other
than property sold, consumed or otherwise disposed of in the Ordinary Course of
Business since the date of the Current Balance Sheet), free and clear of all
Security Interests, except for (i) Security Interests listed on the Disclosure
Schedule, and (ii)
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liens for taxes not yet due and payable or due but not delinquent or being
contested in good faith by appropriate proceedings for which appropriate
reserves under GAAP have been taken. Each such material tangible asset is to the
knowledge of the Company free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it is used.
3.11 Leased and Owned Real Property. The Disclosure Schedule lists
all real property that the Company or its Subsidiaries owns (the "Owned Real
Property") or leases (the "Leased Real Property"). With respect to each parcel
of Owned Real Property, except as set forth in the Disclosure Schedule: (i) the
Company or a Subsidiary thereof has good and marketable title thereto and each
such parcel is free and clear of all Security Interests; (ii) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupancy of any portion of such
parcel; (iii) there are no outstanding actions or rights of first refusal or
options to purchase such parcel or any portion thereof or interest therein; (iv)
to the Company's knowledge, there is no physical condition affecting such
property that materially interferes with access to or the present use of such
parcel in the Ordinary Course of Business; and (v) to the Company's knowledge,
all buildings and improvements located thereon are in good working order and
condition. All certificates of occupancy, permits, licenses, franchises,
approvals, and authorizations of all Governmental Entities having jurisdiction
over the Tuscaloosa, Alabama facility (the "Alabama Facility"), required or
appropriate to have been issued to the Company to enable the Alabama Facility to
undergo the current expansion and to otherwise be lawfully occupied and used for
all of the purposes for which it is currently occupied and used have been
lawfully issued and are, as of the date hereof, in full force and effect. The
Company has provided MergerCo with complete and correct copies of all material
contracts for construction and equipment (collectively, "Construction"), and
an updated Construction budget, as well as amounts paid to date for Construction
and estimated Construction completion costs in connection with the expansion of
the Alabama Facility. The Company has made available to MergerCo correct and
complete copies of the leases and subleases (as amended to date) listed in the
Disclosure Schedule. All such real property leases are in full force and effect
and there exists no default of the Company or any of its Subsidiaries or, to the
Company's knowledge, any other party thereto, under any such real property
leases.
3.12 Intellectual Property.
(a) The Disclosure Schedule contains a complete and correct list of
all patents, trademarks, registered copyrights, trade names and service marks
(and any applications therefor) (collectively, the "Company Intellectual
Property") that are currently used in the business or operations of the Company
or any of its Subsidiaries. Each of the Company or its Subsidiaries owns and
possesses all right, title and interest in and to, or has a valid and
enforceable license to use, the Company Intellectual Property as currently used,
free and clear of all Security Interests.
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(b) No claim by any third party contesting the validity,
enforceability, use or ownership of any of the Company Intellectual Property has
been made, is currently outstanding or to the Company's knowledge is threatened.
Neither the Company nor any of its Subsidiaries has received any notices of any
infringement or misappropriation by, or conflict with, any third party with
respect to the Company products (including, without limitation, any demand or
request that the Company license any rights from a third party). Neither the
Company nor any of its Subsidiaries has infringed, misappropriated or otherwise
conflicted with any intellectual property rights of any third parties and
neither the Company nor any of its Subsidiaries is aware of any infringement,
misappropriation or conflict which will occur as a result of the continued
operation of the business of the Company or any of its Subsidiaries as currently
conducted.
(c) All of the Company Intellectual Property are or will be owned by,
or properly assigned or licensed to, the Company or its Subsidiaries at the time
of the Closing. The transactions contemplated by this Agreement will have no
material adverse effect on the right, title and interest in and to the Company
Intellectual Property or the validity and enforceability thereof. The Company
and its Subsidiaries have each taken reasonable steps to maintain and protect
the Company Intellectual Property. To the Company's knowledge, no loss or
expiration of any Company Intellectual Property is threatened, pending or
reasonably foreseeable, except for the expiration of patents under law.
3.13 Contracts.
(a) As of the date of this Agreement, neither the Company nor any
of its Subsidiaries is a party to any written or oral:
(1) arrangement (or group of related contracts) for the lease
of personal property from or to third parties providing for lease payments in
excess of $250,000 annually;
(2) contract (or group of related arrangements) for the
purchase or sale of products or services which will extend over a period of more
than one year, result in a material loss to the Company and its Subsidiaries,
taken as a whole, or involve consideration in excess of $200,000;
(3) arrangement establishing a partnership or joint venture;
(4) arrangement (or group of related arrangements) under
which it has created, incurred, assumed, or guaranteed (or may create, incur,
assume, or guarantee) indebtedness (including capitalized lease obligations)
involving more than $50,000 or under which it has imposed (or may impose) a
Security Interest on any assets, except for any Security Interests listed on the
Disclosure Schedule;
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(5) arrangement that prohibits the Company or its
Subsidiaries from freely engaging in business anywhere in the world or that
requires the Company to maintain proprietary or confidential information of a
third-party on a confidential basis;
(6) arrangement under which the consequences of a default or
termination would have a Company Material Adverse Effect;
(7) agreement with any of the Stockholders and their
affiliates (as such term is defined in the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder) (individually, an
"Affiliate" and collectively "Affiliates") (other than the Company and its
Subsidiaries);
(8) profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(9) collective bargaining agreements;
(10) agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $100,000 or providing severance benefits;
(11) agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business; or
(12) arrangement (or group of related arrangements) involving
more than $250,000 (other than purchase orders for the purchase of sale of
inventory or raw materials in the Ordinary Course of Business).
(b) The Company has made available to MergerCo a correct and complete
copy of each written agreement (as amended to date) listed in the Disclosure
Schedule and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 3.13(a) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C)
none of the Company, its Subsidiaries or, to the knowledge of the Company, any
other party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) none of the Company,
its Subsidiaries or, to the knowledge of the Company, any other party has
repudiated any provision of the agreement.
3.14 Litigation. Except as set forth on the Disclosure Schedule,
there is no (a) unsatisfied judgment, order, decree, stipulation or injunction
or (b) claim, complaint, action,
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suit, proceeding, hearing or investigation of or in any Governmental Entity or
before any arbitrator to which the Company or any of its Subsidiaries is a party
or, to the Company's knowledge, which has been threatened against the Company or
any of its Subsidiaries.
3.15 Labor Matters. Neither the Company nor any of its Subsidiaries
is a party to or bound by any collective bargaining agreement, nor has either of
them experienced, since January 1, 1992, any (i) strikes or (ii) any grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Company has no knowledge of any organizational effort being made or threatened
since January 1, 1992, by or on behalf of any labor union with respect to
employees of the Company or any of its Subsidiaries.
3.16 Employee Benefits.
(a) The Disclosure Schedule contains a complete and accurate
list of all Employee Benefit Plans (as defined below) maintained, or contributed
to, by the Company, any of its Subsidiaries, or any ERISA Affiliate (as defined
below) for the benefit of present or former employees of the Company or any of
its Subsidiaries (the "Company Plans"). For purposes of this Agreement,
"Employee Benefit Plan" means any "employee pension benefit plan" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) other than a "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA, any "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and any other material written or oral plan, agreement or arrangement
involving direct or indirect compensation, including without limitation
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Internal Revenue Code of
1986, as amended (the "Code") or the regulations under Section 414(o) of the
Code), any of which includes the Company or any of its Subsidiaries. Complete
and accurate copies of all Company Plans and all related trust agreements,
insurance contracts and summary plan descriptions, have been made available to
MergerCo. Each Company Plan has been administered in accordance with its terms
and each of the Company and its Subsidiaries has met its obligations with
respect to such Company Plan. The Company and the Company Plans are in
compliance with the currently applicable provisions of ERISA and the Code and
the regulations thereunder, including all reporting and disclosure requirements,
and other laws applicable to such plans.
(b) There are no termination proceedings or other claims (except
claims for benefits payable in the normal operation of the Employee Benefit
Plans and proceedings with respect to qualified domestic relations orders),
audits, suits or proceedings against or involving any Company Plan or asserting
any rights or claims to benefits under any Company Plan, or, to the Company's
knowledge, investigations by any Governmental Entity involving any Company Plan.
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(c) The Company Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the Internal
Revenue Service to the effect that such Company Plans are qualified and the
plans and the trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code. No event has occurred
that would reasonably be expected to give rise to disqualification or loss of
tax-exempt status of any such Company Plan or related trust under Sections
401(a) and 501(a) of the Code.
(d) No Employee Benefit Plan contributed to, or maintained by,
the Company, any of its Subsidiaries or any ERISA Affiliate which is subject to
Title IV of ERISA has been terminated or has accrued benefits, the present value
of which exceeds the assets of such plans, all calculated based on the
assumptions set forth in the Disclosure Schedule. No "accumulated funding
deficiency" (as defined in Section 412 of the Code) has occurred with respect to
any Employee Benefit Plan contributed to, or maintained by, the Company, any of
its Subsidiaries or any ERISA Affiliate which is subject to Section 412 of the
Code or Title IV of ERISA.
(e) None of the Company, its Subsidiaries or any ERISA Affiliate
is obligated to contribute to or has any actual or potential liability with
respect to any multiemployer plans.
(f) There are no unfunded obligations under any Company Plan
providing benefits after termination of employment to any employee of the
Company or any of its Subsidiaries (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code or other applicable law and insurance conversion
privileges under state law.
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company, any of its
Affiliates or any ERISA Affiliate that would subject the Company, any of its
Subsidiaries or any ERISA Affiliate to any fine, penalty, tax or liability of
any kind imposed under ERISA or the Code.
3.17 Environmental Matters.
(a) Except as disclosed in the Disclosure Schedule:
(i) the Company's and each of its Subsidiaries' operations
are in compliance and have been in compliance with all applicable Environmental
Laws (as defined in Section 3.17(e) below);
(ii) there is no pending civil or criminal litigation,
written notice of violation or formal administrative proceeding relating to any
Environmental Law involving the Company or any of its Subsidiaries;
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(iii) there is no pending investigation, inquiry or
information request relating to any Environmental Law involving the Company or
any of its Subsidiaries; and
(iv) each of the Company and its Subsidiaries have all
permits, licenses and approvals required under Environmental Laws to operate
properties it currently owns and/or leases.
(b) The Disclosure Schedule lists all permits, licenses, and approvals
required under Environmental Laws applicable to the Company's and its
Subsidiaries' operations.
(c) Except as disclosed in the Disclosure Schedule:
(i) there has been no release of Materials of
Environmental Concern (as defined in Section 3.17(f)) to the environment that
would reasonably be expected to give rise to a liability of the Company or any
of its Subsidiaries;
(ii) there is no existing governmental order or claim
requiring the investigation or remediation of a release of Materials of
Environmental Concern; and
(iii) neither the Company nor its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or released any Materials of Environmental Concern, or owned or
operated any property or facility, in a manner that has given or would give rise
to liabilities pursuant to CERCLA or any other Environmental Law.
(e) For purposes of this Agreement, "Environmental Law" means any
federal, state or local law, statute, rule or regulation relating to the
environment or occupational health and safety, including without limitation any
statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) underground and
other storage tanks or vessels; (vi) health and safety of employees; and (vii)
manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or solid or hazardous
waste. As used above, the terms "release" and "environment" shall have the
meaning set forth in the federal Comprehensive Environmental Compensation,
Liability and Response Act of 1980 ("CERCLA").
(f) For purposes of this Agreement, "Materials of Environmental
Concern" mean any chemicals, pollutants or contaminants, hazardous substances
(as such term is defined under CERCLA), solid wastes and hazardous wastes (as
such terms are defined under the federal Resource Conservation and Recovery Act
("RCRA")), toxic materials, oil or petroleum and petroleum products.
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(g) The Company, the Stockholders and MergerCo agree that the
only representations and warranties of the Company and the Stockholders herein
as to any Environmental Matters (as defined below) are those contained in this
Section 3.17. Without limiting the generality of the foregoing, MergerCo
specifically acknowledges that the representations and warranties contained in
Section 3.18 and Section 3.19 do not relate to Environmental Matters. For
purposes of this Agreement, "Environmental Matters" means any legal obligation
or liability arising under Environmental Laws.
3.18 Legal Compliance. Each of the Company and its Subsidiaries has
complied and is in compliance with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and
charges thereunder) of any federal, state, local or foreign government, or any
Governmental Entity (other than Environmental Laws, which are addressed in
Section 3.17 above), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
3.19 Permits.
(a) The Company and its Subsidiaries have all material permits,
licenses, franchises or authorizations from any Governmental Entity used in or
necessary for their business operations as presently conducted (collectively,
the "Permits"). Neither the Company nor any of its Subsidiaries is in violation
of or default under any of its Permits.
(b) No Permit will be revoked, terminated prior to its normal
expiration date or not renewed solely as a result of the consummation of the
transactions contemplated by this Agreement.
3.20 Insurance. The Disclosure Schedule lists each insurance policy
maintained by the Company or its Subsidiaries. All of such insurance policies
are in full force and effect and neither the Company nor its Subsidiaries is in
default with respect to its obligations under any of such insurance policies.
3.21 Brokers' Fees. Neither the Company nor any of its Subsidiaries
has any liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement,
other than to Goldman, Sachs & Co., whose fees and expenses shall be paid by the
Stockholders.
3.22 Indebtedness to and from Officers, Directors and Stockholders:
Other Affiliate Transactions.
(a) Except for intercompany indebtedness payable among the Company and
its Subsidiaries, neither the Company nor any of its Subsidiaries is indebted,
directly or indirectly, to any person who is an officer, director or stockholder
of either the Company or any of its Subsidiaries or any affiliate of any such
person in any amount whatsoever other than for salaries for services rendered or
reimbursable business expenses, and, except as set
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forth on the Disclosure Schedule, no such officer, director, stockholder or
affiliate is indebted to the Company or any of its Subsidiaries except for
advances made to employees of the Company or its Subsidiaries in the Ordinary
Course of Business to meet reimbursable business expenses anticipated to be
incurred by such obligor.
(b) None of the Stockholders and to the Company's knowledge their
Affiliates has been involved in any business arrangement or relationship with
any of the Company and its Subsidiaries within the past 12 months and none of
the Stockholders and to the Company's knowledge their Affiliates owns any asset,
tangible or intangible, which is used in the business of any of the Company and
its Subsidiaries.
3.23 Notes and Accounts Receivable. All notes and accounts receivable
of the Company and its Subsidiaries are reflected properly on their books and
records and are valid receivables subject to no setoffs or counterclaims.
3.24 Powers of Attorney; Guaranties. There are no outstanding
powers of attorney executed on behalf of any of the Company and its
Subsidiaries. None of the Company and its Subsidiaries is a guarantor or
otherwise is liable for any liability or obligation (including indebtedness) of
any other Person.
3.25 Product Warranty and Returns. Each product manufactured, sold,
leased, or delivered by any of the Company and its Subsidiaries has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and reserve for product warranty claims and returns set
forth on the Most Recent Balance Sheet as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company and its Subsidiaries is sufficient to account for any liability for
replacement or repair thereof or other damages in connection therewith. No
product manufactured, sold, leased, or delivered by any of the Company and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease.
3.26 Customer and Supplier Relations. Section 3.26 of the Disclosure
Schedule sets forth a list of the top fifteen (15) customers and top ten (10)
suppliers of the Company and its Subsidiaries, taken as a whole by volume or
sales and purchases respectively, in each case for either of the fiscal years
ended December 31, 1997 and 1996 (the "Material Customers" and "Material
Suppliers", respectively). The Company has not received any information from any
Material Supplier or Material Customer to the effect that, and the Company does
not anticipate that, any Material Supplier or Material Customer will stop,
materially decrease the rate of, or materially change the terms (whether related
to payment, price or otherwise) with respect to, supplying or purchasing, as
applicable, materials, products or services with respect to the Company or its
Subsidiaries (whether as a result of the consummation of the transactions
contemplated hereby or otherwise).
3.27 Teoh Kooi Weng. Except as set forth in Section 3.27 of the
Disclosure Schedule, Teoh Kooi Weng is not, and has never been, an agent or
representative of the Company or any of its Affiliates, except for BRI. Without
limiting the generality of the
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foregoing, none of the Company and its Affiliates, except for BRI, (i) has, or
has ever had, a contract or agreement with Teoh Kooi Weng, or (ii) pays, or has
ever paid any salary to Teoh Kooi Weng.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO
MergerCo represents and warrants to the Company as follows:
4.01 Organization. MergerCo is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.02 Authorization. (a) MergerCo has all requisite corporate power
and authority to execute and deliver this Agreement and the agreements provided
for herein. The execution, delivery and performance by MergerCo of this
Agreement and the consummation by MergerCo of the agreements contemplated hereby
have been duly authorized by its Board of Directors and, other than the approval
and adoption of this Agreement by the stockholders of MergerCo, no other
corporate proceedings on the part of MergerCo are necessary to authorize the
execution and delivery of this Agreement and the consummation of the agreements
contemplated hereby. This Agreement has been duly executed and delivered by
MergerCo and, assuming this Agreement and the agreements provided for herein
constitute the valid and binding obligations of the other parties hereto,
constitute the valid and legally binding obligations of MergerCo, enforceable
against MergerCo in accordance with their respective terms.
(b) MergerCo has previously delivered to the Company a letter
from Fund, addressed to the Company, confirming Fund's agreement to vote to
approve and adopt this Agreement, in its capacity as a stockholder of MergerCo,
upon its purchase of MergerCo Common Stock.
4.03 Noncontravention. Subject to compliance with the applicable
requirements of the Hart-Scott-Rodino Act, neither the execution and delivery of
this Agreement by MergerCo, nor the consummation by MergerCo of the transactions
contemplated hereby, will (a) conflict or violate any provision of the charter
or by-laws of MergerCo, (b) require on the part of MergerCo any filing with, or
any permit, authorization, consent or approval of, any Governmental Entity,
except for any filing, permit, authorization, consent or approval which if not
obtained or made would not reasonably be expected to have a material adverse
effect on the assets, business, financial condition or results of operations of
MergerCo or on the ability of the parties to consummate the transactions
contemplated by this Agreement, (c) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which MergerCo is a
party or by which MergerCo is bound or to which any of its assets are subject,
(d) result in the imposition of any
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Security Interest upon MergerCo shares or any assets of MergerCo or (e) violate
any constitution, statute, order, writ, injunction, decree, judgment, ruling,
charge, rule, regulation or other restriction of any government, governmental
agency or court applicable to MergerCo or any of its properties or assets,
except for any violation that would not reasonably be expected to have a
material adverse effect on the assets, business, financial condition or results
of operations of MergerCo or on the ability of the parties to consummate the
transactions contemplated by this Agreement.
4.04 Broker's Fees. MergerCo has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, other than to Code Hennessy &
Simmons LLC, whose fees and expenses shall be paid by the Surviving Corporation.
4.05 Litigation. There are no actions, suits, claims or legal,
administrative or arbitratorial proceedings pending against, or, threatened
against, MergerCo which would adversely affect MergerCo's performance under this
Agreement or the consummation of the transactions contemplated by this
Agreement.
4.06 Financing. The Fund has received and accepted and agreed to
a commitment letter from Bank of America National Trust and Savings Association
and BancAmerica Robertson Stephens, addressed to the Fund, a copy of which is
attached hereto (the "Bank Commitment Letter"), whereby such financial
institutions have committed, upon the terms and subject to the conditions set
forth therein, to provide debt financing for the transactions contemplated
hereby. MergerCo has received and accepted and agreed to a letter from the
Fund, a copy of which is attached hereto, whereby the Fund has committed, upon
the terms and subject to the conditions set forth therein, to provide equity
financing to MergerCo up to $67.5 million.
4.07 Formation of MergerCo; No Prior Activities. MergerCo was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement. As of the date hereof and the Effective Time, except for (i)
obligations or liabilities incurred in connection with its incorporation or
organizations and the transactions contemplated by this Agreement, and (ii) this
Agreement and any other agreements or arrangements contemplated by this
Agreement or in furtherance of the transactions contemplated hereby, MergerCo
has not incurred, directly or indirectly, through any subsidiary or affiliate,
any obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
Person.
ARTICLE V
PRE-CLOSING COVENANTS
5.01 Efforts. Each of the parties shall use commercially reasonable
efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement.
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5.02 Hart-Scott-Rodino Act. Each of the parties shall promptly
file (or cause to be filed) any Notification and Report Forms and related
material that it may be required to file with the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, shall use reasonable best efforts to obtain an early
termination of the applicable waiting period, and shall make any further filings
or information submissions pursuant thereto that may be necessary, proper or
advisable. Each of the Company and MergerCo will use their reasonable best
efforts to resolve any competitive issues relating to or arising under the Hart-
Scott-Rodino Act or any other federal or state antitrust or fair trade law
raised by any Governmental Entity. If such proposed resolutions are not
accepted by such Governmental Entity, MergerCo (with the Company's cooperation)
shall pursue all litigation resulting from such issues. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
the Hart-Scott-Rodino Act or any other federal or state antitrust or fair trade
law. In the event of a challenge to the transactions contemplated by this
Agreement pursuant to the Hart-Scott-Rodino Act, each of the Company and
MergerCo shall use their reasonable best efforts to defeat such challenge,
including by institution and defense of litigation, or to settle such challenge
on terms that permit the consummation of the transactions contemplated hereby;
provided, however, that nothing herein shall require either party to agree to
divest or hold separate any portion of its business or otherwise take action
that could reasonably be expected to have a material adverse effect on such
party. Without limiting the foregoing, in the event that either the Federal
Trade Commission or the Antitrust Division of the United States Department of
Justice should issue a Request for Additional Information or Documentary
material under 17 C.F.R. (S)803.20 (a "Second Request"), then the Company and
MergerCo each agree to use their reasonable best efforts to respond fully to
such Second Request within 20 days after its receipt and shall promptly make any
further filings or information submissions and make any employee available for
interview or testimony pursuant to the foregoing (both before and after any
Second Request) that may be necessary, proper or advisable.
5.03 Operation of Business. Except as otherwise contemplated by this
Agreement or consented to in writing by MergerCo, during the period from the
date of this Agreement until the Closing Date the Company will not cause or
permit any of the Company and its Subsidiaries to engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Company will
not cause or permit any of the Company and its Subsidiaries to engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3.07 above (other than capital expenditures in the Ordinary Course of
Business); provided that the Company will not be deemed to have breached this
covenant as a result of (i) actions taken or omissions made by Persons other
than the Company or its Subsidiaries or (ii) acts of God or other events beyond
their control.
5.04 Access. The Company and its Subsidiaries shall permit the
representatives of MergerCo listed on Attachment 5.04 of this Agreement to have
reasonable access (at reasonable times, on reasonable prior written notice and
in a manner so as not to interfere with
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the normal business operations of the Company and its Subsidiaries) to the
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company and its
Subsidiaries for reasonable business purposes (it being acknowledged by MergerCo
that MergerCo has completed its due diligence investigation and that the purpose
of this provision is not to permit further due diligence). MergerCo acknowledges
and agrees that it is bound by the Confidentiality Agreement, dated February 10,
1998, previously entered into between the Fund and the Company (the
"Confidentiality Agreement"). Prior to the Closing, MergerCo and its
representatives shall contact and communicate with the employees, customers and
suppliers of the Company in connection with the transactions contemplated by
this Agreement only with the prior written consent of the Company, which consent
will not be unreasonably withheld.
5.05 Notification.
(a) By the Company. The Company shall deliver to MergerCo
written notice of any event or development that would (i) render any statement,
representation or warranty of the Company in this Agreement (including the
Disclosure Schedule) inaccurate or incomplete in any material respect or (ii)
constitute or result in a breach by the Company of, or a failure by the Company
to comply with, any agreement or covenant in this Agreement applicable to it.
Any disclosure made by the Company pursuant to clause (i) of the prior sentence
shall be deemed to amend and supplement the Disclosure Schedule for all purposes
of this Agreement (except for MergerCo's right to terminate this Agreement
pursuant to clause (b) of Section 9.01 (and to seek damages in connection with
such termination as permitted by Section 9.02) and, if the disclosure relates to
a fact or circumstance existing prior to the date hereof or a Knowing Breach
after the date hereof, MergerCo's right to seek indemnification under Article XI
hereof). "Knowing Breach" means an action (or a willful failure to take action)
by, at the direction of, or with the prior knowledge of any of Thomas A.
Rodgers, III, Thomas A. Rodgers, Jr., Lawrence R. Walsh, Robert L. Bailey or
Americo Reis, which would cause any of the representations or warranties of the
Company in this Agreement to be untrue in any material respect (other than
actions (or willful failures to take action) in the Ordinary Course of
Business).
(b) By MergerCo. MergerCo shall deliver to the Company and the
Stockholders Representatives written notice of any event or development that
would (i) render any statement, representation or warranty of MergerCo in this
Agreement inaccurate or incomplete in any material respect, or (ii) constitute
or result in a breach by MergerCo or a failure by MergerCo to comply with, any
agreement or covenant in this Agreement applicable to it.
5.06 Exclusivity. During the period from the date of this Agreement
until the Closing or the earlier termination of this Agreement, the Company
shall not and shall use its best efforts to cause each of its stockholders,
affiliates, officers, directors, employees, representatives and agents not to,
directly or indirectly, encourage, solicit, initiate, engage or participate in
discussions or negotiations with any person or entity (other than MergerCo)
concerning any merger or consolidation involving the Company or its
Subsidiaries, any sale of material assets by the Company or its Subsidiaries not
in the Ordinary Course of Business, sale of the capital stock
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of the Company or its Subsidiaries or other business combination involving the
Company or its Subsidiaries.
5.07 Bakrie Sale and Release. Prior to Closing, the Company shall use
its reasonable efforts to complete the sale of its interest in BRI and to obtain
a release (the "Release") (in form and substance satisfactory to MergerCo) from
BRI and PT. Bakrie Capitanindo Corporation (the sole other owner of an interest
in BRI) with respect to any obligation of, or claim of any kind against, the
Company that relates to BRI (including those related to operating losses,
antitrust matters, losses related to third party claims of any kind,
consequential, incidental or any other form of damages or losses of BRI), except
for trade payables incurred in the Ordinary Course of Business.
5.08 Authorization of Class C Stock. Prior to the Closing, the
Company will use its commercially reasonable efforts to cause to be issued and
outstanding immediately prior to the Effective Time such number of shares of
Class C Stock that, when multiplied by the Cash Merger Consideration, shall
equal at least $7.5 million but not more than $15.0 million.
ARTICLE VI
TRANSFER OF ASSETS
6.01 Asset Transfer. Upon the request of MergerCo, the Company shall
use its commercially reasonable efforts to transfer substantially all of the
assets and liabilities of the Company to Elastic prior to the Closing (the
"Asset Transfer"). Notwithstanding any provision of this Agreement to the
contrary, (i) none of the Company, its Subsidiaries or the Stockholders shall
have any liability under this Agreement to MergerCo, the Fund, the Surviving
Corporation, any Indemnified Person or any third party as a result of or in
connection with (x) the Asset Transfer or any actions or omissions of the
Company, its Subsidiaries or the Stockholders in anticipation of, or in
connection with the Asset Transfer or (y) any breach of, or failure to perform,
any representation, warranty, covenant (other than the covenants set forth in
Section 6.02 below), agreement or obligation contained in this Agreement or any
other agreement, instrument or document contemplated by this Agreement to the
extent such breach or failure to perform is a result of or arises out of the
Asset Transfer or any actions or omissions of the Company, its Subsidiaries or
the Stockholders in anticipation of, or in connection with, the Asset Transfer
(a "Transfer Related Breach"); (ii) Transfer Related Breaches shall have no
impact on the determination of whether a condition precedent set forth in
Section 7.01 of this Agreement, other than Section 7.01(h), shall have been
satisfied and (iii) all fees and expenses incurred in connection with, or in
anticipation of, the Asset Transfer shall be the responsibility of MergerCo.
6.02 Covenant of Company. Upon the request of MergerCo to undertake
the Asset Transfer, the Company shall promptly prepare and deliver to MergerCo a
schedule of assets to be transferred and consents to be obtained in connection
with the Asset Transfer that, to the Company's knowledge, is true and correct in
all material respects. The Company shall use its
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commercially reasonable efforts to complete the Asset Transfer. The Company
shall consult with MergerCo from time to time regarding the Asset Transfer.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF MERGERCO AND THE COMPANY
7.01 Conditions to Obligations of MergerCo. The obligation of
MergerCo to consummate the transactions contemplated by this Agreement is
subject to the satisfaction (or waiver by MergerCo) of the following conditions:
(a) the Company and its Subsidiaries shall have obtained all of
the waivers, permits, consents, approvals or other authorizations, and effected
all of the registrations, filings and notices required to consummate the
transactions contemplated by this Agreement and included on the Disclosure
Schedule and identified thereon as being subject to Section 7.01(a).
(b) the representations and warranties of the Company set forth
in Article III shall be true and correct at and as of the Closing Date as if
made as of the Closing Date, except for (i) changes contemplated or permitted by
this Agreement, (ii) those representations and warranties that address matters
only as of a particular date (which shall be true and correct as of such date)
and (iii) where the failure of the representations and warranties to be true and
correct could not reasonably be expected to have a Company Material Adverse
Effect.
(c) the Company shall have performed or complied with its
agreements and covenants required to be performed or complied with by it under
this Agreement as of or prior to the Closing, except where the failure to so
perform or comply could not reasonably be expected to have a Company Material
Adverse Effect;
(d) the Company shall have delivered to MergerCo a certificate to
the effect that each of the conditions specified in clauses (a) and (c) of this
Section 7.01 is satisfied in all respects and the Company shall have delivered
to MergerCo a certificate as to its compliance with Section 7.01(b) (the "Bring-
Down Certificate");
(e) no action, suit or proceeding shall be pending by or before
any Governmental Entity wherein an unfavorable judgment, order, decree,
stipulation or injunction would reasonably be expected to (i) prevent
consummation of any of the transactions contemplated by this Agreement or (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, and no such judgment, order, decree, stipulation or
injunction shall be in effect;
(f) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
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(g) MergerCo shall have received at or prior to the Closing such
documents, instruments or certificates as MergerCo may reasonably request
including, without limitation:
(i) such certificates of the Company's officers and such
other documents evidencing satisfaction of the conditions specified in this
Section 7.01 as MergerCo shall reasonably request;
(ii) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the legal existence and good standing of the
Company in Massachusetts;
(iii) certificates of the Clerk of the Company attesting to the
incumbency of the Company's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents of the Company;
(iv) certificates of appropriate governmental officials in
each state in which the Company is required to qualify to do business as a
foreign corporation as to the due qualification and good standing of the Company
in each such jurisdiction;
(v) a certificate of an appropriate officer of the Company to
the effect that SHFEES represents all fees and expenses incurred by the Company
on behalf of the Stockholders as contemplated by Section 2.01(c);
(vi) written resignations of all members of the Company's
Board of Directors;
(vii) the original corporate minute books of the Company and
all corporate seals; and
(viii) a certification executed on behalf of the Company by an
appropriate officer of the Company, pursuant to the requirements of Section
1.897-2(g) of the Treasury Regulations, certifying that neither the Company nor
any of its Subsidiaries is or has been a United States Real Property Holding
Corporation, as defined in Section 897(c)(2) of the Code and Section 1.897-2(b)
of the regulations promulgated by the Internal Revenue Service during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) MergerCo and the Company shall have received sufficient funds to
pay the Merger Consideration, repay or redeem all of the existing indebtedness
of the Company and its Subsidiaries (including accrued interest and prepayment
premiums or penalties) and otherwise enable MergerCo to consummate the
transactions contemplated hereby and to meet the working capital requirements of
the Surviving Corporation pursuant to financing arrangements consistent with the
structure reflected in the Bank Commitment Letter and definitive financing
agreements completed to the satisfaction of MergerCo in its reasonable judgment
(the "Financing" );
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(i) certain of the Stockholders shall have exchanged certain of
their shares of Company Common Stock for shares of Class C Stock, as
contemplated in Section 5.08, with the result that, after such exchange: (i) at
least $7,500,000 in aggregate value of Class C Stock (including shares
outstanding and held by the persons identified in (ii) through (v) below) shall
be held by former holders of Company Common Stock (the various values of Class C
Stock referred to in this subparagraph being the product of an appropriate
number of shares of Class C Stock times the Cash Merger Consideration), (ii) at
least $5,500,000 in value of such Class C Stock, issued in exchange for shares
of Class A Stock, shall be held by Thomas A. Rodgers, Jr., (iii) at least
$2,000,000 in value of such Class C Stock shall be held by Thomas A. Rodgers,
III, (iii) at least $500,000 in value of Class C Stock shall be held by, or
subject to Options held by, Americo Reis, (iv) at least $500,000 in value of
Class C Stock shall be held by, or subject to Options held by, Lawrence R.
Walsh, and (v) at least $500,000 in value of Class C Stock shall be held by, or
subject to Options held by, Robert L. Bailey;
(j) each of Thomas A. Rodgers, Jr., Thomas A. Rodgers, III, Americo
Reis, Lawrence Walsh and Robert L. Bailey shall have entered into noncompetition
and confidentiality agreements substantially in the form attached hereto as
Exhibit C with the Surviving Corporation;
(k) the Company shall have received payoff letters and lien releases
with respect to the Indebtedness of the Company to be paid at Closing as
specified by MergerCo;
(l) the Company shall have either (i) dissolved Globe Elastic
Thread, Ltd. (the "British Subsidiary") or (ii) transferred all of the
outstanding capital stock of the British Subsidiary to the Company (except for
any shares required by law to be held by another person or entity);
(m) the Company shall have received an acknowledgment in writing
from each of Thomas A. Rodgers, Jr., Thomas A. Rodgers, III, Robert L. Bailey,
Americo Reis, and Lawrence Walsh that the Company's funding obligations under
its supplemental pension plan and its non-qualified pension plan do not continue
upon the respective covered employee's termination of employment; and
(n) the Company shall have received full payment for the loan
outstanding to Thomas A. Rodgers, III in the principal amount of $278,181.00,
including any and all accrued interest thereon.
7.02 Conditions to Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated by this Agreement is subject
to the satisfaction (or waiver by the Company) of the following conditions:
(a) the representations and warranties of MergerCo set forth in
Article 4 shall be true and correct at and as of the Closing Date as if made as
of the Closing Date, except for (i) changes contemplated or permitted by this
Agreement, (ii) those representations and warranties that address matters only
as of a particular date (which shall be true and correct as
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of such date) and (iii) where the failure of the representations and warranties
to be true and correct could not reasonably be expected to have a material
adverse effect on the assets, business, financial condition or results of
operations of MergerCo or on the ability of the parties to consummate the
transactions contemplated by this Agreement;
(b) MergerCo shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
by it under this Agreement as of or prior to the Closing, except where the
failure to so perform or comply could not reasonably be expected to have a
material adverse effect on the assets, business, financial condition or results
of operations of MergerCo or on the ability of the parties to consummate the
transactions contemplated by this Agreement.;
(c) MergerCo shall have delivered to the Company a certificate to the
effect that each of the conditions specified in clauses (a) and (b) of this
Section 7.02 is satisfied in all respects;
(d) no action, suit or proceeding shall be pending by or before any
Governmental Entity wherein an unfavorable judgment, order, decree, stipulation
or injunction would reasonably be expected to (i) prevent consummation of any of
the transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(e) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated; and
(f) the Company shall have received at or prior to the Closing such
documents, instruments or certificates as the Company may reasonably request
including, without limitation:
(i) such certificates of MergerCo's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
7.02 as the Company shall reasonably request;
(ii) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of MergerCo in Delaware;
and
(iii) a certificate of the Secretary of MergerCo attesting to the
incumbency of MergerCo's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents and by-laws
delivered pursuant to this Agreement.
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ARTICLE VIII
PRESS RELEASES AND ANNOUNCEMENTS
Prior to the Closing, neither the Company nor MergerCo shall issue (and
each party shall cause its Affiliates not to issue) any press release or public
disclosure relating to the subject matter of this Agreement without the prior
written approval of the other such party; provided, however, that either such
party may make any public disclosure it believes in good faith is required by
law, regulation or exchange rule (in which case the disclosing party shall
advise the other party and the other party shall have the right to review such
press release or announcement prior to its publication).
ARTICLE IX
TERMINATION
9.01 Termination of Agreement. The parties may terminate this
Agreement prior to the Closing as provided below:
(a) the parties may terminate this Agreement by mutual written
consent of MergerCo and the Company;
(b) MergerCo may terminate this Agreement by giving written
notice to the Company in the event the Company is in material breach of any
representation, warranty, covenant or agreement contained in this Agreement, and
such breach (i) is not remedied within 15 days of delivery of written notice
thereof and (ii) results in a Company Material Adverse Effect;
(c) the Company may terminate this Agreement by giving written
notice to MergerCo in the event MergerCo is in material breach of any
representation, warranty, covenant or agreement contained in this Agreement, and
such breach (i) is not remedied within 15 days of delivery of written notice
thereof and (ii) results in a material adverse effect on the assets, business,
financial condition or results of operation of MergerCo or on the ability of the
parties to consummate the transactions contemplated by this Agreement;
(d) MergerCo may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before
September 15, 1998 by reason of the failure of any condition precedent under
Section 7.01 hereof (unless the failure results primarily from a breach by
MergerCo of any representation, warranty, covenant or agreement contained in
this Agreement);
(e) the Company may terminate this Agreement by giving written
notice to MergerCo if the Closing shall not have occurred on or before September
15, 1998 by reason of the failure of any condition precedent under Section 7.02
hereof (unless the failure
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results primarily from a breach by the Company or any Stockholder of any
representation, warranty, covenant or agreement contained in this Agreement);
and
(f) if the Closing shall not have occurred before August 1, 1998,
August 16, 1998 or August 31, 1998 (each of which dates shall constitute an
"Optional Termination Date") due to the failure of MergerCo to obtain the
Financing (unless the failure results from a breach by the Company or any
Stockholder of any representation, warranty, covenant or agreement contained in
this Agreement), then the Company may terminate this Agreement by giving written
notice to MergerCo on such Optional Termination Date. If the Company fails to
provide written notice of termination on such Optional Termination Date, it
shall have waived its right to terminate this Agreement pursuant to this clause
(f) as of such date.
9.02 Effect of Termination. If this Agreement is terminated pursuant
to Section 9.01, all obligations of the parties hereunder shall terminate
without any liability of any party to any other party; provided, however, that
nothing herein shall relieve any party from liability for any breach of this
Agreement prior to such termination. The Confidentiality Agreement shall
survive the termination of this Agreement for any reason.
ARTICLE X
FURTHER AGREEMENTS
10.01 Director and Officer Indemnification. For the six (6) year
period after the Closing, each of MergerCo and the Company shall not take any
action to alter or impair any exculpatory or indemnification provisions, now
existing in the charter or by-laws of the Company or its Subsidiaries, for the
benefit of any individual who served as a director or officer of the Company or
any of its Subsidiaries at any time prior to the Closing Date, except for any
changes that may be required to conform with changes in applicable law and any
changes that do not affect the application of such provisions to acts or
omissions of such individuals prior to the Closing Date. For the six (6) year
period after the Closing, the Surviving Corporation shall continue the Company's
executive risk insurance coverage on substantially similar terms and conditions
as the Company's existing Executive Risk Package, a summary of which has been
previously delivered to MergerCo; provided, however, that the Surviving
Corporation may reduce such coverage as necessary so that the annual premium
does not exceed $80,000.
10.02 Disclosure Generally.
(a) Any information furnished in the Disclosure Schedule (or
any update thereto) shall be arranged in sections corresponding to the numbered
paragraphs contained in Article III hereof and the disclosure in any section of
the Disclosure Schedule shall qualify only the corresponding section in Article
III hereof unless the applicability to another section of Article III is readily
apparent. The inclusion of any information in the Disclosure Schedule (or any
update thereto) shall not be deemed to be an admission or acknowledgment, in and
of itself, that such information is required by the terms hereof to be disclosed
or is material to the Company or any of its Subsidiaries or outside the Ordinary
Course of Business.
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(b) For purposes of this Agreement, the terms "to the Company's
knowledge," "known by the Company" or other words of similar meaning shall mean
the actual knowledge of Thomas A. Rodgers, III, Thomas A. Rodgers, Jr., Lawrence
R. Walsh, Robert L. Bailey or Americo Reis.
10.03 Further Assurances. At any time and from time to time after
the Closing, as and when requested by any party hereto and at such party's
expense, the other party shall promptly execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to evidence and effectuate the
transactions contemplated by this Agreement.
ARTICLE XI
INDEMNIFICATION
11.01 By the Stockholders. From and after the Effective Time, the
Stockholders shall indemnify and hold harmless the Surviving Corporation and its
officers, directors, employees and agents (the "Indemnified Persons") from and
against all claims, damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any reasonable legal, accounting or
other expenses for investigating or defending any actions or threatened actions)
incurred by the Indemnified Persons ("Damages");
(a) resulting from, relating to or constituting any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement (including the reaffirmation of such representations
and warranties in the Bring-Down Certificate);
(b) resulting from, relating to or constituting any breach
prior to the Effective Time of any covenant, agreement or obligation of the
Company contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement;
(c) resulting from any failure of any Stockholders to have
good, valid and marketable title to the issued and outstanding Shares held by
such Stockholders, free and clear of all liens, claims, pledges, options,
adverse claims or charges of any nature whatsoever;
(d) resulting from, relating to, or arising out of (i) the
current criminal environmental investigation relating to the Company's facility
in Fall River, Massachusetts to the extent related to acts or omissions prior to
the Effective Time; (ii) civil or criminal antitrust claims or investigations
associated with rubber thread and/or P.T. Bakrie Rubber Industry ("BRI") to the
extent related to acts or omissions prior to the Effective Time, in each case
including, without limitation, civil or criminal fines or penalties assessed
against the Surviving Corporation or its officers, directors or employees;
and/or (iii) the complaint filed in Superior Court in the State of Rhode Island
by American Condominium Association, Inc. and Harbor Houses Condominium
Association, Inc. against the Company; or
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(e) if the Company fails to obtain the Release prior to
Closing, resulting from any obligation of, or claim of any kind against, the
Company with respect to BRI (including those related to operating losses,
antitrust matters, losses related to third party claims of any kind,
consequential, incidental or any other form of damages or losses of BRI), except
for trade payables incurred in the Ordinary Course of Business.
11.02 Method of Asserting Claims.
(a) All claims for indemnification by an Indemnified Person
pursuant to this Article XI shall be made in accordance with the provisions of
the Escrow Agreement.
(b) The Indemnified Person shall give prompt written
notification to the Stockholders Representatives of the commencement of any
action, suit or proceeding relating to a third party claim for which
indemnification pursuant to this Article XI may be sought (a "Third Party
Claim"); provided, however, that no delay on the part of the Indemnified Person
in notifying the Stockholders Representatives shall relieve the Stockholders of
any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Stockholders Representatives may, upon
written notice thereof to the Indemnified Person, assume control of the defense
of such action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Person, provided the Stockholders Representatives acknowledge in
writing to the Indemnified Person that any damages, fines, costs or other
liabilities that may be assessed against the Indemnified Person in connection
with such action, suit or proceeding constitute Damages for which the
Indemnified Person shall be entitled to indemnification pursuant to this Article
XI. If the Stockholders Representatives do not so assume control of such
defense, the Indemnified Person shall control such defense. The party not
controlling such defense may participate therein at its own expense; provided
that if the Stockholders Representatives assume control of such defense and the
Indemnified Person reasonably concludes that the indemnifying parties and the
Indemnified Person have conflicting interests or different defenses available
with respect to such action, suit or proceeding, the reasonable fees and
expenses of counsel to the Indemnified Person shall be considered "Damages" for
purposes of this Agreement. The party controlling such defense shall keep the
other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The Indemnified Person shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Stockholders Representatives, which shall not be unreasonably withheld.
The Stockholders Representatives shall not agree to any settlement of such
action, suit or proceeding without the prior written consent of the Indemnified
Person, which shall not be unreasonably withheld except as provided in Section
11.02(d).
(c) Notwithstanding anything to the contrary in this Section
11.02, should any claim hereunder involve a situation where an Indemnified
Person reasonably anticipates that part of the claim will be borne by it due to
(i) the Basket or (ii) the Damages from such claim exceeding the Indemnification
Escrow Fund, the Indemnified Person and the Stockholders Representatives shall
jointly consult and proceed as to any such claim.
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(d) Notwithstanding anything to the contrary in this Section
11.02, the Stockholders Representatives shall not settle or compromise any claim
or action without the express written consent of the Indemnified Person, which
consent may be withheld for any reason or no reason, if such settlement involves
the issuance of injunctive or other forms of non-monetary relief, binding upon
the Indemnified Person, or a plea of guilty or nolo contendere on the part of
any Indemnified Person in any criminal or quasi-criminal proceeding or which has
any collateral estoppel effect on the Indemnified Person.
(e) Notwithstanding anything to the contrary in this Section
11.02, the Stockholders Representatives shall not be entitled to assume control
of any Third Party Claim (and the reasonable fees and expenses of counsel
retained by the Indemnified Person shall be included within the Damages relating
to the claim) if (i) the Indemnified Person reasonably believes an adverse
determination with respect to the action, lawsuit, investigation, proceeding or
other claim giving rise to such claim for indemnification would be detrimental
in any material respect to or injure in any material respect the Indemnified
Person's reputation or future business prospects or (ii) the claim seeks an
injunction or equitable relief against the Indemnified Person. With respect to
the actions, lawsuits, investigations, proceedings and other claims that are the
subject to this Section 11.02(d), the Stockholders Representatives shall have
the right to retain their own counsel (but the expense of such counsel shall be
at the expense of the Stockholders Representatives) and participate therein, and
the Stockholders shall not be liable for any settlement of any such action,
proceeding or claim without the Stockholders Representatives' written consent
(which consent shall not be unreasonably withheld).
(f) Notwithstanding anything to the contrary in this Section
11.02, the Indemnified Persons shall not settle or compromise any claim or
action without the express written consent of the Stockholders Representatives,
which consent may be withheld for any reason or no reason, if such settlement
involves the issuance of injunctive or other forms of non-monetary relief,
binding upon any Stockholder, or a plea of guilty or nolo contendere on the part
of any Stockholder in any criminal or quasi-criminal proceeding or which has any
collateral estoppel effect on any Stockholder.
11.03 Survival. The representations, warranties and covenants of
the Company set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until the date
that is 18 months after the Closing Date and shall not be affected by any
examination made for or on behalf of MergerCo or the knowledge of any of
MergerCo's officers, directors, stockholders, employees or agents.
Notwithstanding the foregoing, (i) the representations and warranties contained
in Section 3.17 shall survive the Closing and the consummation of the
transactions contemplated thereby and continue until the second anniversary of
the Closing Date; and (ii) the representations and warranties contained in
Section 3.09 shall survive the Closing and the consummation of the transactions
contemplated thereby and continue until the expiration of the applicable statute
of limitations. In addition, the Stockholders' indemnification obligations
pursuant to Sections 11.01(c), 11.01(d) and 11.01(e) above shall survive the
Closing and the consummation of the transactions contemplated thereby and
continue until December 31, 2001. If a notice is given in accordance with the
Escrow Agreement before expiration of the periods referred to in the preceding
two sentences, then
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(notwithstanding the expiration of such time period) the representation,
warranty or covenant (if applicable) and indemnification obligation applicable
to such claim shall survive until, but only for purposes of, the resolution of
such claim.
11.04 Limitations. Notwithstanding anything to the contrary herein,
(a) the aggregate liability of the Stockholders for Damages under this Article
XI shall not exceed the aggregate amount then available for such Damages in the
Indemnification Escrow Fund (including accrued interest); (b) the Stockholders
shall be liable under this Article XI for only that portion of the aggregate
Damages which exceeds $1,000,000 (the "Basket"); provided, however, that any
Damages pursuant to Section 11.01(b), (c), (d) or (e) above or resulting from a
breach of the representations and warranties of the Company in Section 3.02(a)
above shall not be subject to the Basket. Except with respect to claims based on
fraud or claims against any Stockholder by MergerCo resulting from or relating
to the matters described in Section 11.01(c) with respect to such Stockholder,
the rights of the Indemnified Person under this Article XI shall be the
exclusive remedy of the Indemnified Person with respect to claims resulting from
or relating to the matters described in Sections 11.01(c), 11.01(d) or 11.01(e)
above, any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of the Company or the Stockholders contained in this
Agreement or any other agreement, instrument or document contemplated by this
Agreement. No Stockholder shall have any right of contribution against the
Company with respect to any breach by the Company of any of its representations,
warranties, covenants or agreements.
11.05 Dispute Resolution
(a) In the event that any dispute should arise between the
Stockholders Representatives and an Indemnified Person with respect to any
matter covered by this Article XI ("Indemnification Dispute"), resolution of
such Indemnification Dispute shall be in accordance with the procedures set
forth in this Section 11.05.
(b) In the event an Indemnification Dispute remains unresolved
after 30 days of negotiation by the Indemnified Person and the Stockholders
Representatives, either the Stockholders Representatives or the Indemnified
Person may submit such Indemnification Dispute to arbitration by notifying the
other party in writing. Within 10 days after receipt of such notice, the
Stockholders Representatives and the Indemnified Person shall designate in
writing a single arbitrator knowledgeable in the matters in dispute (the
"Arbitrator") to resolve the dispute; provided, however, that if the parties
hereto cannot agree on an Arbitrator within such 10-day period, the Arbitrator
shall be selected by the Boston, Massachusetts office of the American
Arbitration Association. The Arbitrator so designated shall not be an Affiliate,
employee, consultant, officer, director or stockholder of the Company, its
Subsidiaries, MergerCo, or the Fund.
(i) Within 15 days after the designation of the Arbitrator,
the Stockholders Representatives and the Indemnified Person shall deliver to the
Arbitrator in writing all disputed issues and a proposed ruling on each such
issue.
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(ii) The Arbitrator shall set a date for a hearing, which
shall be no later than 30 days after the submission of written proposals
pursuant to Section 11.05(b)(i) above, to discuss each of the issues identified
by the Stockholder Representatives and the Indemnified Person. Each such party
shall have the right to be represented by counsel. The arbitration shall be
governed by the Commercial Arbitration Rules of the American Arbitration
Association; provided, however, that the Federal Rules of Evidence shall govern
the admissibility of evidence.
(iii) The Arbitrator shall use his best efforts to rule
on each disputed issue within 30 days after the completion of such hearings. In
the absence of fraud, the determination of the Arbitrator as to the resolution
of any dispute shall be binding and conclusive upon all parties hereto. All
rulings of the Arbitrator shall be in writing and shall be delivered to the
parties.
(iv) Any attorneys' fees of the parties in any arbitration
shall be borne by the parties as determined by the Arbitrator, together with the
fees of the Arbitrator and the costs and expenses of the arbitration.
(v) Any arbitration pursuant to this Section 11.05 shall
be conducted in Boston, Massachusetts. Any arbitration award may be entered in
and enforced by any court having jurisdiction thereover and shall be final and
binding upon the parties.
11.06 Indemnification for Pre-Closing Taxes. From and after the
Effective Time, the Stockholders agree to indemnify the Surviving Corporation
against all Taxes imposed on the Company or its Subsidiaries with respect to any
Tax period or portion thereof that ends on or before the Closing Date; provided,
however, that the Stockholders shall be liable only to the extent that such
Taxes are in excess of the amount reserved for Tax liability shown on the face
of the Closing Balance Sheet. For purposes of this section in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Tax period ending on the Closing Date shall (x)
in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days in the Tax
period ending on the Closing Date and the denominator of which is the number of
days in the entire Tax period, and (y) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant Tax period ended on the Closing Date. Any credits
relating to a Tax period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Tax period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company and its Subsidiaries. Any amounts payable by the Stockholders hereunder
(i) shall be Damages for purposes of Article XI, (ii) shall not be subject to
the Basket and (iii) shall be payable only out of, and subject to, the
Indemnification Escrow Fund.
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ARTICLE XII
MISCELLANEOUS
12.01 Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns and, to the extent specified herein,
their respective Affiliates; provided, however, that the provisions of Section
10.01 are intended for the benefit of the entities and individuals specified
therein and their respective legal representatives, successors and assigns.
12.02 Action to be Taken by Affiliates. Each of the parties shall
cause its Affiliates to comply with any of the obligations specified in this
Agreement to be performed by such Affiliates. .
12.03 Entire Agreement. This Agreement (including the documents
referred to herein) and the Confidentiality Agreement constitute the entire
agreement between MergerCo and its Affiliates, on the one hand, and the Company
and the Stockholders and their Affiliates, on the other. This Agreement
supersedes any prior understandings, agreements, or representations by or
between MergerCo and its Affiliates, on the one hand, and the Company, the
Stockholders and their Affiliates, on the other, whether written or oral, with
respect to the subject matter hereof (other than the Confidentiality Agreement).
12.04 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. Except for the assignment by the Surviving
Corporation of its rights or interests hereunder after the Closing to one or
more of its lenders for collateral security purposes, no party may assign either
this Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the Company and MergerCo.
12.05 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.06 Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.07 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered one
business day after it is sent by (i) a reputable courier service guaranteeing
delivery within one business day or (ii) telecopy, provided electronic
confirmation of successful transmission is received by the sending party and a
confirmation copy is sent on the same day as the telecopy transmission by
certified mail, return receipt requested, in each case to the intended recipient
as set forth below:
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If to the Company Globe Manufacturing Co.
or the Surviving Corporation: 456 Bedford Street
Fall River, MA 02720
Attention: President
Telephone: (508) 674-3585
Telecopy: (508) 679-9458
Copy notices to the Hale and Dorr LLP
Company to: 60 State Street
Boston, MA 02109
Attention: John A. Burgess, Esq.
Telephone: (617) 526-6000
Telecopy: (617) 526-5000
Copy notices to the
Surviving Corporation to: Code, Hennessy & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Attention: Peter Gotsch
Telephone: (312) 876-1840
Telecopy: (312) 876-3854
Copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie, Esq.
Telephone: (312) 861-2210
Telecopy: (312) 861-2200
If to MergerCo: Globe Acquisition Company
c/o Code, Hennessy & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Attention: Peter Gotsch
Telephone: (312) 876-1840
Telecopy: (312) 876-3854
Copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie, Esq.
Telephone: (312) 861-2210
Telecopy: (312) 861-2200
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If to the Stockholders Goldman Sachs & Co.
Representatives: 85 Broad Street
New York, NY 10004
Attention: John Bu
Telephone: (212) 902-1000
Telecopy: (212) 902-3000
Globe Manufacturing Co.
456 Bedford Street
Fall River, MA 02720
Attention: Thomas A. Rodgers, III
Telephone: (508) 674-3585
Telecopy: (508) 674-3580
Copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: John A. Burgess, Esq.
Telephone: (617) 526-6000
Telecopy: (617) 526-5000
Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
Attention: Ben Adler, Esq.
Telephone: (212) 902-1000
Telecopy: (212) 902-3000
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the party for whom
it is intended. Any party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other parties notice in the manner herein set forth.
12.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction)
that would cause the application of laws of any jurisdiction other than those of
the Commonwealth of Massachusetts.
12.09 Amendments and Waivers. The parties may mutually amend or waive
any provision of this Agreement at any time. No amendment or waiver of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Company,
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MergerCo and the Stockholders Representatives. No waiver by any party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
12.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the body making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
12.11 Expenses. Except as otherwise specifically provided to the
contrary in this Agreement, each of the parties shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
12.12 Specific Performance. Each of the parties acknowledges and
agrees that the other parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter.
12.13 Submission to Jurisdiction. Each of the parties, (a) submits to
the jurisdiction of any state or federal court sitting in the Commonwealth of
Massachusetts in any action or proceeding arising out of or relating to this
Agreement, (b) agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court, and (c) agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the parties, waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and any defense of improper
venue. Each of the parties, may make service on any other party by sending or
delivering a copy of the process to the entity to be served at the address and
in the manner provided for the giving of notices in Section 12.07. Nothing in
this Section 12.13, however, shall affect the right of any party to serve legal
process in any other manner permitted by law.
12.14 Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Any reference to any federal, state, local, or
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foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
12.15 Acknowledgements by MergerCo. MergerCo acknowledges that it has
conducted to its satisfaction an independent investigation and verification of
the financial condition, results of operations, assets, liabilities, properties
and projected operations of the Company and its Subsidiaries and, in making its
determination to proceed with the transactions contemplated by this Agreement,
MergerCo has relied on the results of its own independent investigation and
verification and the representations and warranties of the Company expressly and
specifically set forth in Article III of this Agreement, including the
Disclosure Schedules (and any updates thereto). SUCH REPRESENTATIONS AND
WARRANTIES BY THE COMPANY CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY TO MERGERCO IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, AND MERGERCO UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL
OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESSED OR IMPLIED
(INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL
FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY
AND ANY SET FORTH IN THE DESCRIPTIVE MEMORANDUM PREVIOUSLY DELIVERED TO
MERGERCO) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY AND THE STOCKHOLDERS.
12.16 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
12.17 Facsimile Signature. This Agreement may be executed by
facsimile signature.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
(Corporate Seal) GLOBE ACQUISITION COMPANY
ATTEST
/s/ Peter M. Gotsch
______________________________
Name: Peter M. Gotsch
Title: President
/s/ Edward M. Lhee
______________________
Assistant Secretary
(Corporate Seal) GLOBE MANUFACTURING CO.
ATTEST
/s/ Thomas A. Rodgers, Jr.
______________________________
Thomas A. Rodgers, Jr.
Chairman and Treasurer
/s/ Lawrence R. Walsh
______________________
(Corporate Seal) GLOBE MANUFACTURING CO.
ATTEST
/s/ Thomas A. Rodgers, III
______________________________
Thomas A. Rodgers, III
President
/s/ Lawrence R. Walsh
______________________
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The undersigned, being the duly elected Secretary of MergerCo, hereby
certifies that this Agreement has been adopted by two-thirds of the votes
represented by the outstanding shares of capital stock of MergerCo entitled to
vote on this Agreement.
/s/ Edward M. Lhee
________________________________
Assistant Secretary
The undersigned, being the duly elected Clerk of the Company, hereby
certifies that this Agreement has been adopted by a majority of the votes
represented by the outstanding Shares entitled to vote on this Agreement.
/s/ Lawrence R. Walsh
________________________________
Assistant Clerk
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THE INFORMATION PROVIDED IN THE SCHEDULES, ATTACHMENTS AND DISCLOSURE SCHEDULE
TO THE AGREEMENT AND PLAN OF MERGER IS SUMMARIZED. FURTHER INFORMATION WILL BE
FURNISHED UPON REQUEST.
SCHEDULE I
Schedule I contains a list of stockholders and the number of shares of stock,
options and warrants held by each stockholder prior to the merger.
SCHEDULE II
Globe Manufacturing Co.
List of Outstanding Options and Warrants
Schedule II contains a list of outstanding options and warrants prior to the
merger.
EXHIBIT A
Form of Articles of Organization of the Surviving Corporation
EXHIBIT B
Form of Escrow Agreement
EXHIBIT C
Form of Non-Competition Agreement
ATTACHMENT 5.04
Attachment 5.04 lists the representative of MergerCo permitted to have access to
the Company.
DISCLOSURE SCHEDULE
FOR
AGREEMENT AND PLAN OF MERGER
Section 3.01 lists the Board of Directors and Officers of the Company and its
Subsidiaries and the Subsidiaries' jurisdictions of organization.
Section 3.02 lists the outstanding or authorized options, warrants, rights,
agreements or commitments of the Company for the issuance, disposition or
acquisition of any of its capital stock and the authorized, issued and
outstanding capital stock of each of the Company's Subsidiaries.
Section 3.03 indicates "None."
Section 3.04 lists the effects of the Agreement and Plan of Merger on certain
agreements of the Company or its Subsidiaries.
Section 3.05 indicates "None."
Section 3.06 list the Indebtedness of the Company or its Subsidiaries.
Section 3.07 lists exceptions to the items listed under Absence of Certain
Changes.
Section 3.08 indicates "None."
Section 3.09 lists tax audits and filings for extensions.
Section 3.10 lists Security Interests.
Section 3.11 lists real property owned or leased by the Company or its
Subsidiaries and the Construction Budget for the Tuscaloosa, Alabama facility.
Section 3.12 lists patents, trademarks, registered copyrights, trade names and
service marks (and any applications therefor) of the Company or its
Subsidiaries.
Section 3.13 lists exceptions to the statements in Section 3.13 of the
Agreement.
Section 3.14 lists litigation and complaints pending or threatened against the
Company or its Subsidiaries.
Section 3.15 indicates "None."
Section 3.16 lists Employee Benefit Plans of the Company and its Subsidiaries.
Section 3.17 lists exceptions to the environmental representations and contains
a list of required permits, licenses, and approvals.
Section 3.18 indicates "See Section 3.17."
Section 3.19 indicates "None."
Section 3.20 lists each insurance policy maintained by the Company or its
Subsidiaries.
Section 3.21 indicates "None."
Section 3.22 lists indebtedness to and from Officers, Directors and Stockholders
and other affiliate transactions.
Section 3.23 indicates "None."
Section 3.24 lists existing Powers of Attorney.
Section 3.25 indicates "None."
Section 3.6 lists customers and suppliers.
Section 3.27 indicates "None."
<PAGE>
EXHIBIT 2.2
ASSET TRANSFER AGREEMENT
ASSET TRANSFER AGREEMENT made as of July 29, 1998, by and among Globe
Elastic Co., Inc., an Alabama corporation with its principal office at 1301
Industrial Park Drive, Tuscaloosa, Alabama 35406 (the "Transferee"), and Globe
Manufacturing Co., a Massachusetts corporation with its principal office at 456
Bedford Street, Fall River, Massachusetts 02720 (the "Transferor").
Preliminary Statement
The Transferee desires to acquire from the Transferor, and the Transferor
desires to transfer to the Transferee, all of the assets and business of the
Transferor (which assets and business relate to the manufacture and sale of
elastomeric threads and fibers (the "Business")), and in connection with such
acquisition, the Transferee will assume substantially all of the Transferor's
liabilities, all on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Contribution and Delivery of the Assets
1.1 Delivery of the Assets. Subject to and upon the terms and
conditions of this Agreement, at the closing of the transactions contemplated by
this Agreement (the "Closing"), the Transferor shall contribute, transfer,
convey, assign and deliver to the Transferee, and the Transferee shall acquire
from the Transferor, all of the Transferor's properties, assets and other
claims, rights and interests (collectively, the "Assets"), including without
limitation, the following:
(i) all inventories, finished goods, office supplies, maintenance
supplies, packaging materials, spare parts and similar items of the Transferor
(collectively, the "Inventory") which exist on the Closing Date (as defined
below);
(ii) all accounts, accounts receivable, notes and notes receivable
existing on the Closing Date which are payable to the Transferor, including any
security held by the Transferor for the payment thereof (the "Accounts
Receivable");
(iii) all prepaid expenses, deposits, bank accounts and other similar
assets of the Transferor existing on the Closing Date, including the cash
represented by such assets;
<PAGE>
(iv) all rights of the Transferor under all of the contracts, agreements,
leases, licenses and other instruments to which the Transferor is a party,
including without limitation those contracts set forth on Schedule 1 attached
hereto (collectively, the "Contract Rights");
(v) all books, records and accounts, correspondence, manuals, customer
lists, employment records, studies, reports or summaries relating to or arising
out of the Business;
(vi) all rights of the Transferor under express or implied warranties
from the suppliers of the Transferor;
(vii) all of the machinery, equipment, furniture, leasehold or feehold
improvements and construction in progress owned by the Transferor on the Closing
Date, which are reflected as "fixed assets" or "capital assets" in the
accounting records of the Transferor (collectively, the "Fixed Assets");
(viii) all of the Transferor's right, title and interest in and to all
intangible property rights, including but not limited to inventions,
discoveries, trade secrets, processes, formulas, know-how, United States and
foreign patents, patent applications, trade names, including without limitation
the names "Glospan" and "Cleerspan" or any derivation thereof, trademarks,
trademark registrations, applications for trademark registrations, copyrights,
copyright registrations, owned or, where not owned, used by the Transferor in
its business and all licenses and other agreements to which the Transferor is a
party (as licensor or licensee) or by which the Transferor is bound relating to
any of the foregoing kinds of property or rights to any "know-how" or disclosure
or use of ideas (collectively, the "Intangible Property");
(ix) all of the Transferor's right, title and interest in and to its real
properties, including without limitation, its real properties situated in Fall
River, Massachusetts and Gastonia, North Carolina (and all associated fixtures,
improvements and personal property); and
(x) all other assets, properties, claims, rights and interests of the
Transferor which exist on the Closing Date, of every kind and nature and
description, whether tangible or intangible, real, personal or mixed.
Notwithstanding the foregoing, the Assets shall not include shares of
capital stock in Transferee which are owned by Transferor, or the rights of
Transferor under the agreements listed on Schedule 2 hereto.
1.2 Further Assurances. At any time and from time to time after the
Closing, at the Transferee's request and without further consideration, the
Transferor promptly shall execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take such other action,
as the Transferee may reasonably request to more effectively transfer, convey
and assign to the Transferee, and to confirm the Transferee's title to, all of
the Assets, to put the Transferee in actual possession and operating control
thereof, to assist the Transferee in
-2-
<PAGE>
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.3 Assumption of Liabilities; Bill of Sale Etc. At the Closing, the
Transferee shall execute and deliver an Instrument of Assumption, substantially
in the form attached hereto as Exhibit A, pursuant to which it shall assume and
agree to perform, pay and discharge all of the liabilities, obligations and
commitments of the Transferor other than the Excluded Liabilities described
below (all such liabilities to be assumed, the "Assumed Liabilities"), which
shall include, but not be limited to, the following:
(i) All obligations of the Transferor continuing after the Closing under
the leases and contracts of the Business, including without limitation the
contracts set forth on Schedule 1 attached hereto;
(ii) Accounts payable incurred by Transferor for purchase of supplies or
otherwise and all of Transferor's other accrued expenses;
(iii) All liabilities of the Transferor under outstanding purchase orders
from Transferor's customers;
(iv) All obligations and liabilities of Transferor associated with the
operation of its facilities in Fall River, Massachusetts, and Gastonia, North
Carolina, including without limitation, obligations under all applicable
federal, state and local environmental permits (Transferee hereby assuming all
of the obligations under such permits and agreeing to be bound by the terms and
conditions thereof); and
(v) All obligations and liabilities of Transferor in respect of
Transferor's employee benefit, bonus, medical and other benefit plans, and other
compensation obligations related to Transferor's employees and executive
officers.
Notwithstanding the foregoing, the parties hereby agree and acknowledge
that the Assumed Liabilities will not include certain of Transferor's
liabilities which will be repaid or otherwise satisfied in full on or about the
Closing Date, or which will otherwise remain liabilities of the Transferor, and
which liabilities are listed on Schedule 2 attached hereto (the "Excluded
Liabilities").
At the Closing the Transferor shall deliver to the Transferee a Bill of
Sale, substantially in the form attached hereto as Exhibit B, pursuant to which
Transferor shall convey to Transferee the Assets.
1.4 The Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place on or before the date on which the closing of
the transactions contemplated by that certain Agreement and Plan of Merger dated
June 23, 1998, by and between
-3-
<PAGE>
the Transferor and Globe Acquisition Company (the "Merger Agreement") occurs, at
the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109,
at 9:00 a.m., or at such other place, time and date as may be mutually
determined by Transferee and the Transferor. The transfer of the Assets by the
Transferor to the Transferee shall be deemed to occur at 9:00 a.m., Boston time,
on the date of the Closing (the "Closing Date").
2. No Representations or Warranties. The Assets to be transferred
pursuant to and in accordance with this Agreement are to be transferred "as is",
and neither party is making any express or implied representation or warranty to
the other as to the Assets, their condition, the Assumed Liabilities, or as to
any other matter.
3. Termination of Agreement. This Agreement shall terminate at 5:00
p.m., Boston time, on September 30, 1998, if the transactions contemplated
hereby have not been consummated by such date, unless such date is extended by
the written consent of all of the parties hereto. In the event of any such
termination, the Transferee shall have no further obligation or liability to the
Transferor under this Agreement, and the Transferor shall have no further
obligation or liability to the Transferee under this Agreement.
4. Transfer and Sales Tax. Notwithstanding any provisions of law
imposing the burden of such taxes on the Transferor or the Transferee, as the
case may be, the Transferee shall be responsible for and shall pay (a) all
sales, use and transfer taxes, and (b) all governmental charges, if any, upon
the sale or transfer of any of the Assets hereunder.
5. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by federal
express or other reputable overnight courier, registered or certified mail,
postage prepaid, addressed as follows or to such other address of which the
parties may have given notice:
To the Transferor: Globe Manufacturing Co.
456 Bedford Street
Fall River, Massachusetts 02720
To the Transferee: Globe Elastic Co., Inc.
1301 Industrial Park Drive
Tuscaloosa, AL 35406
With a copies to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: John H. Chory, Esq.
Code, Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
-4-
<PAGE>
Chicago, IL 60606
Attn: Peter Gotsch, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally; (b) one
business day after delivery to an overnight courier, if sent by overnight
courier; or (c) three business days after being sent, if sent by registered or
certified mail.
6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Transferee and the Transferor may not assign their
respective obligations hereunder without the prior written consent of the other
party.
7. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Transferee and the Transferor may amend or modify
this Agreement, in such manner as may be agreed upon, by a written instrument
executed by the Transferee and the Transferor, provided that the parties shall
notify Code, Hennessy & Simmons LLC of any amendment to this Agreement proposed
to be made by the parties hereto (to the extent reasonably practicable, not less
than 48 hours in advance of the execution thereof), and shall provide to Code,
Hennessy & Simmons LLC, at the address indicated above, a copy of any amendment
hereto.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
9. Section Headings. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.
-5-
<PAGE>
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
TRANSFEROR:
GLOBE MANUFACTURING CO.
By: /s/ Lawrence R. Walsh
----------------------------------------------
Name: Lawrence R. Walsh
--------------------------------------------
Title: Vice President, Finance and Administration
-------------------------------------------
TRANSFEREE:
GLOBE ELASTIC CO., INC.
By: /s/ Lawrence R. Walsh
----------------------------------------------
Name: Lawrence R. Walsh
-------------------------------------------
Title: Vice President, Finance and Administration
-------------------------------------------
-6-
<PAGE>
Schedule 1
Material Contracts
Supply arrangement between BASF Company and Globe Manufacturing Co.
Energy Services Agreement by and between Globe Manufacturing Co. and EUA
Cogenex Corp., dated March 15, 1988 relating to lease of certain energy services
equipment; EUA Cogenex Corp. sold this contract to Ridgewood Power Corp. on or
about December 18, 1995.
Split Dollar Insurance Arrangement and a Supplemental Executive
Compensation Plan.
Employment contracts with the following members of Transferor's senior
management: Thomas A. Rodgers, III, Americo Reis, Robert Bailey and Lawrence
Walsh.
-7-
<PAGE>
Schedule 2
Excluded Liabilities
1. Liabilities of the Transferor under the Amended and Restated Credit
Agreement with Fleet National Bank in its capacity as agent for certain lenders
for a $72,000,000 term loan (dated April 16, 1997), as amended by the First
Amendment to the Amended and Restated Credit Agreement with Fleet National Bank
in its capacity as agent for certain lenders for a $14,000,000 term loan (dated
February 12, 1998). Such liabilities will be discharged on or before the closing
of the transactions contemplated by the Merger Agreement.
2. Liabilities of the Transferor Stock and Warrant Purchase and
Recapitalization Agreement, dated December 21, 1992 by and among the Transferor
and certain stockholders.
3. Junior Subordinated Notes (a) to be issued by the Transferor to those
persons who are (or will become) Class C stockholders of the Transferor, and (b)
to be assumed by Transferor from Globe Acquisition Company, in connection with
the consummation of the transactions contemplated by the Merger Agreement.
-8-
<PAGE>
Exhibit A
Form of Instrument of Assumption
-9-
<PAGE>
Exhibit B
Form of Bill of Sale
-10-
<PAGE>
Exhibit 2.3
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
----------------------------
This is Amendment No. 1 dated as of July 17, 1998 (the "Amendment") to the
AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"), dated as of June 23,
1998, by and between Globe Manufacturing Co., a Massachusetts corporation (the
"Company"), and Globe Acquisition Company, a Delaware Corporation ("MergerCo").
Any capitalized term used herein and not otherwise defined shall have the
meaning ascribed to it in the Merger Agreement.
WHEREAS, each party to the Merger Agreement deems this Amendment advisable
and in its best interest and the Stockholders Representatives deem this
Amendment advisable and in the best interest of the stockholders of the Company;
NOW, THEREFORE, in consideration of the foregoing and other good and
sufficient consideration, the undersigned agree as follows:
1. The second to the last sentence of paragraph (c) of Section 2.01 of
the Merger Agreement shall be deleted and replaced in its entirety by the
following:
"For purposes of this Agreement, "Class C Merger Consideration" shall
equal 10 shares of Recapitalized Common Stock and a junior
subordinated note in an aggregate principal amount equal to the
product of (i) the Cash Merger Consideration and (ii) a fraction, the
numerator of which is 55 and the denominator of which is 75 and with
terms and conditions identical to the junior subordinate notes issued
immediately prior to the Effective time by MergerCo to the Fund (it
being understood that the securities constituting the Class C Merger
Consideration will be issued at the same price and in the same
proportion or "strip" as the comparable securities are issued to the
Fund)."
2. Paragraph (a) of Section 2.03 of the Merger Agreement shall be deleted
and replaced in its entirety by the following:
" (a) The Company shall take all actions necessary or appropriate
to cause all of the warrants to purchase Company Common Stock
(individually, a "Company Warrant" and collectively, the "Company
Warrants") to be delivered to the Company prior to the Closing Date by
the respective holder of the Company Warrants set forth on Schedule II
attached hereto. As of the Effective Time, by virtue of the Merger
and without any action on the part of the holder, each Company Warrant
so delivered shall be converted into the right to receive the Merger
Consideration for each share of Company Common Stock
<PAGE>
otherwise issuable upon exercise of such Company Warrant, less the
exercise price thereunder. Any Company Warrants not so delivered
prior to the Closing will represent the right to receive the Merger
Consideration upon exercise after the Effective Time. Each share of
Company Common Stock issuable upon exercise of Company Warrants shall
be deemed to be issued and outstanding for purposes of determining
OSCS."
3. Clause (ii) of Paragraph (d) of Section 11.01 of the Merger Agreement
shall be deleted and replaced in its entirety by the following:
"(ii) civil or criminal antitrust claims or investigations associated
with rubber thread and/or P.T. Bakrie Rubber Industry ("BRT") to the
extent related to acts or omissions prior to the Effective Time, in
the case of each of (i) and (ii), including, without limitation, civil
or criminal fines or penalties assessed against the Surviving
Corporation or its officers, directors or employees, and/or"
4. This Agreement may be executed by facsimile signature and in
counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of July
17, 1998.
GLOBE ACQUISITION COMPANY
/s/ PETER M. GOTSCH
---------------------------------
Name: Peter Gotsch
Title: President
(Corporate Seal)
ATTEST
/s/ EDWARD M. LHEE
- -----------------------------
Assistant Secretary
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<PAGE>
(Corporate Seal) GLOBE MANUFACTURING CO.
/s/ THOMAS A. RODGERS, III
ATTEST --------------------------------
Thomas A. Rodgers, III
President
/s/ LAWRENCE R. WALSH
- --------------------------------
STOCKHOLDERS REPRESENTATIVES
/s/ THOMAS A. RODGERS, III
ATTEST ---------------------------------
Thomas A. Rodgers, III
/s/ LAWRENCE R. WALSH
- ---------------------------------
/s/ JOHN BU
ATTEST ---------------------------------
John Bu
/s/ illegible
- ---------------------------------
-3-
<PAGE>
Exhibit 2.4
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
----------------------------
This is Amendment No. 2 dated as of July 30, 1998 (the "Amendment") to the
AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"), dated as of June 23,
1998, by and between Globe Manufacturing Co., a Massachusetts corporation (the
"Company"), and Globe Acquisition Company, a Delaware corporation ("MergerCo").
Any capitalized term used herein and not otherwise defined shall have the
meaning ascribed to it in the Merger Agreement.
WHEREAS, each party to the Merger Agreement deems this Amendment advisable
and in its best interest and the Stockholders Representatives deem this
Amendment advisable and in the best interest of the stockholders of the Company;
NOW, THEREFORE, in consideration of the foregoing and other good and
sufficient consideration, the undersigned agree as follows:
1. The first sentence of paragraph (a) of Section 2.02 of the Merger
Agreement shall be deleted and replaced in its entirety by the following:
" (a) With respect to any certificate or certificates, which
immediately prior to the Effective Time represented outstanding shares
of Company Common Stock or Class C Stock (other than Dissenting Shares
and shares held by the Company) (the "Certificates") and are delivered
at the Closing, the Surviving Corporation will, with respect to
Certificates representing shares of Company Common Stock, pay by check
or by wire transfer immediately after the Effective Time the Cash
Merger Consideration per share to the holder thereof or a Stockholders
Representative (or an agent of a Stockholders Representative) and,
with respect to Certificates representing shares of Class C Stock,
deliver the Class C Merger Consideration per share."
2. The last sentence of Paragraph (b) of Section 2.03 of the Merger
Agreement shall be deleted and replaced in its entirety by the following:
"To the extent any Contingent Merger Consideration is distributed to
the Stockholders Representatives with respect to any such shares after
the Effective Time, such amount shall be delivered to the Surviving
Corporation until the exercise of such Company Stock Option, at which
time such amounts shall be delivered to the person exercising such
Company Stock Option."
<PAGE>
3. The following sentence shall be added as the second sentence to
paragraph (b) of Section 2.01.
"Each issued and outstanding share of MergerCo's Class A Preferred
Stock, par value $.01 per share, shall become one fully paid and
nonassessable share of the Company's newly authorized Class A
Preferred Stock, par value $.01 per share."
4. The second to the last sentence of paragraph (c) of the Section 2.01
of the Merger Agreement shall be deleted and replaced in its entirety by the
following:
"For purposes of this Agreement, "Class C Merger Consideration" shall
equal 10 shares of Recapitalized Common Stock and a number of shares
of the Company's newly authorized Class A Preferred Stock, par value
$.01 per share, equal to the result of (i) the product of (x) the Cash
Merger Consideration and (y) 0.6 divided by (ii) 1,000 and with the
terms and conditions identical to the preferred stock issued
immediately prior to the Effective Time by MergerCo to the Fund (it
being understood that the securities constituting the Class C Merger
Consideration will be issued at the same price and in the same
proportion or "strip" as the comparable securities are issued to the
Fund)."
5. This Agreement may be executed by facsimile signature and in
counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of July
30, 1998.
(Corporate Seal) GLOBE ACQUISITION COMPANY
ATTEST
/s/ Peter M. Gotsch
_______________________________
Name: Peter Gotsch
Title: President
/s/ Edward M. Lhee
________________________
Assistant Secretary
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<PAGE>
(Corporate Seal) GLOBE MANUFACTURING CO.
ATTEST
/s/ Thomas A. Rodgers, III
________________________________
Thomas A. Rodgers, III
President
/s/ Lawrence R. Walsh
________________________________
STOCKHOLDERS REPRESENTATIVES
ATTEST
/s/ Thomas A. Rodgers, III
____________________________________
Thomas A. Rodgers, III
/s/ Lawrence R. Walsh
_________________________________
ATTEST
/s/ John Bu
____________________________________
John Bu
_________________________________
-3-
<PAGE>
Exhibit 2.5
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT (the "Agreement") is made as of July 31, 1998
by and among Globe Acquisition Company, a Delaware corporation ("MergerCo"),
Code, Hennessy & Simmons III, L.P., a Delaware limited partnership ("CHS"), and
each of the other Persons listed on Schedule A attached hereto (collectively,
CHS and the other Persons listed on Schedule A are referred to sometimes herein
as the "Purchasers"). Except as otherwise indicated herein, capitalized terms
used herein are defined in Section 4 hereof.
This Agreement contemplates a transaction in which MergerCo will sell,
and the Purchasers will purchase in the aggregate, 1,943,044 shares of
MergerCo's Class A Common Stock, par value $0.01 per share (the "Common Stock")
and 25,680 shares of MergerCo's Class A Preferred Stock, par value $0.01 per
share (the "Preferred Stock").
This Agreement contemplates that pursuant to the Agreement and Plan of
Merger, dated as of June 23, 1998 (the "Merger Agreement"), by and between Globe
Holdings, Inc., a Massachusetts corporation formerly known as Globe
Manufacturing Co. (the "Company"), and MergerCo, the Common Stock purchased
pursuant to this Agreement shall be converted into Recapitalized Class A Stock
(as defined in Section 2B) and the Preferred Stock purchased pursuant to this
Agreement shall be converted into Recapitalized Preferred Stock (as defined in
Section 2B).
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Securities. MergerCo shall authorize the
issuance and sale to each Purchaser of the number of shares of Common Stock and
the number of shares of Preferred Stock set forth across from such Purchaser's
name on Schedule A attached hereto ("Schedule A"). The Common Stock and the
Preferred Stock are collectively referred to herein as the "Securities."
1B. Purchase and Sale of the Securities. At the Closing, MergerCo
shall sell to the Purchasers and, on the terms and subject to the conditions set
forth herein, the Purchasers shall purchase from MergerCo the shares of Common
Stock (at a price equal to $8.90256 per share) and the shares of Preferred Stock
(at a price equal to $1,000 per share), in each case in the amounts and at the
purchase prices set forth on Schedule A.
<PAGE>
1C. The Closing. The closing of the purchases and sales of the
Securities (the "Closing") shall take place at the offices of Winston & Strawn,
35 West Wacker Drive, Chicago, Illinois at 10:00 a.m. on the date hereof, or at
such other place or on such other date as may be mutually agreeable to MergerCo
and CHS. At the Closing, MergerCo shall deliver to each Purchaser stock
certificates evidencing the Securities to be purchased by such Purchaser, and
each Purchaser shall deliver to MergerCo a cashier's check or wire transfer of
immediately available funds to a bank account designated by MergerCo in the
amount set forth next to such Purchaser's name on Schedule A.
Section 2. Representations and Warranties of MergerCo. As a material
inducement to the Purchasers to enter into this Agreement and purchase the
Securities, MergerCo hereby represents and warrants that:
2A. Organization and Corporate Power. MergerCo is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify. MergerCo has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement.
2B. Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the authorized
capital stock of MergerCo shall consist of 3,500,000 shares of Common Stock, of
which 1,923,044 shares shall be issued and outstanding, and 40,000 shares of
Preferred Stock, of which 25,680 shares shall be issued and outstanding. As of
the Closing, MergerCo shall not have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or containing
any profit participation features, nor shall it have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any stock
appreciation rights or phantom stock plans. As of the Closing, MergerCo shall
not be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock, except pursuant to the
Merger Agreement. As of the Closing, all of the outstanding shares of MergerCo's
capital stock shall be validly issued, fully paid and nonassessable.
(ii) There are no statutory or, to MergerCo's knowledge, contractual
stockholders preemptive rights or rights of refusal with respect to the issuance
of the Securities hereunder. MergerCo has not violated any applicable federal or
state securities laws in connection with the offer, sale or issuance of any of
its capital stock. To MergerCo's knowledge, there are no agreements between
MergerCo's stockholders with respect to the voting or transfer of MergerCo's
capital stock except for the Merger Agreement.
-2-
<PAGE>
(iii) Immediately after the Merger (the "Effective Date"), the
authorized capital stock of the Company shall consist of 5,000,000 shares of
Class A Common Stock (the "Recapitalized Class A Stock"), of which 2,179,150
shares shall be issued and outstanding, 350,000 shares of Class B Common Stock
(the "Recapitalized Class B Stock"), none of which shares shall be issued and
outstanding, 600,000 shares of Class C Common Stock (the "Recapitalized Class C
Stock"), none of which shares shall be issued and outstanding and 40,000 shares
of Preferred Stock (the "Recapitalized Preferred Stock"), of which 29,100 shares
shall be issued and outstanding. As of the Closing, the Company shall have
outstanding rights or options to subscribe for or to purchase 67,395 shares of
its Recapitalized Class A Stock and 900 shares of its Recapitalized Preferred
Stock. Except as otherwise set forth in the immediately preceding sentence, as
of the Effective Date the Company shall not have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor shall it have outstanding any
rights or options to subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans. As of the Effective Date, the
Company shall not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock, except pursuant
to the Merger Agreement. As of the Effective Date, all of the outstanding shares
of the Company's capital stock shall be validly issued, fully paid and
nonassessable.
2C. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Merger Agreement and all other agreements
contemplated hereby to which MergerCo is a party (the "MergerCo Agreements")
have been duly authorized by MergerCo and its stockholders. Each MergerCo
Agreement constitutes a valid and binding obligation of MergerCo, enforceable in
accordance with its terms. The execution and delivery by MergerCo of the
MergerCo Agreements, the offering, sale and issuance of the Securities
hereunder, the adoption of the Certificate of Incorporation and the fulfillment
of and compliance with the respective terms hereof and thereof by MergerCo, do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest charge or encumbrance upon
MergerCo's capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice to any court or administrative or governmental body
pursuant to, the charter or bylaws of MergerCo, or any material law, statute,
rule or regulation to which MergerCo is subject, or any material agreement,
instrument, order, judgment or decree to which MergerCo is subject.
2D. Regulatory Compliance Cooperation. Before MergerCo redeems,
purchases or otherwise acquires, directly or indirectly, or converts or takes
any action with respect to the voting rights of, any shares of any class of its
capital stock or any securities convertible into or exchange able for any shares
of any class of its capital stock (other than a redemption of Preferred Stock or
a conversion of Class C Stock, or, after the Merger, a redemption of
Recapitalized Preferred Stock or conversion of Recapitalized Class B Stock or
Recapitalized Class C Stock), MergerCo shall give written notice of such pending
action to the Purchasers. Upon the written request of any Purchaser
-3-
<PAGE>
made within 10 days after its receipt of any such notice stating that after
giving effect to such action such Purchaser would have a Regulatory Problem,
MergerCo shall defer taking such action for such period (not to extend beyond 45
days after such Purchaser's receipt of MergerCo's original notice) as such
Purchaser requests to permit it and its Affiliates to reduce the quantity of
MergerCo's securities it owns in order to avoid the Regulatory Problem. In
addition, MergerCo shall not be a party to any merger, consolidation,
recapitalization or other transaction pursuant to which any Purchaser would be
required to take any voting securities, or any securities convertible into
voting securities, which might reasonably be expected to cause such Purchaser to
have a Regulatory Problem. For purposes of this paragraph, a Person shall be
deemed to have a "Regulatory Problem" when such Person and such Person's
Affiliates would own, control or have power over a greater quantity of
securities of any kind issued by MergerCo or any other entity than are permitted
under any requirement of any governmental authority.
Section 3. Transfer of Restricted Securities.
3A. Generally. Restricted Securities are transferable only pursuant
to (a) public offerings registered under the Securities Act, (b) Rule 144 or
Rule 144A of the Securities and Exchange Commission (or any similar rule or
rules then in force) if such rule is available, and (c) subject to the
conditions specified in paragraph 3B below and, after the Merger, in the
Securityholders Agreement (as defined in Section 3C), any other legally
available means of transfer.
3B. Opinion of Counsel. In connection with the transfer of any
Restricted Securities, the holder thereof shall, at the request of MergerCo,
deliver written notice to MergerCo describing in reasonable detail the transfer
or proposed transfer, together with an opinion of Kirkland & Ellis or other
counsel which (to MergerCo's reasonable satisfaction) is knowledgeable in
securities law matters, to the effect that such transfer of Restricted
Securities may be effected without registration of such Restricted Securities
under the Securities Act. In addition, if the holder of the Restricted
Securities delivers to MergerCo an opinion of Kirkland & Ellis or such other
counsel that no subsequent transfer of such Restricted Securities shall require
registration under the Securities Act, MergerCo shall promptly upon such
contemplated transfer deliver new certificates for such Restricted Securities
which do not bear the Securities Act legend set forth in paragraph 5B. If
MergerCo is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof shall not transfer the
same until the prospective transferee has confirmed to MergerCo in writing its
agreement to be bound by the conditions contained in this paragraph and
paragraph 5B. For the avoidance of doubt, with respect to a transfer of any
Restricted Securities after the Merger, this paragraph 3B shall continue to
apply and "the Company" (or the successor thereof) shall be substituted for
"MergerCo" each place in which "MergerCo" appears in this paragraph 3B.
3C. Registration Agreement and Securityholders Agreement. Each
Purchaser hereby covenants and agrees to execute, as of the Effective Date, a
Registration Agreement substantially in the form attached hereto as Exhibit I
(the "Registration Agreement") and a
-4-
<PAGE>
Securityholders Agreement substantially in the form attached hereto as Exhibit
II (the "Securityholders Agreement").
Section 4. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" (and collectively "Affiliates") means with respect to any
Person, any other Person controlling, controlled by, or under common control
with such first Person and in the case of a Person which is a partnership, any
partner of that Person.
"Certificate of Incorporation" means MergerCo's certificate of
incorporation as in effect from time to time.
"Person" means an individual, a partnership, a corporation, a limited
liability company, association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"Restricted Securities" means (i) the Common Stock issued hereunder,
(ii) the Preferred Stock issued hereunder, (iii) any securities issued with
respect to the securities referred to in clauses (i) or (ii) above by way of an
interest payment, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 5B have been delivered by MergerCo
in accordance with paragraph 3B. Whenever any particular securities cease to be
Restricted Securities, the holder thereof shall be entitled to receive from
MergerCo, without expense, new securities of like tenor not bearing a Securities
Act legend of the character set forth in paragraph 5B.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Subsidiary" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by MergerCo either
directly or through one or more Subsidiaries.
-5-
<PAGE>
Section 5. Miscellaneous.
5A. Remedies. The Purchasers shall have all rights and remedies set
forth in this Agreement and all rights and remedies which the Purchasers have
been granted at any time under any other agreement or contract and all of the
rights which the Purchasers have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
5B. Purchasers' Investment Representations. Each Purchaser hereby
represents that he, she or it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for his, her or its own account with the
present intention of holding such securities for purposes of investment, and
that he, she or it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein shall prevent the
Purchasers and subsequent holders of Restricted Securities from transferring
such securities in compliance with the provisions of Section 3 hereof. Each
certificate for Restricted Securities shall be imprinted with a legend in
substantially the following form:
"The securities represented by this certificate were originally
issued as of July 31, 1998, have not been registered under the Securities
Act of 1933, as amended (the "Act"), and may not be sold or transferred in
the absence of an effective registration statement under the Act or an
exemption from registration thereunder. The securities represented by this
certificate are also subject to additional restrictions on transfer set
forth in the Purchase Agreement, dated as of July 31, 1998, by and among
the issuer (the "Company") and certain purchasers, as the same may be
amended from time to time. A copy of such Purchase Agreement may be
obtained by the holder hereof at MergerCo's principal place of business
without charge."
5C. Place of Payments with Respect to the Securities. All payments to
be made to a Purchaser with respect to the Securities, including, without
limitation, dividends and redemption payments, shall be delivered to the
respective address indicated on Schedule A or to such other Person or account as
a Purchaser may from time to time specify to MergerCo by prior written notice.
5D. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and MergerCo may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if MergerCo has obtained the written consent of each
Purchaser. No other course of dealing between MergerCo and any Purchaser or any
delay in exercising any rights hereunder or under the Certificate of
Incorporation shall operate as a waiver of any rights of any such Person. For
purposes of this Agreement, any Securities held by MergerCo shall not be deemed
to be outstanding.
-6-
<PAGE>
5E. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on such Purchaser's behalf.
5F. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for each Purchaser's benefit as a
purchaser of the Securities are also for the benefit of, and enforceable by, any
subsequent holder of the Securities.
5G. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
5H. Counterparts; Facsimile Signature. This Agreement may be
executed simultaneously in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same Agreement. This Agreement may be
executed by facsimile signature.
5I. Descriptive Headings; Interpretation. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
5J. Governing Law. The corporate law of the state of Delaware will
govern all questions concerning the relative rights of MergerCo and the holders
of its Securities. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Illinois.
5K. Stockholder Approval. Each of the Purchasers, as holders of all
of the outstanding Common Stock and Preferred Stock of MergerCo, agrees that
entering into this Agreement shall constitute stockholder approval of the Merger
Agreement and the transactions contemplated thereby for purposes of Sections 228
and 252 of the General Corporation Law of the State of Delaware.
5L. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be
-7-
<PAGE>
deemed to have been given when delivered personally to the recipient, sent to
the recipient by reputable express courier service (charges prepaid) or mailed
to the recipient by certified or registered mail, return receipt requested and
postage prepaid.
* * * * *
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
GLOBE ACQUISITION COMPANY
By: /s/ Peter M. Gotsch
----------------------------------
Its: President
----------------------------------
CODE, HENNESSY & SIMMONS III, L.P.
By: CHS Management III, L.P.
Its: General Partner
By: Code Hennessy & Simmons LLC
Its: General Partner
By: /s/ Peter M. Gotsch
---------------------------------
Peter M. Gotsch
Partner
/s/ Tracy A. Hogan
---------------------------------------
TRACY A. HOGAN
/s/ Marcus J. George
---------------------------------------
MARCUS J. GEORGE
/s/ Edward M. Lhee
---------------------------------------
EDWARD M. LHEE
/s/ Paige T. Walsh
---------------------------------------
PAIGE T. WALSH
BRINSON TRUST COMPANY AS TRUSTEE
FOR BRINSON MAP VENTURE CAPITAL FUND
III TRUST
By: /s/ David S. Timson
----------------------------------
Its: /s/ Trust Officer
----------------------------------
Brinson Trust Company
<PAGE>
BRINSON VENTURE CAPITAL FUND III, L.P.
By: Brinson Partners, Inc.
Its: General Partner
By: /s/ David S. Timson
---------------------------------
Its: Executive Director
---------------------------------
Brinson Partners, Inc.
VIRGINIA RETIREMENT SYSTEM
By: Brinson Partners, Inc. as Agent
For Virginia Retirement System
By: /s/ David S. Timson
---------------------------------
Its: Executive Director
---------------------------------
Brinson Partners, Inc.
BANKAMERICA INVESTMENT CORPORATION
By: /s/ Jeffrey M. Mann
---------------------------------
Its:
---------------------------------
MIG PARTNERS VII
By: /s/ Jason A. Mehring
---------------------------------
Its: General Partner
---------------------------------
<PAGE>
SCHEDULE A
----------
(Schedule of Purchasers)
------------------------
<TABLE>
<CAPTION>
Purchasers Common Stock Preferred Stock
---------- ------------ ---------------
Shares $ Per Share Shares $ Per Share
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Total 1,923,044 $ 8.90256 25,680 $ 1,000
Code, Hennessy & Simmons III, L.P. 1,647,437 $14,666,400 21,999.60 $21,999,600
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Tracy A. Hogan 1,348 $ 12,000 18 $ 18,000
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Marcus J. George 1,348 $ 12,000 18 $ 18,000
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Edward M. Lhee 1,977 $ 17,600 26.4 $ 26,400
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Paige T. Walsh 1,348 $ 12,000 18 $ 18,000
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Brinson Venture Capital Fund III, L.P. 38,631 $ 343,912 515.87 $ 515,869
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Purchasers Common Stock Preferred Stock
---------- ------------ ---------------
Shares $ Per Share Shares $ Per Share
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Brinson Trust Company as Trustee for
Brinson MAP Venture Capital Fund III
Trust 6,300 $ 56,088 84.13 $ 84,131
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
Virginia Retirement System 179,724 $ 1,600,000 2,400 $ 2,400,000
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
BankAmerica Investment Corporation 35,944.80 $ 320,000 480 $ 480,000
231 South LaSalle Street, 12th Floor
Chicago, IL 60697
MIG Partners VII 8,986.20 $ 80,000 120 $ 120,000
c/o BankAmerica Investment Corporation
231 South LaSalle Street, 12th Floor
Chicago, IL 60697
</TABLE>
<PAGE>
EXHIBIT 3.1
STATE OF ALABAMA (S).
(S). ss.
TUSCALOOSA COUNTY (S).
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
GLOBE MANUFACTURING CORP.
formerly known as
GLOBE ELASTIC CO., INC.
KNOW ALL PERSONS BY THESE PRESENTS,
That I, the undersigned Lawrence R. Walsh, Vice President, Finance and
Administration of Globe Manufacturing Corp., formerly known as Globe Elastic
Co., Inc., an Alabama business corporation, hereby certify that these Amended
and Restated Articles of Incorporation have been duly adopted in accordance with
sections 10-2B-10.06 and -10.07 of the Alabama Business Corporation Act, as
amended, and hereby deliver these Amended and Restated Articles of Incorporation
of Globe Manufacturing Corp. to the Probate Judge of Tuscaloosa County, in
accordance with section 10-2B-10.06 of said Act.
1. The name of the corporation listed in the Articles of Incorporation
filed of record in the Office of the Judge of Probate of Tuscaloosa County,
Alabama, in Incorporation Book 107, at Page 80, and amended at Incorporation
Book 110, at Page 128, is Globe Elastic Co., Inc. The name of the corporation is
being changed to Globe Manufacturing Corp. by virtue of these Amended and
Restated Articles of Incorporation.
2. These Amended and Restated Articles of Incorporation restate,
integrate, and correctly set forth the corresponding provisions of the Articles
of Incorporation as heretofore amended and these Amended and Restated Articles
of Incorporation supersede the original Articles of Incorporation and all prior
amendments thereto.
3. These Amended and Restated Articles of Incorporation contain
amendments to the articles of incorporation requiring shareholder approval.
4. The capital of the Corporation will not be reduced by reason of the
adoption of these Amended and Restated Articles of Incorporation.
5. These Amended and Restated Articles of Incorporation have been duly
adopted in accordance with sections 10-2B-10.06, -10.07, and -8.21 of the
Alabama Business Corporation Act, as amended.
6. These Amended and Restated Articles of Incorporation were adopted by
the shareholder and board of directors of Globe Elastic Co., Inc. on the 31st
day of July, 1998.
7. The number of shares of voting stock of Globe Elastic Co., Inc.
outstanding at the time of such adoption was 1,000; and the number of shares of
voting stock entitled to vote thereon was 1,000.
8. The number of shares voted for the amendment and restatement was
1,000; and the number
<PAGE>
of shares voting against such amendment and restatement was 0.
9. Because the name of the corporation is being changed by virtue of
this amendment, each shareholder shall surrender its shares to the secretary in
exchange for re-issued shares of the corporation showing the new name of the
corporation.
10. The text of the Articles of Incorporation is hereby amended and
restated to read as follows:
<PAGE>
SECTION 1. NAME OF CORPORATION
The name of the corporation shall be Globe Manufacturing Corp.
SECTION 2. PURPOSES
The nature of the business and the purposes for which the corporation
is formed shall be as follows:
SECTION 2.1 SPECIFIC PURPOSE
SECTION 2.1.1 To acquire by purchase, lease, or otherwise, and to equip,
maintain and operate one or more manufacturing facilities for the purpose of
producing items to be used in clothing and related uses, including, but not
limited to, the production of elastomeric fibers and to transact all other
lawful business for which corporations may be incorporated under the Alabama
Business Corporation Act General Powers
SECTION 2.1.2 To exercise all powers granted corporations by the Alabama
Business Corporation Act, as from time to time amended.
SECTION 2.1.3 To do all things necessary, desirable, or expedient in the
operation, management, and conduct of the aforesaid business.
SECTION 2.1.4 To guarantee, act as surety for, endorse, and act as
accommodation maker for any debt of the shareholders of the corporation,
subsidiaries of the corporation (regardless of the percentage of ownership held
by the corporation), corporations the stock of which is owned by a shareholder
of the corporation (regardless of the percentage of ownership held by such
shareholder), and any other persons, regardless of the presence or adequacy of
the consideration to be received by the corporation for so doing or the presence
or adequacy of any direct or indirect benefit to the corporation, upon a vote of
a majority of the board of directors of the corporation. "Debt" includes
liquidated and unliquidated amounts, amounts arising ex contractu and ex
delicto, and amounts fixed or contingent and matured or unmatured, whether new,
pre-existing, renewed, or extended, regardless of the terms thereof.
SECTION 3. REGISTERED OFFICE AND AGENT
The present address of the registered office of the Corporation is 1301
Industrial Park Drive, Tuscaloosa, Alabama 35401, and the registered agent at
such address is B.H. Wright.
SECTION 4. DURATION
The duration of the corporation shall be perpetual unless the
corporation is dissolved by law or otherwise terminated.
SECTION 5. SHARES
The corporation shall be authorized to issue 5,000 common shares having
a par value of $1.00 each.
<PAGE>
SECTION 6. INCORPORATOR
The name and address of the incorporator is as follows:
NAME ADDRESS
---- -------
Bert M. Guy Tuscaloosa, Alabama
SECTION 7. DIRECTORS
The initial board of directors consisted of one director, and
thereafter the board of directors shall have such number of directors as may be
fixed by the bylaws.
SECTION 8. VOTING
At any meeting of the shareholders of the corporation, a shareholder of
record shall be entitled to one vote for each share standing in his or her name.
Shares may be voted by the shareholders either in person or by proxy.
SECTION 9. PREEMPTIVE RIGHTS
Each shareholder shall have a preemptive right to purchase additional
or treasury shares of the corporation under section 10-2B-6.30 of the Alabama
Business Corporation Act.
SECTION 10. MANAGEMENT
The business and affairs of the corporation shall be managed and
conducted in accordance with the bylaws of the corporation.
SECTION 11. VACANCIES
The board of directors may fill any vacancy on the board, including
those vacancies resulting from an increase in the number of directors.
SECTION 12. SHARES NONASSESSABLE
The shares of the corporation, when fully paid for in accordance with
the subscription therefor, shall be fully paid and nonassessable; and in no case
shall any shareholder be liable other than for the unpaid shares subscribed for
by him.
SECTION 13. AMENDMENTS
The corporation reserves the right to amend or repeal any provision of
these articles of incorporation in the manner provided by law; and all rights
conferred upon the officers, directors, and shareholders of the corporation are
granted subject to this reservation.
<PAGE>
IN WITNESS WHEREOF, the corporation has caused these Amended and
Restated Articles of Incorporation to be signed by Lawrence R. Walsh, its Vice
President, Finance & Administration, effective as of the 31st day of July, 1998.
/s/ Lawrence R. Walsh
-------------------------------------
Lawrence R. Walsh
As Vice President, Finance &
Administration of Globe Manufacturing
Corp.
THIS INSTRUMENT PREPARED BY:
Jay F. Guin
TANNER & GUIN, L.L.C.
Attorneys at Law
Capitol Park Center
2711 University Boulevard (35401)
P. O. Box 3206
Tuscaloosa, Alabama 35403
Telephone: (205) 349-4300
Facsimile: (205) 349-4332
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
GLOBE MANUFACTURING CORP.
SECTION 1. IDENTIFICATION
SECTION 1.1 NAME
The name of the corporation is Globe Manufacturing Corp. (the
"Corporation").
SECTION 1.2 PRINCIPAL OFFICE
The address of the principal office of the Corporation is 456 Bedford
Street, Fall River, MA 02720. The Corporation may have such other offices
either within or without the State of Alabama as the board of directors may
designate or as the business of the Corporation may from time to time require.
SECTION 2. MEETINGS OF SHAREHOLDERS
SECTION 2.1 ANNUAL MEETING
The annual meeting of the shareholders of the Corporation shall be held on
the second Tuesday of the third month following the end of the Corporation's
fiscal year, if not a legal holiday, and if a legal holiday, then on the next
day following, or such other date as may be prescribed by the board of
directors, for the purposes of
1. electing directors;
2. considering and acting upon the reports of officers and
directors; and
3. transacting such other business as may come before the meeting.
SECTION 2.2 SPECIAL MEETINGS
Special meetings of the shareholders may be held at any time whenever
called by the president, by the board of directors, or by any shareholder.
SECTION 2.3 NOTICE
Written notice of all meetings shall be given to each shareholder at his
address as it appears on the stock transfer books of the Corporation. Notices
shall specify the purpose, place, day, and hour of the meeting. Notice shall be
given not less than 10 or more than 60
<PAGE>
days before the meeting.
SECTION 2.4 WAIVER
Any shareholder may waive notice of any meeting of the shareholders by a
written waiver of notice signed by such shareholder before, at, or after such
meeting.
SECTION 2.5 PROXY
At any meeting of the shareholders a shareholder may vote either in person
or by written proxy. No proxy shall be valid after 11 months from the date of
its execution, unless otherwise provided in the proxy.
SECTION 2.6 QUORUM
For the transaction of business at any meeting of the shareholders, the
holders of more than 50 percent of the shares must be present in person or by
proxy, except as otherwise provided by law. If, however, such majority shall
not be present at any meeting of the shareholders, the shareholders present
shall have power to adjourn the meeting, without notice other than announcement
at the meeting, until the requisite number of shares shall be present. If the
requisite number of shares shall become represented after such adjournment, any
business may then be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.7 VOTING
All questions and elections shall be determined by a majority vote of the
shares present at any meeting, except as otherwise provided by law. Only
persons in whose names shares appear on the stock transfer books of the
Corporation on the date on which notice of the meeting is given shall be
entitled to vote at such meeting, unless some other day is fixed by the board of
directors for the determination of shareholders of record. Such date shall be
not less than 10 days nor more than 60 days before the meeting. Each
outstanding share shall be entitled to one vote on each matter submitted to a
vote.
SECTION 2.8 PLACE
The board of directors may designate any place either within or without the
State of Alabama as the place of meeting for any annual or special meeting of
the shareholders. In the absence of any designation, all meetings shall be held
at the principal office of the Corporation.
SECTION 2.9 CONSENT
Any action which may be taken by the shareholders at a meeting may be taken
without a meeting if a written consent setting forth the action so taken is
signed by all of the
<PAGE>
shareholders. Such a consent shall have the effect of a unanimous vote, and the
signature of a shareholder thereon shall constitute a waiver of notice under
Section 2.4 above.
SECTION 2.10 VOTING RECORD
Within two business days of notice to the shareholders of a meeting of the
shareholders, the secretary shall make a complete list of the shareholders
entitled to vote at such meeting. Such list shall be prepared in alphabetical
order and shall show the address and number of shares held by each shareholder.
The list shall be kept on file at the principal office of the Corporation and
shall be subject to inspection at any time during normal business hours by any
shareholder making written request therefor. The list shall be produced and
kept open at the time and place of the meeting and shall be subject to
inspection by any shareholder during the meeting.
SECTION 3. THE BOARD OF DIRECTORS
SECTION 3.1 NUMBER AND QUALIFICATIONS
The board of directors of the Corporation shall consist of not less than
one nor more than seven directors, to be elected by the shareholders except as
provided in the Corporation's articles of incorporation or herein. No director
need be a shareholder or a resident of the State of Alabama.
SECTION 3.2 TERM
A director's term of office shall be for the twelve-month period following
his election and until his successor is duly elected and qualified, or until
such director's earlier death or resignation.
SECTION 3.3 VACANCY
The remaining directors, even if not constituting a quorum, shall elect a
director to fill any vacancy caused by death or by an increase in the number of
directorships.
SECTION 3.4 REMOVAL
Any director may be removed with or without cause by vote of the
shareholders at any meeting called for that purpose; and the shareholders may
immediately upon such removal elect a successor to fill such director's
unexpired term.
SECTION 3.5 POWERS
The board of directors shall have the general management of the Corporation
and is vested with all the powers possessed by the Corporation itself. The
board of directors shall have the power to determine what constitutes net
income, earnings, what amounts shall be
<PAGE>
reserved for working capital and for other purposes, and what amount shall be
declared as distributions. The board of directors shall have the right to
revalue the Corporation's assets. Such determinations by the board of directors
shall be final and conclusive. The board of directors may from time to time
adopt such rules and regulations for the conduct of their meetings and the
general management of the Corporation as they may deem proper by resolution or
otherwise.
SECTION 3.6 REGULAR MEETINGS
A regular meeting of the board of directors shall be held immediately
following the annual meeting of the shareholders.
SECTION 3.7 SPECIAL MEETINGS
Special meetings of the board of directors may be called by the president
or by any two directors.
SECTION 3.8 NOTICE
Special meetings of the board of directors shall be called on no less than
48 hours advance written notice, or such lesser notice as may be reasonable
under the circumstances, to each director, specifying the place, day, and hour
of such meeting. Meetings may be held by conference telephone call or by like
means in accordance with section 10-2B-8.20 of the Alabama Business Corporation
Act, as in effect from time to time.
SECTION 3.9 WAIVER
Any director may waive notice of any meeting of the board of directors by
written waiver of notice signed by such director before, at, or after such
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting unless the director objects in accordance with section
10-2B-8.23 of the Alabama Business Corporation Act, as in effect from time to
time.
SECTION 3.10 QUORUM
A quorum shall consist of a majority of the directors.
SECTION 3.11 VOTING
All questions and elections shall be determined by a majority vote of the
directors in attendance at any meeting, except as may otherwise be provided by
law.
SECTION 3.12 CONSENT
Any action which may be taken by the board of directors at a meeting may be
taken
<PAGE>
without a meeting if a written consent setting forth the action so taken is
signed by all of the directors. Such a consent shall have the effect of a
unanimous vote, and the signature of a director thereon shall constitute a
waiver of notice under Section 3.9.
SECTION 3.13 COMPENSATION
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement for expenses as may be fixed or
determined by resolution of the board of directors.
SECTION 4. THE OFFICERS
SECTION 4.1 OFFICERS
The officers of the Corporation shall be elected by the board of directors
and shall consist of a president, a vice president, a secretary, and a
treasurer, or a secretarytreasurer. The board of directors may also elect
additional vice presidents, assistant secretaries, assistant treasurers, and
such other officers as the board of directors may determine. Such other
officers shall exercise such powers and perform such duties as shall be assigned
by the board of directors.
SECTION 4.2 ELECTION
At its regular meeting after an annual meeting of the shareholders, the
board of directors shall elect a president, a vice president, a secretary, and a
treasurer, or a secretary/treasurer, and such other officers as shall be deemed
appropriate. One person may hold more than one office.
SECTION 4.3 OTHER AGENTS
The board of directors may elect such other agents as it shall deem
appropriate. Such agents shall exercise such powers and perform such duties as
shall be fixed by the board of directors.
SECTION 4.4 COMPENSATION
The salaries and other compensation of all officers, agents, and employees
of the Corporation shall be as fixed by the board of directors.
SECTION 4.5 TERM OF OFFICE
The term of office for an officer shall be the 12-month period following
election and until a successor is duly elected and qualified or until such
officer's earlier death or resignation. Any vacancy occurring in any office of
the corporation shall be filled by the board of directors during the board's
regular meeting or at a special meeting called for such
<PAGE>
purpose.
SECTION 4.6 REMOVAL
Any officer elected by the board of directors may be removed at any time
with or without cause by vote of the board of directors.
SECTION 4.7 DUTIES
Each officer shall have the duties usual and customary to his office or as
hereafter set by resolution of the board of directors, including, but not
limited to, the following:
SECTION 4.7.1 PRESIDENT
The president shall be the chief executive officer of the Corporation.
He shall preside at all meetings of the shareholders and directors and shall
have the responsibility for daytoday supervision and management of the business
of the Corporation. The president shall see that all orders and resolutions are
carried into effect. The president shall have authority to execute instruments
and documents on behalf of the Corporation in the ordinary course of business.
SECTION 4.7.2 VICE PRESIDENT
The vice president shall perform those duties assigned to him by the
board of directors and shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president. However, the vice
president shall not have the power to execute instruments and documents on
behalf of the Corporation, except upon resolution of the board of directors.
SECTION 4.7.3 SECRETARY
The secretary shall attend all meetings of the board of directors and
meetings of the shareholders, and shall record all votes and minutes of all
meetings in a book to be kept for that purpose. He shall give notice of all
shareholder's meetings to the shareholders and of all meetings of the board of
directors to the directors. He shall be custodian of the corporate seal of the
Corporation and may affix the corporate seal to any instrument requiring it,
attesting the same by his signature. The secretary shall keep and maintain the
Corporation's stock transfer book, including a stock register, showing the
number of shares issued to all shareholders, and the date of any issuance,
transfer, or cancellation of same.
SECTION 4.7.4 TREASURER
The treasurer shall have custody of the Corporation's funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. The treasurer shall deposit
all monies and all valuable effects in the name of the
<PAGE>
Corporation in such depositories as may be designated by the board of directors,
except such petty cash funds as may be provided by the board of directors. Such
funds so deposited shall be subject to withdrawal on checks signed by the
treasurer or by such other person as the board of directors may designate.
SECTION 5. SHARES
SECTION 5.1 CERTIFICATES FOR SHARES
Every shareholder of the Corporation shall be entitled to have a
certificate signed in the name of the Corporation by the president or vice
president and the secretary or treasurer, certifying the number of shares owned
by him.
SECTION 5.2 TRANSFER OF SHARES
Upon surrender to the secretary of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment, or authority to
transfer, the secretary shall issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon the
Corporation's books--subject, however, to any agreement of the shareholders and
the Corporation restricting the right to transfer shares.
SECTION 5.3 SHAREHOLDER'S RIGHTS
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive distributions
and to vote as such owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not it shall have notice or knowledge thereof, except as
otherwise provided by law.
SECTION 5.4 COMMON SHARES
The shares of the Corporation shall be common shares. Except as stated in
the articles of incorporation or herein, such shares have all of the powers
granted by the laws of the State of Alabama to shares of that nature.
SECTION 5.5 ASSESSMENT
When fully paid for, the shares of the Corporation shall not be assessable.
SECTION 5.6 LOST CERTIFICATES
Any person claiming that a certificate for shares has been lost, stolen, or
destroyed shall make an affidavit or affirmation of that fact and advertise the
same in such manner as the board of directors may require and shall give the
Corporation such bond or indemnification in such amount and form and with such
sureties as may be required by the
<PAGE>
board of directors, whereupon a new certificate may be issued of the same tenor
and for the same number of shares as the one alleged to have been lost, stolen,
or destroyed.
SECTION 6. DISTRIBUTIONS
Distributions to shareholders shall be declared and paid as often and at
such times as the board of directors may determine. Before payment of any
distribution, the board of directors may set aside such sum as the board of
directors may, in its discretion, deem proper as a reserve fund for meeting
contingencies, for equalizing distributions, for repairing or maintaining any
property of the Corporation, or for any other purpose the board of directors
shall deem conducive to the interests of the Corporation.
The board of directors may make such distribution if the Corporation is
able to pay its debts as they become due in the usual course of business and if
the total assets of the Corporation at least equal the sum of its total
liabilities. Such measurement of assets may be done by the board of directors
using any method that is reasonable in the circumstances including a fair
revaluation of the assets.
SECTION 7. NOTICES
Whenever the provisions of these Bylaws or the laws of the State of Alabama
require notice to be given to any director or shareholder, notice shall be given
by personal delivery, facsimile, or by depositing the same in the United States
mail, postage prepaid, addressed to such shareholder or director at his address
as it appears in the minute book or stock transfer records of the Corporation.
Any director or shareholder may waive any notice required to be given by law,
the articles of incorporation, or these Bylaws.
SECTION 8. FISCAL YEAR
The first fiscal year of the Corporation shall begin on the formation of
the Corporation and shall end on such day as may be selected by the officers;
and each subsequent fiscal year shall conform to the fiscal year adopted for
purposes of reporting under the Internal Revenue Code of 1986, as in effect from
time to time.
SECTION 9. RECORDS AND FINANCIAL REPORTS
SECTION 9.1 MINUTE BOOK
The secretary shall keep and maintain a minute book containing the articles
of incorporation, bylaws, minutes of the meetings of the shareholders,
directors, and committees, the stock transfer books, and other pertinent records
of the Corporation.
SECTION 9.2 RECORDS OF TRANSACTIONS
The secretary shall maintain at the principal office of the Corporation
correct and
<PAGE>
complete records of all transactions of the Corporation and the minute book, or
copies thereof.
SECTION 9.3 FINANCIAL STATEMENTS
The board of directors shall direct the treasurer to mail to each of the
shareholders such financial information as may be required by the laws of the
State of Alabama.
SECTION 9.4 OTHER INFORMATION
The secretary shall keep and maintain at the principal office of the
Corporation correct and complete records of all resolutions creating classes or
series of shares, if shares issued pursuant to those resolutions are
outstanding, records of actions taken by shareholders without a meeting for the
past three years, and all written communications to shareholders generally
within the past three years.
SECTION 10 CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Corporation
and the words "Corporate Seal, Alabama." The seal may be used by causing it or
a facsimile thereof to be impressed or otherwise affixed.
SECTION 11 INDEMNIFICATION
The Corporation shall indemnify the officers and members of the board of
directors of the Corporation as follows:
SECTION 11.1 ALABAMA BUSINESS CORPORATION ACT
The Corporation shall indemnify the officers and members of the board of
directors of the Corporation and former officers and former members of the board
of directors to the maximum extent permitted by the Alabama Business Corporation
Act, as in effect from time to time.
SECTION 11.2 ADDITIONAL INDEMNITY
Additionally, the Corporation shall indemnify any person who is or was a
party or who is threatened to be made a party to any threatened, pending, or
completed claim, action, lawsuit, or proceeding, whether civil, criminal,
administrative, or investigative by reason that he is or was an officer or
director of the Corporation or that he is or was serving at the request of the
Corporation as a director, manager, member, partner, officer, employee, trustee,
fiduciary, or agent of another corporation, limited liability company,
partnership, joint venture, trust, plan, or other enterprise against expenses
(including attorneys' fees), judgments, costs, fines, and amounts paid in
settlement, actually and reasonably incurred by him in connection with such
claim, action, lawsuit, or proceeding if he acted in good faith
<PAGE>
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, had no reasonable cause to believe his conduct unlawful.
Determination of any claim, action, lawsuit, proceeding, or prosecution by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent shall not, in and of itself, create a presumption that the person
did not act in good faith and in a manner in which he reasonably believed to be
in or not opposed to the best interests of the Corporation, and with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful; except that no indemnification shall be made with respect
at any claim, issue, or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Corporation unless, and only to the extent that, a court of equity or the court
in which such claim, action, lawsuit, or proceeding was brought shall determine
upon application that, despite the adjudication of liability, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court of equity or other court shall deem
proper.
SECTION 11.3 ADVANCEMENT
Expenses, including, but not limited to, attorneys' fees, incurred in
defending a civil or criminal claim, action, lawsuit, or proceeding may be paid
by the Corporation in advance of the final disposition of such claim, action,
lawsuit or proceeding upon receipt of an undertaking by or on behalf of the
officer or director to repay such amount if such advance is made in accordance
with section 102B8.53 of the Alabama Business Corporation Act, as in effect from
time to time.
SECTION 11.4 NONEXCLUSIVE NATURE
Indemnification provided by these Bylaws shall not be exclusive of any
other rights to which those indemnified may be otherwise entitled under any
statute, rule of law, provision of certificate or articles of incorporation or
bylaws, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity, while holding such office, and shall continue as to a person
who has ceased to be an officer or director and shall inure to the benefit of
his personal representatives, legatees, distributees, heirs, nextofkin,
successors, and assigns. If such other provisions provide broader rights of
indemnification than these Bylaws, such other provisions shall control and take
precedence.
SECTION 11.5 INSURANCE
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was an officer, director, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, manager, member, partner, officer, employee, trustee, fiduciary, or
agent of another corporation, limited liability
<PAGE>
company, partnership, joint venture, trust, plan, 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
otherwise have the power to indemnify him against such liability under the
provisions of these Bylaws.
SECTION 11.6 SEVERABILITY
The invalidity or unenforceability of any provision hereof shall not in any
way affect the remaining provisions hereof, which shall continue in full force
and effect.
SECTION 12. MISCELLANEOUS
SECTION 12.1 AMENDMENTS
These Bylaws may be amended or repealed and new bylaws may be adopted by
the board of directors at any meeting of the board of directors.
SECTION 12.2 GENDER
All personal pronouns used in these Bylaws shall include all genders,
whether used in the masculine, feminine, or neuter gender. Singular nouns and
pronouns shall include the plural, as may be appropriate, and vice versa.
<PAGE>
Dated as of this the ______ day of _________________, 1998.
/s/ Lawrence R. Walsh
--------------------------------------------
Lawrence R. Walsh
As Vice President, Finance & Administration
of Globe Manufacturing Corp.
THIS INSTRUMENT PREPARED BY:
TANNER & GUIN, L.L.C.
Attorneys at Law
Capitol Park Center
2711 University Boulevard (35401)
P. O. Box 3206
Tuscaloosa, Alabama 35403
Telephone: (205) 349-4300
Facsimile: (205) 349-4332
<PAGE>
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of July 31, 1998
Among
Globe Manufacturing Corp.,
as Issuer,
the guarantors party hereto from time to time,
and
Norwest Bank Minnesota, National Association,
as Trustee
_________________________
$300,000,000
10% Senior Subordinated Notes due 2008
================================================================================
<PAGE>
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.
(a)(5)......................................... 7.08; 7.10
(b)............................................ 7.08; 7.10
(c)............................................ N.A.
311 (a)............................................ 7.11
(b)............................................ 7.11
(c)............................................ N.A.
312 (a)............................................ 2.05
(b)............................................ 13.03
(c)............................................ 13.03
313 (a)............................................ 7.06
(b)(1)......................................... 7.06
(b)(2)......................................... 7.06
(c)............................................ 7.06; 13.02
(d)............................................ 7.06
314 (a)(1),(2),(3)................................. 4.06; 4.08 7.06; 13.02
(a)(4)......................................... 4.06
(b)............................................ N.A.
(c)(1)......................................... 13.04
(c)(2)......................................... 13.04
(c)(3)......................................... N.A.
(d)............................................ N.A.
(e)............................................ 13.05
(f)............................................ N.A.
315 (a)............................................ 7.01(b)
(b)............................................ 7.05; 13.02
(c)............................................ 7.01(a)
(d)............................................ 7.01(c)
(e)............................................ 6.11
316 (a)(last sentence)............................. 2.09
(a)(1)(A)...................................... 6.05
(a)(1)(B)...................................... 6.04
(a)(2)......................................... N.A.
(b)............................................ 6.07
317 (a)(1)......................................... 6.08
(a)(2)......................................... 6.09
(b)............................................ 2.04
318 (a)............................................ 13.01
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(c)............................................ 13.01
</TABLE>
___________________
** N.A. means Not Applicable
This Cross-Reference Table shall not, for any purpose, be deemed to be a part of
this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE............................................................... 1
SECTION 1.01. Definitions............................................................................ 1
SECTION 1.02. Incorporation by Reference of TIA...................................................... 26
SECTION 1.03. Rules of Construction.................................................................. 27
ARTICLE TWO
THE SECURITIES.......................................................................................... 28
SECTION 2.01. Form and Dating....................................................................... 28
SECTION 2.02. Execution and Authentication.......................................................... 28
SECTION 2.03. Registrar and Paying Agent............................................................ 30
SECTION 2.04. Paying Agent To Hold Assets in Trust.................................................. 30
SECTION 2.05. Securityholder Lists.................................................................. 30
SECTION 2.06. Transfer and Exchange................................................................. 31
SECTION 2.07. Replacement Securities................................................................ 31
SECTION 2.08. Outstanding Securities................................................................ 32
SECTION 2.09. Treasury Securities................................................................... 33
SECTION 2.10. Temporary Securities.................................................................. 33
SECTION 2.11. Cancellation.......................................................................... 33
SECTION 2.12. Defaulted Interest.................................................................... 34
SECTION 2.13. CUSIP Number.......................................................................... 34
SECTION 2.14. Deposit of Moneys..................................................................... 34
SECTION 2.15. Book-Entry Provisions for Global Securities........................................... 35
SECTION 2.16. Special Transfer Provisions........................................................... 36
SECTION 2.17. Liquidated Damages under Registration Rights Agreement................................ 39
ARTICLE THREE
REDEMPTION.............................................................................................. 39
SECTION 3.01. Optional Redemption................................................................... 39
SECTION 3.02. Applicability of Article.............................................................. 40
SECTION 3.03. Election To Redeem; Notice to Trustee................................................. 40
SECTION 3.04. Selection by Trustee of Securities To Be Redeemed..................................... 40
SECTION 3.05. Notice of Redemption.................................................................. 41
SECTION 3.06. Deposit of Redemption Price........................................................... 42
SECTION 3.07. Securities Payable on Redemption Date................................................. 42
SECTION 3.08. Securities Redeemed in Part........................................................... 42
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE FOUR
COVENANTS............................................................................................... 43
SECTION 4.01. Payment of Securities................................................................. 43
SECTION 4.02. Maintenance of Office or Agency....................................................... 43
SECTION 4.03. Corporate Existence................................................................... 43
SECTION 4.04. Payment of Taxes and Other Claims..................................................... 43
SECTION 4.05. Maintenance of Properties and Insurance............................................... 44
SECTION 4.06. Compliance Certificate; Notice of Default............................................. 44
SECTION 4.07. Compliance with Laws.................................................................. 45
SECTION 4.08. Reports............................................................................... 45
SECTION 4.09. Waiver of Stay, Extension or Usury Laws............................................... 46
SECTION 4.10. Limitation on Restricted Payments..................................................... 46
SECTION 4.11. Limitation on Transactions with Related Persons....................................... 48
SECTION 4.12. Limitation on Incurrence of Debt and Issuance
of Preferred Stock........................................................... 49
SECTION 4.13. Payment Restrictions Affecting Restricted Subsidiaries................................ 52
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Debt................................. 53
SECTION 4.15. Change of Control..................................................................... 54
SECTION 4.16. Limitation on Asset Sales............................................................. 56
SECTION 4.17. Limitation on Liens................................................................... 58
SECTION 4.18. Guarantees by Restricted Subsidiaries. ............................................... 58
SECTION 4.19. Conduct of Business of the Issuer and
Its Restricted Subsidiaries.................................................. 59
SECTION 4.20. Guarantors. .......................................................................... 59
SECTION 4.21. Rule 144A Information Requirement..................................................... 60
SECTION 4.22. Issuance and Sale of Capital Stock of Restricted Subsidiaries......................... 60
SECTION 4.23. Limitation on Sale and Lease-Back Transactions........................................ 60
SECTION 4.24. Payments for Consent.................................................................. 60
ARTICLE FIVE
SUCCESSOR CORPORATION................................................................................... 61
SECTION 5.01. Merger, Consolidation or Sale of Assets. ............................................. 61
SECTION 5.02. Successor Corporation Substituted..................................................... 62
ARTICLE SIX
DEFAULT AND REMEDIES.................................................................................... 62
SECTION 6.01. Events of Default..................................................................... 62
SECTION 6.02. Acceleration.......................................................................... 64
SECTION 6.03. Other Remedies........................................................................ 65
SECTION 6.04. Waiver of Past Defaults............................................................... 66
</TABLE>
ii
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<TABLE>
<S> <C>
SECTION 6.05. Control by Majority................................................................... 66
SECTION 6.06. Limitation on Suits................................................................... 66
SECTION 6.07. Rights of Holders To Receive Payment.................................................. 67
SECTION 6.08. Collection Suit by Trustee............................................................ 67
SECTION 6.09. Trustee May File Proofs of Claim...................................................... 67
SECTION 6.10. Priorities............................................................................ 68
SECTION 6.11. Undertaking for Costs................................................................. 68
SECTION 6.12. Restoration of Rights and Remedies.................................................... 68
ARTICLE SEVEN
TRUSTEE................................................................................................. 69
SECTION 7.01. Duties of Trustee..................................................................... 69
SECTION 7.02. Rights of Trustee..................................................................... 70
SECTION 7.03. Individual Rights of Trustee.......................................................... 71
SECTION 7.04. Disclaimer of Trustee................................................................. 71
SECTION 7.05. Notice of Default..................................................................... 72
SECTION 7.06. Reports by Trustee to Holders......................................................... 72
SECTION 7.07. Compensation and Indemnity............................................................ 72
SECTION 7.08. Replacement of Trustee................................................................ 73
SECTION 7.09. Successor Trustee by Merger, etc...................................................... 74
SECTION 7.10. Eligibility; Disqualification......................................................... 75
SECTION 7.11. Preferential Collection of Claims Against the Issuer.................................. 75
ARTICLE EIGHT
DISCHARGE OF THIS INDENTURE; DEFEASANCE................................................................. 75
SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance.................................... 75
SECTION 8.02. Defeasance and Discharge.............................................................. 75
SECTION 8.03. Covenant Defeasance................................................................... 76
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance....................................... 76
SECTION 8.05. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions................................... 78
SECTION 8.06. Reinstatement......................................................................... 79
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................................................... 80
SECTION 9.01. Without Consent of Holders............................................................ 80
SECTION 9.02. With Consent of Holders............................................................... 81
SECTION 9.03. Compliance with TIA................................................................... 82
SECTION 9.04. Revocation and Effect of Consents..................................................... 82
SECTION 9.05. Notation on or Exchange of Securities................................................. 83
SECTION 9.06. Trustee To Sign Amendments, etc....................................................... 83
</TABLE>
iii
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<TABLE>
<S> <C>
ARTICLE TEN
SUBORDINATION OF SECURITIES.................................................................... 84
SECTION 10.01. Securities Subordinated to Senior Debt....................................... 84
SECTION 10.02. No Payment on Securities in Certain Circumstances............................ 84
SECTION 10.03. Payment Over of Proceeds upon Dissolution, etc............................... 85
SECTION 10.04. Payments May Be Paid Prior to Dissolution.................................... 86
SECTION 10.05. Subrogation.................................................................. 87
SECTION 10.06. Obligations of the Issuer Unconditional...................................... 87
SECTION 10.07. Notice to Trustee............................................................ 87
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent............... 88
SECTION 10.09. Trustee's Relation to Senior Debt............................................ 88
SECTION 10.10. Subordination Rights Not Impaired by Acts or
Omissions of the Issuer or Holders of Senior Debt............................ 89
SECTION 10.11. Securityholders Authorize Trustee To
Effectuate Subordination of Securities....................................... 90
SECTION 10.12. This Article Ten Not To Prevent Events of Default............................ 90
ARTICLE ELEVEN
GUARANTEES OF THE SECURITIES................................................................... 91
SECTION 11.01. Guarantees................................................................... 91
SECTION 11.02. Execution and Delivery of the Guarantees..................................... 93
SECTION 11.03. Additional Guarantors........................................................ 93
SECTION 11.04. Limitation of Guarantors' Liability.......................................... 93
SECTION 11.05. Release from Guarantee....................................................... 93
SECTION 11.06. Contribution................................................................. 94
SECTION 11.07. Waiver of Subrogation........................................................ 94
ARTICLE TWELVE
SUBORDINATION OF GUARANTEES.................................................................... 95
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.................. 95
SECTION 12.02. No Payment on Guarantees in Certain Circumstances............................ 95
SECTION 12.03. Payment Over of Proceeds Upon Dissolution, etc............................... 97
SECTION 12.04. Payments May Be Paid Prior to Dissolution.................................... 98
SECTION 12.05. Subrogation.................................................................. 98
SECTION 12.06. Guarantee Provisions Solely To Define Relative Rights........................ 99
SECTION 12.07. Trustee To Effectuate Subordination of Obligations
Under the Guarantees......................................................... 100
SECTION 12.08. No Waiver of Guarantee Subordination Provisions.............................. 100
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
SECTION 12.09. Guarantors To Give Notice to Trustee........................................ 101
SECTION 12.10. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc., of Guarantors............................ 102
SECTION 12.11. No Suspension of Remedies................................................... 102
SECTION 12.12. Trustee's Relation to Guarantor Senior Debt................................. 102
SECTION 12.13. No Subordination of Certain Claims.......................................... 103
ARTICLE THIRTEEN
MISCELLANEOUS................................................................................. 103
SECTION 13.01. TIA Controls................................................................ 103
SECTION 13.02. Notices..................................................................... 103
SECTION 13.03. Communications by Holders with Other Holders................................ 104
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.......................... 104
SECTION 13.05. Statements Required in Certificate or Opinion............................... 105
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar................................... 105
SECTION 13.07. Legal Holidays.............................................................. 105
SECTION 13.08. Governing Law............................................................... 106
SECTION 13.09. No Adverse Interpretation of Other Agreements............................... 106
SECTION 13.10. No Recourse Against Others.................................................. 106
SECTION 13.11. Successors.................................................................. 106
SECTION 13.12. Duplicate Originals......................................................... 106
SECTION 13.13. Severability................................................................ 106
SIGNATURES............................................................................................. 108
</TABLE>
Exhibit A-1 - Form of Security
Exhibit A-2 - Form of Exchange Security
Exhibit B - Form of Legend for Global Security
Exhibit C - Transferee Certificate for Institutional Accredited Investors
Who Are Not QIBs
Exhibit D - Form of Letter for Transfers to Non-U.S. Persons
This Table of Contents shall not, for any purpose, be deemed to be part of this
Indenture.
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This INDENTURE, dated as of July 31, 1998, among Globe Manufacturing
Corp., an Alabama corporation (the "Issuer"), each of the Issuer's future
Restricted Domestic Subsidiaries that executes a supplemental indenture in which
it agrees to be bound by the terms of this Indenture as a Guarantor
(collectively, the "Guarantors") and Norwest Bank Minnesota, National
Association, a national banking association, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the holders of the Issuer's 10%
Senior Subordinated Notes due 2008:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.0 Definitions.
"Acceleration Notice" has the meaning provided in Section 6.02.
"Accounts Receivable Subsidiary" means any Subsidiary of the Issuer
that is, directly or indirectly, wholly owned by the Issuer (other than director
qualifying shares) and organized solely for the purpose of and engaged in (i)
purchasing, financing and collecting accounts receivable obligations of
customers of the Issuer or its Subsidiaries, (ii) the sale or financing of such
accounts receivable or interest therein and (iii) other activities incident
thereto.
"Acquired Debt" means, with respect to any specified Person, (i) Debt
of any other Person existing at the time such other Person is merged with or
into or became a Restricted Subsidiary of such specified Person, including,
without limitation, Debt incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted Subsidiary of
such specified Person, and (ii) Debt secured by a Lien encumbering any asset
acquired by such specified Person which, in each case, is not repaid at or
within five days following the date of such acquisition.
"Adjusted Net Assets" of a Guarantor at any date means the lesser of
the amount by which (i) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under its
Guarantee, of such Guarantor at such date and (ii) the present fair salable
value of the assets of such Guarantor at such date exceeds the amount that will
be required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any Subsidiary of
such Guarantor in respect of the obligations of such Subsidiary under the
Guarantee of such Guarantor), excluding Guarantor Subordinated Debt and debt in
respect of its Guarantee, as they become absolute and matured.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. Notwithstanding the
foregoing, no Person (other than the Issuer or any Subsidiary of the Issuer) in
whom a Securitization Entity makes an Investment in connection with a Qualified
Securitization Transaction shall be deemed to be an Affiliate of the Issuer or
any of its Subsidiaries solely by reason of such Investment.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.15.
"Asset Sale" means (i) the sale, lease (other than operating leases
entered into in the ordinary course of business), conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
Sale and Lease-Back Transaction) other than in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Issuer and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Section 4.15 and/or the
provisions of Section 5.01 and not by the provisions of Section 4.16), and (ii)
the issue or sale by the Issuer or any of its Restricted Subsidiaries of Equity
Interests of any of the Issuer's Restricted Subsidiaries (to the extent such
Equity Interests are held by the Issuer or another Restricted Subsidiary of the
Issuer), in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions that (x) have a fair market
value in excess of $1.0 million or (y) generate net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following shall not be deemed to
constitute Asset Sales: (i) sales of accounts receivable, equipment and related
assets (including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof as determined in accordance with GAAP; (ii) transfers
of accounts receivable, equipment and related assets (including contract rights)
of the type specified in the definition of "Qualified Securitization
Transaction" (or a fractional undivided interest therein) by a Securitization
Entity in a Qualified Securitization Transaction (for the purposes of this
clause (ii), Purchase Money Notes shall be deemed to be cash); (iii) a transfer
of assets by the Issuer to a Restricted Subsidiary or by a Restricted Subsidiary
to the Issuer or to another Restricted Subsidiary; (iv) a disposition of
inventory held for sale in the ordinary course of business or obsolete, worn out
or damaged property or equipment in the ordinary course of business; (v) an
issuance of Equity Interests by a Restricted Subsidiary to the Issuer or to
another Restricted Subsidiary; (vi) a Restricted Payment or Permitted Investment
that is permitted by Section 4.10; (vii) the sale or discount, in each case
without recourse, of accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof;
(viii) the grant in the ordinary course of business of any non-exclusive license
of patents, trademarks, registrations therefor and other similar intellectual
property;
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and (ix) sales of accounts receivable for cash at fair market value, and any
sale, conveyance or transfer of accounts receivable in the ordinary course of
business to an Accounts Receivable Subsidiary or to third parties that are not
Affiliates of the Issuer or any Subsidiary of the Issuer.
"Asset Sale Offer" has the meaning provided in Section 4.16(c).
"Asset Sale Offer Date" has the meaning provided in Section 4.16(c).
"Asset Sale Offered Price" has the meaning provided in Section
4.16(c).
"Asset Sale Pari Passu Offer" has the meaning provided in Section
4.16(c).
"Attributable Debt" in respect of a Sale and Lease-Back Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Lease-Back Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
"Authorized Officer" means, with respect to any Person (other than any
Agent), each of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President, the Treasurer, the
Secretary or any Assistant Secretary of such Person, or any other officer
designated as an Authorized Officer by the Board of Directors (or similar
governing body of such Person) in a writing delivered to the Trustee, or with
respect to a Person (other than any Agent) organized as a partnership, limited
liability partnership or limited liability limited partnership, the general
partner or managing member of such Person, as the case may be.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States federal, state or foreign law
relating to bankruptcy, insolvency, receivership, winding up, liquidation,
reorganization or relief of debtors, or any amendment to, succession to or
change in any such law.
"Board of Directors" means the board of directors, advisory committee,
management committee or similar governing body or any authorized committee
thereof responsible for the management of the business and affairs of any
Person.
"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 Issuer or a Restricted Subsidiary of the Issuer, as appropriate, and to be
in full force and effect, and delivered to the Trustee.
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"Business Day" means a day that is not a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and Eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any lender party to the Senior Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within one year after the date of acquisition, (vi) marketable
direct obligations issued by any state of the United States or any political
subdivision, or public instrumentality of such state, in each case having
maturities of not more than one year from the date of acquisition and, at the
time of acquisition thereof, having one of the two highest ratings obtainable
from either Moody's Investors Service, Inc. or Standard & Poor's Corporation,
and (vii) money market, mutual or similar funds which invest substantially all
of their assets in securities of the type described in clauses (i) through (vi)
above.
"Certificated Securities" has the meaning provided in Section 2.01.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), or group of related persons, together with any Affiliates thereof (other
than Permitted Holders); (ii) the adoption by the Issuer of a plan relating to
the liquidation or dissolution of the Issuer; (iii) the first day on which a
majority of the members of the Board of Directors of the Issuer or Parent (for
so long as Parent beneficially owns a majority of any class of the Voting Stock
of the Issuer) are not Continuing Directors; or (iv) the consummation of any
transaction (including, without
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limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) or group of related persons, together with any
Affiliates thereof (other than Permitted Holders) becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of more than 50% (measured by voting power rather than
number of shares) of the Voting Stock of the Issuer or Parent (for so long as
Parent beneficially owns a majority of any class of the Voting Stock of the
Issuer).
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income and without regard to the
$1.0 million threshold in the definition thereof), plus (ii) provision for taxes
based on income or profits of such Person and its Subsidiaries for such period,
to the extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such Person
and its Restricted Subsidiaries for such period (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) the consolidated net interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period
to the extent that any such expense was deducted in computing such Consolidated
Net Income, plus (v) depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated Net Income, minus
(vi) other non-recurring non-cash items increasing such Consolidated Net Income
for such period (which will be added back to Consolidated Cash Flow in any
subsequent period to the extent cash is received in respect of such item in such
subsequent period), in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, "Consolidated Cash Flow"
shall be calculated without giving effect to amortization or depreciation of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16
(including non-cash write-ups and non-cash charges relating to
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<PAGE>
inventory and fixed assets, in each case arising in connection with any
acquisition permitted under this Indenture) and 17 (including non-cash charges
relating to intangibles and goodwill arising in connection with any such
acquisition).
"Consolidated Fixed Charge Coverage Ratio" means with respect to any
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Consolidated Fixed Charges of such Person for such
period. In the event that the Issuer or any of its Restricted Subsidiaries
incurs, assumes, guarantees, repays or redeems any Debt (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Consolidated Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Consolidated Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee,
repayment or redemption of Debt, or such issuance or redemption of preferred
stock, as if the same had occurred at the beginning of the applicable four-
quarter reference period. In addition, for purposes of making the computation
referred to above, (i) acquisitions or Asset Sales that have been made by the
Issuer or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Consolidated Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such
Consolidated Fixed Charges will not be obligations of the referent Person or any
of its Restricted Subsidiaries following the Calculation Date. 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 Debt determined on a fluctuating basis as of the Calculation 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 Debt in
effect on the Calculation Date, (ii) if interest on any Debt actually incurred
on the Calculation Date may be optionally 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 Calculation Date will be
deemed to have been in effect during the relevant four-quarter period reference,
and (iii) notwithstanding the foregoing, interest on Debt determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Swap Obligations, 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) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization
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of debt issuance costs (other than those debt issuance costs incurred on the
Issue Date in connection with the Transactions) and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Debt of another Person that is guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Subsidiaries (whether or not such guarantee or Lien
is called upon), and (iv) all dividend payments, whether or not in cash, on any
series of preferred stock of such Person or any of its Restricted Subsidiaries
(other than dividend payments on Equity Interests payable solely in Equity
Interests (other than Disqualified Stock) of the Issuer) paid or accrued during
such period.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income (or loss) of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles adopted after the Issue Date shall be excluded, (v) any restoration
to Net Income of any contingency reserve of an extraordinary, nonrecurring or
unusual nature, except to the extent that provision for such reserve was made
out of Consolidated Net Income accrued at any time following the Issue Date,
shall be excluded, (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, (vii) non-cash compensation charges
arising upon the issuance or exercise of employee stock options or Capital Stock
(other than Disqualified Stock) shall be excluded and (viii) all extraordinary
gains and extraordinary losses and any unusual or non-recurring charges recorded
or accrued in connection with the Transactions (as defined in the Final Offering
Memorandum) shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the ordinary shareholders of
such Person and its consolidated Subsidiaries as of such date and (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
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its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (A) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (B)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments) and (C)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of the Issuer or Parent, as the case may be,
who (i) was a member of such Board of Directors on the date of this Indenture,
(ii) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election or (iii) was nominated for
election or elected to such Board of Directors by or with the approval of the
Permitted Holders.
"Credit Facilities" means, with respect to the Issuer or any
Subsidiary, one or more debt facilities (including, without limitation, the
Senior Credit Facility) or commercial paper facilities with banks or other
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables), bankers
acceptance or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
Debt under Credit Facilities outstanding on the date on which Securities are
first issued and authenticated under this Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
definition of Permitted Debt.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Issuer or any Restricted Subsidiary of the Issuer against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Debt of others
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secured by a Lien on any asset of such Person (whether or not such Debt is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any Debt of any other Person (but excluding, with respect to
Debt of a Securitization Entity, any Standard Securitization Undertakings that
might be deemed to constitute guarantees). The amount of any Debt outstanding as
of any date shall be (i) the accrued or accreted value thereof, in the case of
any Debt that does not require current payments of interest, and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Debt. For purposes of calculating the
amount of Debt of a Securitization Entity outstanding as of any date, the face
or notional amount of any interest in receivables or equipment that is
outstanding as of such date shall be deemed to be Debt but any such interests
held by Affiliates of such Securitization Entity shall be excluded for purposes
of such calculation.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depositary by the Issuer, which must be a clearing agency
registered under the Exchange Act.
"Designated Senior Debt" means (i) any Debt under the Senior Credit
Facility and (ii) any other Senior Debt or Guarantor Senior Debt permitted under
this Indenture the principal amount of which is $10.0 million or more and that
has been expressly designated by the Issuer in such Senior Debt or Guarantor
Senior Debt instrument as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the first
anniversary of the Stated Maturity of the Securities; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Issuer to repurchase such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Issuer may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.10.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a bona fide underwritten sale to the public of
Equity Interests (other than Disqualified Stock) of the Issuer or of Parent (to
the extent the net proceeds thereof are contributed to the Issuer as common
equity) pursuant to a registration statement (other
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than on Form S-8 or any other form relating to securities issuable under any
benefit plan of the Issuer or Parent, as the case may be) that is declared
effective by the Commission.
"Existing Debt" means up to $500,000 in aggregate principal amount of
Debt of the Issuer and its Restricted Subsidiaries (other than Debt under the
Senior Credit Facility) in existence on the date of this Indenture, until such
amounts are repaid.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.16(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 10% Senior Subordinated Notes due 2008
of the Issuer to be issued in exchange for the Initial Securities pursuant to
the Registration Rights Agreement or, with respect to Initial Securities issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02 and
Section 4.12, a registration rights agreement substantially similar to the
Registration Rights Agreement.
"Final Offering Memorandum" means the Offering Memorandum dated July
28, 1998, relating to the offering of the Securities on the Issue Date.
"Foreign Subsidiary" means any Subsidiary not organized or validly
existing under the laws of the United States or any state thereof or the
District of Columbia.
"Foreign Restricted Subsidiary" means any Foreign Subsidiary that is a
Restricted Subsidiary.
"Funding Guarantor" has the meaning provided in Section 11.06.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Global Security" means a security evidencing all or a part of the
Securities issued to the Depositary in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit B.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including,
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without limitation, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Debt.
"Guarantee" means a guarantee of the Issuer's Obligations under this
Indenture and the Securities by a Guarantor in accordance with Sections 4.18 or
4.20 and Article 11 of the Indenture.
"Guarantor" means each of the Issuer's Restricted Subsidiaries that
executes a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of this Indenture as a Guarantor; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
of this Indenture.
"Guarantor Blockage Period" means a period commencing on the date of
receipt by the Trustee of a Guarantor Default Notice and ending on the earliest
of the dates referred to in clauses (a), (b), (c) or (d) of clause (y) of the
second sentence of Section 12.02(a).
"Guarantor Default Notice" has the meaning provided in Section 12.02.
"Guarantor Senior Debt" means, with respect to any Guarantor, (i) all
Debt of such Guarantor under the Senior Credit Facility and all Hedging
Obligations with respect thereto (including, but not limited to, the principal
of, premium, if any, interest (including any interest accruing subsequent to a
filing of a petition of bankruptcy at the rate provided for in documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, reimbursement obligations under letters of credit issued
under, and fees, expenses, indemnities and other amounts owing in respect of,
the foregoing Debt), (ii) any other Debt permitted to be incurred by such
Guarantor under the terms of this Indenture, unless the instrument under which
such Debt is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Guarantee of such Guarantor and (iii)
all Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Guarantor Senior Debt will not include (v) Debt
represented by Disqualified Stock, (w) any liability for federal, state, local
or other taxes owed or owing by any Guarantor, (x) any Debt of a Guarantor to
any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) that
portion of any Debt that is incurred in violation of this Indenture.
"Guarantor Subordinated Debt" means any Debt of any Guarantor which is
by its terms subordinated in right of payment to the Obligations under such
Guarantor's Guarantee of the Securities.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under Interest Swap Agreements and Currency
Agreements.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
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"IAI Securities" means Securities resold by the Initial Purchasers to
an Institutional Accredited Investor.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Purchasers" means BancAmerica Robertson Stephens and Merrill
Lynch & Co.
"Initial Securities" means, collectively, (i) the 10% Senior
Subordinated Notes due 2008 of the Issuer issued on the Issue Date and (ii) one
or more series of 10% Senior Subordinated Notes due 2008 that are issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02 and Section
4.12, in each case for so long as such securities constitute Restricted
Securities.
"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)
under the Securities Act.
"interest" means interest payable on the Securities under this
Indenture and interest payable under the Registration Rights Agreement.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Swap Agreements" means any interest rate swap agreement,
interest rate cap agreement, interest rate floor agreement, interest rate collar
agreement, treasury rate-lock agreement or other similar agreement or
arrangement designed to protect the Issuer or any Restricted Subsidiary of the
Issuer from fluctuations in interest rates.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any Interest Swap Agreement with any other Person.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees and extensions of trade credit made in the ordinary
course of business), purchases or other acquisitions for consideration of Debt,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP.
"Issue Date" means July 31, 1998, the date of original issuance of the
Securities.
"Issuer" has the meaning provided in the preamble.
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"Legal Holiday" has the meaning provided in Section 13.07.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Limited Originator Recourse" means a reimbursement obligation of the
Issuer or a Restricted Subsidiary in connection with a drawing on a letter of
credit, revolving loan commitment, cash collateral account or other such credit
enhancement issue to support Debt of a Securitization Entity under a facility
for the financing of trade receivables and the warehousing of equipment loans
and leases; provided that the available amount of any such form of credit
enhancement at any time shall not exceed 10.0% of the principal amount of such
Debt at such time.
"Management Agreement" means the Management Agreement between the
Issuer and CHS Management III, L.P., dated as of July 31, 1998, as in effect on
the date of this Indenture or as thereafter amended in a manner that is not
adverse to the Issuer or the Holders of the Securities.
"Maturity Date" means August 1, 2008.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Lease-Back Transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Debt of such Person or any of its
Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash and Cash Equivalents received upon the
sale or other disposition of any non-cash consideration received in any Asset
Sale), net of (i) the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, (ii)
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), (iii) any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP, or against any liabilities associated with
the Asset Sale, or the assets subject thereto, and retained by the Issuer or any
Restricted Subsidiary, and (iv) amounts required to be applied to the repayment
of Debt secured by a Lien on the asset or assets that were the subject of such
Asset Sale,
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or to the satisfaction of contractual obligations either existing at the date of
this Indenture, or entered into after the date of this Indenture in connection
with the payment of deferred purchase price of the properties or assets that
were the subject of such Asset Sale.
"Non-Recourse Debt" means Debt (i) as to which neither the Issuer nor
any of its Restricted Subsidiaries (A) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute Debt),
(B) is directly or indirectly liable (as guarantor or otherwise) or (C)
constitutes the lender and (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Debt (other than the Securities being offered hereby) of the
Issuer or any of its Restricted Subsidiaries to declare a default on such other
Debt or cause the payment thereof to be accelerated or payable prior to its
Stated Maturity.
"Non-U.S. Person" means a Person who is not a "U.S. Person."
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Officers' Certificate" means with respect to any Person, a
certificate signed by the Chairman, Vice Chairman, Chief Executive Officer, the
President or any Vice President and the Chief Financial Officer, Controller or
the Treasurer of such Person that shall comply with applicable provisions of
this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Section
13.05, as they relate to the giving of an Opinion of Counsel.
"Parent" means Globe Holdings, Inc., a Massachusetts corporation, and
its successors and assigns.
"Pari Passu Debt" shall mean (i) any Debt of the Issuer that is pari
passu in right of payment to the Securities and (ii) with respect to any
Guarantee of the Securities, Debt which ranks pari passu in right of payment to
such Guarantee.
"Pari Passu Debt Amount" shall have the definition set forth under
Section 4.16(c).
"Paying Agent" has the meaning provided in Section 2.03, except that,
during the continuance of a Default or Event of Default and for the purposes of
Articles Three and Eight and Sections 4.15 and 4.16, the Paying Agent shall not
be the Issuer or any Affiliate of the Issuer.
"Payment Blockage Notice" has the meaning provided in Section
10.02(a).
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"Payment Blockage Period" means a period commencing on the date of
receipt by the Trustee of a Payment Blockage Notice and ending on the earliest
of the dates referred to in clauses (1), (2), (3) or (4) of clause (B) of the
second sentence of Section 10.02(a).
"Payment Default" has the meaning provided in Section 6.01.
"Permitted Debt" has the meaning provided in Section 4.12(b).
"Permitted Holders" means (i) Code, Hennessy & Simmons, Inc., (ii)
Code Hennessy & Simmons LLC, (iii) Code, Hennessy & Simmons III, L.P. and (iv)
their respective affiliates.
"Permitted Investments" means: (i) any Investment in the Issuer or in
a Restricted Subsidiary of the Issuer that is engaged in the same or a similar
line of business as the Issuer and its Restricted Subsidiaries (or reasonable
extensions or expansions thereof); (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in
a Person, if as a result of such Investment (A) such Person becomes a Restricted
Subsidiary of the Issuer that is engaged in the same or a similar line of
business as the Issuer and its Restricted Subsidiaries (or reasonable extensions
or expansions thereof) 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 Issuer or a Restricted Subsidiary of the Issuer that is
engaged in the same or a similar line of business as the Issuer and its
Restricted Subsidiaries (or reasonable extensions or expansions thereof); (iv)
any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.16; (v)
any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Issuer; (vi) Investments made
in exchange for accounts receivable arising in the ordinary course of business
which have not been collected for 180 days and which are, in the good faith of
the Issuer, substantially uncollectible; provided that any such Investments in
excess of $500,000 shall be approved by the Board of Directors (evidenced by a
Board Resolution set forth in an Officers' Certificate delivered to the
Trustee); (vii) loans and advances to employees of the Issuer and its Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
not to exceed $1.0 million in the aggregate at any one time outstanding; (viii)
Investments in Permitted Joint Ventures and Investments in suppliers to the
Issuer and its Restricted Subsidiaries in an aggregate amount when taken
together with all other Investments pursuant to this clause (viii) does not
exceed the greater of $10.0 million or 10% of Total Assets at any one time
outstanding; (ix) Hedging Obligations entered into in the ordinary course of
business and otherwise in compliance with this Indenture; (x) other Investments
in any Person having an aggregate fair market value (measured on the date each
such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (x) that are at the time outstanding, not to exceed $10.0 million; (xi)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (xii) guarantees (A) by the
Issuer of Debt otherwise permitted to be incurred by Restricted Subsidiaries of
the Issuer under this
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Indenture or (B) permitted by Section 4.18; (xiii) any Investment by the Issuer
or a Wholly Owned Subsidiary of the Issuer in a Securitization Entity or any
Investment by a Securitization Entity in any other Person in connection with a
Qualified Securitization Transaction; provided that any Investment in a
Securitization Entity is in the form of a Purchase Money Note or an Equity
Interest; and (xiv) Investments received by the Issuer or its Restricted
Subsidiaries as consideration for asset sales, including Asset Sales; provided
that in the case of an Asset Sale, such Asset Sale is effected in compliance
with Section 4.16; and (xv) Investments by Foreign Subsidiaries of the Company
in currencies of countries in which such subsidiaries conduct business, provided
that such currencies are freely convertible into United States dollars. For
purposes of calculating the aggregate amount of Permitted Investments permitted
to be outstanding at any one time pursuant to clauses (viii) and (x) of the
preceding sentence, (i) to the extent the consideration for any such Investment
consists of Equity Interests (other than Disqualified Stock) of the Issuer, the
value of the Equity Interests so issued will be ignored in determining the
amount of such Investment and (ii) the aggregate amount of such Investments made
by the Issuer and its Restricted Subsidiaries on or after the date of this
Indenture will be decreased (but not below zero) by an amount equal to the
lesser of (A) the cash return of capital to the Issuer or a Restricted
Subsidiary with respect to such Investment that is sold for cash or otherwise
liquidated or repaid for cash (less the cost of disposition, including
applicable taxes, if any) and (B) the initial amount of such Investment.
"Permitted Joint Venture" means any Person which is, directly or
indirectly through its Subsidiaries or otherwise, engaged principally in the
principal business of the Issuer, or a reasonably related business, and the
Capital Stock of which is owned by the Issuer and one or more Persons other than
the Issuer or any Affiliate of the Issuer.
"Permitted Junior Securities" means (i) Equity Interests in Parent,
for so long as Parent owns all of the outstanding Capital Stock of the Issuer,
or, in all other cases, Equity Interests in the Issuer or (ii) debt securities
of the Issuer that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to the same extent as, or to a greater
extent than, the Securities are subordinated to Senior Debt pursuant to this
Indenture and which, in the case of clauses (i) and (ii), do not mature or
become subject to a mandatory redemption obligation prior to the maturity of the
Securities and do not cause the Securities to be treated in any case or
proceeding or similar event under any bankruptcy or insolvency law as part of
the same class of claims as the Senior Debt.
"Permitted Liens" means (i) Liens to secure obligations in respect of
workers compensation, unemployment, social security, statutory obligations,
surety or appeal bonds or other obligations of a like nature incurred in the
ordinary course of business, (ii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, (iii) Liens in favor of the Issuer and any Restricted Subsidiary,
(iv) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations not overdue for a period in excess of 30 days or which
are being contested in good faith by appropriate proceedings promptly instituted
and diligently prosecuted; provided that
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any reserve or other appropriate provision as shall be required to conform with
GAAP shall have been made therefor, (v) Liens securing Senior Debt (including
the Senior Credit Facility), (vi) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Issuer or any
Restricted Subsidiary of the Issuer; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Issuer or such Restricted Subsidiary, (vii) Liens on property existing at the
time of acquisition thereof by the Issuer or any Restricted Subsidiary of the
Issuer; provided that such liens were in existence prior to the contemplation of
such acquisition, (viii) purchase money Liens to finance property or assets of
the Issuer or any Restricted Subsidiary of the Issuer acquired in the ordinary
course of business; provided, however, that (A) the related Purchase Money
Obligations shall not exceed the cost of such property or assets and shall not
be secured by any property or assets of the Issuer or any Restricted Subsidiary
of the Issuer other than the property or assets so acquired and (B) the Lien
securing such Debt shall be created within 90 days of such acquisition, (ix)
Liens existing on the date of this Indenture, (x) judgment Liens not giving rise
to an Event of Default, (xi) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects incurred or
imposed, as applicable, in the ordinary course of business and consistent with
industry practices which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value of the property
subject thereto (as such property is used by the Issuer or its Restricted
Subsidiaries) or interfere with the ordinary conduct of business of the Issuer
or its Subsidiaries; provided, however, that any such Liens are not incurred in
connection with any borrowing of money or commitment to loan any money to or to
extend any credit, (xii) Liens on assets transferred to a Securitization Entity
or on assets of a Securitization Entity, in either case incurred in connection
with a Qualified Securitization Transaction, (xiii) Liens incurred in the
ordinary course of business of the Issuer or any Restricted Subsidiary of the
Issuer with respect to obligations that do not exceed $5.0 million at any one
time outstanding and that (A) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (B) do not in the aggregate materially detract
from the value of property or materially impair the use thereof in the operation
of business by the Issuer or such Restricted Subsidiary, (xiv) Liens on assets
of Guarantors to secure Guarantor Senior Debt of such Guarantors that was
permitted by this Indenture to be incurred, (xv) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries, (xvi)
any interest or title of a lessor under any Capital Lease Obligation, (xvii)
Liens upon specific items of inventory or other goods and proceeds of any Person
securing such Person's obligations in respect of bankers' acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods, (xviii) Liens securing reimbursement
obligations with respect to commercial letters of credit which encumber
documents and other property relating to such letters of credit and products and
proceeds thereof, (xix) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Issuer or any of its Restricted Subsidiaries, including rights of offset and
set-off, (xx) Liens securing Hedging Obligations, (xxi) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of the Issuer and its Restricted Subsidiaries, (xxii) Liens arising
from filing Uniform Commercial Code financing statements regarding operating
leases entered into in the ordinary course of business, (xxiii) Liens
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in favor of customs and revenue authorities arising as a matter of law to secure
payments of customer duties in connection with the importation of goods and
(xxiv) Liens securing Debt of Foreign Restricted Subsidiaries incurred in
reliance on clause (x) of Section 4.12(b).
"Permitted Refinancing Debt" means any Debt of the Issuer or any of
its Restricted Subsidiaries or any Disqualified Stock issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Debt of the Issuer or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accrued value, if applicable) of
such Permitted Refinancing Debt does not exceed the principal amount of (or
accrued value, if applicable), plus accrued interest on, the Debt so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable fees and expenses incurred in connection therewith); (ii) such
Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Debt being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Securities or any Guarantee, such Permitted Refinancing
Debt has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to the Securities on terms at least as
favorable to the Holders of Securities or the Guarantees, as applicable, as
those contained in the documentation governing the Debt being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Debt is
incurred either by the Issuer or by the Restricted Subsidiary who is the obligor
on the Debt being extended, refinanced, renewed, replaced, defeased or refunded
or is Disqualified Stock.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" of any Person means any Equity Interest of such
Person that has preferential rights to any other Equity Interest of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Debt (including the Securities) means the principal
amount of such Debt plus the premium, if any, on such Debt.
"Private Exchange Securities" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Exhibit A-1.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as in effect on the
Issue Date.
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"Purchase Money Notes" means a promissory note of a Securitization
Entity evidencing a line of credit, which may be irrevocable, from the Issuer or
any Subsidiary of the Issuer in connection with a Qualified Securitization
Transaction to a Securitization Entity which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment.
"Purchase Money Obligations" of a Person means Debt of such Person
incurred in connection with the purchase, construction or improvement of
property, plant or equipment used in the business of such Person (whether
through the direct purchase of the assets or the Equity Interests of any Person
owning such assets).
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Qualified Securitization Transaction" means any transaction or series
of transactions pursuant to which the Issuer or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization
Entity (in the case of a transfer by the Issuer or any of its Restricted
Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Securitization Entity), or may grant a security interest in, any receivables or
equipment loans (whether now existing or arising or acquired in the future) of
the Issuer or any of its Restricted Subsidiaries, and any assets related thereto
including, without limitation, all collateral securing such receivables and
equipment loans, all contracts and contract rights and all guarantees or other
obligations in respect of such receivables and equipment loans, proceeds of such
receivables and equipment loans and other assets (including contract rights)
which are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transaction
involving receivables and equipment (collectively, "transferred assets");
provided that in the case of any such transfer by the Issuer or any of its
Restricted Subsidiaries, the transferor receives cash or Purchase Money Notes in
an amount which (when aggregated with the cash and Purchase Money Notes received
by the Issuer and its Restricted Subsidiaries upon all other such transfers of
transferred assets during the ninety days preceding such transfer) is at least
equal to 75.0% of the aggregate face amount of all receivables so transferred
during such day and the ninety preceding days.
"Redemption Date" means, with respect to any Securities, the Maturity
Date of such Security or the earlier date on which such Security is to be
redeemed by the Issuer pursuant to the terms of the Securities.
"Redemption Price" shall have the meaning provided in Section 3.01.
"Registrar" has the meaning provided in Section 2.03.
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"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof among the Issuer and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Related Person" means with respect to any Person (i) any Affiliate of
such Person, (ii) any individual or other Person who directly or indirectly is
the registered or beneficial owner of 5% or more of any class of Capital Stock
of such Person or warrants, rights, options or other rights to acquire more than
5% of any class of Capital Stock of such Person, (iii) any relative of such
individual by blood, marriage or adoption not more remote than first cousin and
(iv) any officer or director of such Person.
"Related Person Transaction" has the meaning provided in Section 4.11.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt.
"Required Filing Dates" has the meaning provided in Section 4.08.
"Restricted Domestic Subsidiary" means a Restricted Subsidiary
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means: (i) any dividend or any other payment or
distribution on account of the Issuer's or any of its Restricted Subsidiaries'
Equity Interests or to the direct or indirect holders of the Issuer's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Issuer or such Restricted Subsidiary or dividends or
distributions payable to the Issuer or any Wholly Owned Restricted Subsidiary);
(ii) any payment to purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Issuer, any direct or indirect parent of the Issuer
or any Restricted Subsidiary of the Issuer (other than any Equity Interests
owned by the Issuer or any Wholly Owned Restricted Subsidiary); (iii) any
payment to purchase, redeem, defease or otherwise acquire or retire for value
any Subordinated Debt of the Issuer or a Restricted Subsidiary, except a payment
of interest or principal at Stated Maturity; and (iv) any Restricted Investment.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided, that the Trustee or the Registrar shall be
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Security is a Restricted Security.
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"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Issuer or any Restricted Subsidiary of
the Issuer of any real or tangible personal property, which property has been or
is to be sold or transferred by the Issuer or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Issuer's 10% Senior Subordinated Notes due
2008, as amended or supplemented from time to time in accordance with the terms
hereof, that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securitization Entity" means a Wholly Owned Subsidiary of the Issuer
(or another Person in which the Issuer or any Restricted Subsidiary of the
Issuer makes an Investment and to which the Issuer or any Restricted Subsidiary
of the Issuer transfers receivables or equipment and related assets) that
engages in no activities other than in connection with the financing of
receivables or equipment and that is designated by the Board of Directors of the
Issuer (as provided below) as a Securitization Entity (i) no portion of the Debt
or any other Obligations (contingent or otherwise) of which (A) is guaranteed by
the Issuer or any Restricted Subsidiary of the Issuer (other than the
Securitization Entity) in any way other than pursuant to Standard Securitization
Undertakings or Limited Originator Recourse, (B) is recourse to or obligates the
Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization
Entity) in any way other than pursuant to Standard Securitization Undertakings
or Limited Originator Recourse or (C) subjects any property or asset of the
Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization
Entity), directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings or Limited
Originator Recourse, (ii) with which neither the Issuer nor any Restricted
Subsidiary of the Issuer has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Issuer or such
Restricted Subsidiary than those that might be obtained at the time from Persons
that are not Affiliates of the Issuer, other than fees payable in the ordinary
course of business in connection with servicing receivables of such entity and
(iii) to which neither the Issuer nor any Restricted Subsidiary of the Issuer
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Issuer shall be evidenced by the
filing with the Trustee a Board Resolution of the Issuer giving effect to such
designation and an Officer's Certificate certifying that such designation
complied with the foregoing conditions.
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"Security Amount" has the meaning provided in Section 4.16(c).
"Securityholder" or "Holder" means the Person in whose name a Security
is registered on the Registrar's books.
"Senior Credit Facility" means the Credit Agreement dated as of July
31, 1998, among the Issuer, Parent, the lenders party thereto in their capacity
as such, Bank of America National Trust and Savings Association, as
administrative agent, Merrill Lynch, Pierce, Fenner & Smith, Inc., as
syndication agent, and BancAmerica Robertson Stephens, as arranger, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
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,
without limitation, increasing the amount of available borrowings thereunder or
adding Subsidiaries of the Issuer as additional borrowers or guarantors
thereunder) all or any portion of the indebtedness under such agreement or any
successor or replacement agreement, whether by the same or any other agent,
lender or group of lenders, whether contained in one or more agreements.
"Senior Debt" means: (i) all Debt of the Issuer outstanding under the
Senior Credit Facility and all Hedging Obligations with respect thereto
(including, but not limited to, the principal of, premium, if any, interest
(including any interest accruing subsequent to a filing of a petition of
bankruptcy at the rate provided for in documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on,
reimbursement obligations under letters of credit issued under, and fees,
expenses, indemnities and other amounts owing in respect of, the foregoing
Debt); (ii) any other Debt permitted to be incurred by the Issuer under the
terms of this Indenture, unless the instrument under which such Debt is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Securities; and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (v) Debt represented by Disqualified Stock, (w) any
liability for federal, state, local or other taxes owed or owing by the Issuer,
(x) any Debt of the Issuer to any of its Subsidiaries or other Affiliates, (y)
any trade payables or (z) that portion of any Debt that is incurred in violation
of this Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Issuer
that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect
on the Issue Date. Any group of Restricted Subsidiaries of the Issuer that,
taken together, would constitute a Significant Subsidiary, shall be deemed to be
a Significant Subsidiary for purposes of Article Six.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnitees entered into by the Issuer or any
Subsidiary of the Issuer that are reasonably customary in receivables or
equipment loan transactions.
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"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Debt, the date on which such payment of interest
or principal was scheduled to be paid in the original documentation governing
such Debt, and shall not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally scheduled
for the payment thereof.
"Subordinated Debt" means any Debt of the Issuer or any Guarantor
which is by its terms subordinated in right of payment to the Securities or any
Guarantee.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof). Unless otherwise indicated,
references in this Indenture to a Subsidiary shall mean a Subsidiary of the
Issuer.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
the date of this Indenture between the Issuer and Parent as in effect on the
date of this Indenture or as thereafter amended in a manner that is not adverse
to the Issuer or the Holders of Securities.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"Total Assets" means, with respect to any date of determination, the
total assets of the Issuer and its Restricted Subsidiaries shown on the Issuer's
consolidated balance sheet prepared in accordance with GAAP on the last day of
the fiscal quarter prior to the date of determination.
"Transfer Amount" has the meaning provided in Section 2.16.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters or, in the
case of a successor trustee, an officer assigned to the department, division or
group performing the corporate trust work of such successor.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unit Offering" means the offering by Parent of units consisting of
its 14% Senior Discount Notes due 2009 and its warrants to purchase shares of
its common stock undertaken in connection with the Transactions (as defined in
the Final Offering Memorandum).
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"Unrestricted Securities" means one or more Securities that do not and
are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that as of the time of determination shall be or continue to be
designated an Unrestricted Subsidiary in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Issuer
may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of the Issuer or any Restricted Subsidiary or holds any Lien on
any property of the Issuer or any other Subsidiary of the Issuer that is not a
Subsidiary of the Subsidiary to be so designated; provided that (i) the Issuer
certifies to the Trustee that such designation complies with the provisions of
Section 4.10 and (ii) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to, any indebtedness pursuant to which the lender
has recourse to any of the assets of the Issuer or any of its Restricted
Subsidiaries. The Board of Directors of the Issuer may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (i) immediately
after giving effect to such designation, the Issuer is able to incur at least
$1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage
Ratio test set forth in Section 4.12(a) and (ii) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Person" has the meaning given in Regulation S under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors, managers, trustees or other governing body, as applicable, of such
Person.
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (A) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal including
payment at final maturity, in respect thereof, by (B) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Debt.
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"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person that is a Wholly Owned Subsidiary of such
Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person, by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"SEC" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect on the Issue Date;
(c) "or" is not exclusive;
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(d) words in the singular include the plural, and words in the plural
include the singular;
(e) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(f) all references to Articles, Sections and Exhibits shall mean,
unless the clearly indicates otherwise, the Articles and Sections hereof
and the Exhibits attached hereto, the terms of which Exhibits are hereby
incorporated into this Indenture.
ARTICLE TWO
THE SECURITIES
SECTION 2.01 Form and Dating.
The Securities and the Exchange Securities, and the notation relating
to the Trustee's certificate of authentication shall be substantially in the
form of Exhibits A-1 and A-2, respectively. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, depository rule or
usage. The Issuer and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the Securities, annexed hereto
as Exhibits A-1 and A-2, shall constitute, and are hereby expressly made, a part
of this Indenture and, to the extent applicable, the Issuer and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A or in reliance on
any other exemption from registration under the Securities Act may be issued
initially in the form of one or more permanent Global Securities in registered
form, substantially in the form set forth in Exhibit A-1 ("Global Securities"),
deposited with, or on behalf of, the Depositary and registered in the name of
Cede & Co. or such other nominee, as nominee of the Depositary, and shall bear
the legend set forth on Exhibit B. The aggregate principal amount of any Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Depositary and the Registrar, as the custodian for the
Depositary.
Securities issued in exchange for interests in a Global Security
pursuant to Section 2.15 and Securities offered and sold in reliance on any
exemption from registration under the Securities Act may be issued in the form
of certificated securities in registered form in substantially the form set
forth in Exhibit A-1 (the "Certificated Securities").
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SECTION 2.02 Execution and Authentication.
Two Authorized Officers shall sign, or one Authorized Officer shall
sign and one Authorized Officer (each of whom shall, in each case, have been
duly authorized by all requisite corporate actions) shall attest to, the
Securities for the Issuer by manual or facsimile signature.
If an Authorized Officer whose signature is on a Security was an
Authorized Officer at the time of such execution but no longer holds that office
or position at the time the Trustee authenticates the Security, the Security
shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in the aggregate principal amount not to exceed $300,000,000 in one or
more series, (ii) Private Exchange Securities from time to time for issue only
in exchange for a like principal amount of Initial Securities and (iii)
Unrestricted Securities from time to time only (A) in exchange for a like
principal amount of Initial Securities or (B) in an aggregate principal amount
of not more than the excess of $300,000,000 over the sum of the aggregate
principal amount of (x) Initial Securities then outstanding, (y) Private
Exchange Securities then outstanding and (z) Unrestricted Securities issued in
accordance with (iii)(A) above, in each case upon a written order of the Issuer
in the form of an Officers' Certificate of the Issuer. Each such written order
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated, whether the Securities are to be Initial
Securities, Private Exchange Securities or Unrestricted Securities and whether
the Securities are to be issued as Certificated Securities or Global Securities
and such other information as the Trustee may reasonably request. The aggregate
principal amount of Securities outstanding at any time may not exceed
$300,000,000, except as provided in Section 2.07.
In the event that the Issuer shall issue and the Trustee shall
authenticate any Securities issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Issuer shall use its reasonable efforts to obtain the
same "CUSIP" number for such Securities as is printed on the Securities
outstanding at such time; provided, however, that if any series of Securities
issued under this Indenture subsequent to the Issue Date is determined, pursuant
to an Opinion of Counsel of the Issuer in a form reasonably satisfactory to the
Trustee, to be a different class of security than the Securities outstanding at
such time for federal income tax purposes, the Issuer may obtain a "CUSIP"
number for such Securities that is different than the "CUSIP" number printed on
the Securities then outstanding. Notwithstanding the foregoing, all Securities
issued under this Indenture shall vote and consent together on all matters (as
to which any of such Securities may vote or consent) as one class and no series
of Securities will have the right to vote or consent as a separate class on any
matter.
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The Trustee may appoint an authenticating agent (an "Authenticating
Agent") reasonably acceptable to the Issuer to authenticate Securities. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
Authenticating Agent has the same rights as an Agent to deal with the Issuer and
Affiliates of the Issuer.
The Securities shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03 Registrar and Paying Agent.
The Issuer shall maintain an office or agency in the county where the
principal corporate office of the Trustee is located or in such other locations
as the Issuer shall determine, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands to or upon the Issuer in respect of the Securities and this
Indenture may be served. The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Issuer, upon notice to the Trustee, may
have one or more co-Registrars and one or more additional paying agents
reasonably acceptable to the Trustee. The term "Paying Agent" includes any
additional paying agent. The Issuer upon notice to the Trustee may change any
Registrar or Paying Agent without notice to any Holder.
The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Issuer shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Issuer fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
The Issuer initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Securities,
until such time as the Trustee has resigned or a successor has been appointed.
Any of the Registrar, the Paying Agent or any other Agent may resign upon 30
days' notice to the Issuer.
SECTION 2.04 Paying Agent To Hold Assets in Trust.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Securities (whether such assets have been
distributed to it by the Issuer or any other obligor on the Securities), and the
Issuer and the Paying Agent shall notify the Trustee of any default by the
Issuer (or any other obligor on the Securities) in making any such payment. The
Issuer, upon written direction to the Paying Agent, at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account
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for any assets disbursed 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 distribute all assets held by it to the Trustee and to account
for any assets distributed. Upon distribution to the Trustee of all assets that
shall have been delivered by the Issuer (or any other obligor on the Securities)
to the Paying Agent and the completion of any accounting required to be made
hereunder, the Paying Agent shall have no further liability for such assets.
SECTION 2.05 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Issuer shall furnish to
the Trustee five Business Days before each Interest Payment Date and at such
other times as the Trustee may request in writing a list as of the applicable
record date and in such form as the Trustee may reasonably require of the names
and addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06 Transfer and Exchange.
Subject to the provisions of Section 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar or co-Registrar, duly executed by the Holder thereof or
his attorney duly authorized in writing. To permit registration of transfers
and exchanges, the Issuer shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-Registrar's written request. No service
charge shall be made for any registration of transfer or exchange, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or other governmental charge payable upon exchanges or transfers
pursuant to Section 2.02, 2.10, 3.01(ii), 3.08, 4.15, 4.16, or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing, (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Security being redeemed in part and (iii) during a Change of
Control Offer or an Asset Sale Offer if such Security is tendered pursuant to
such Change of Control Offer or Asset Sale Offer and not withdrawn.
Prior to the registration of any transfer by a Holder, the Issuer, the
Trustee and any agent of the Issuer shall treat the person in whose name the
Security is registered as the owner thereof for all purposes whether or not the
Security shall be overdue, and neither the Issuer, the Trustee nor any such
agent shall be affected by notice to the contrary. Any Holder of the Global
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Security shall, by acceptance of such Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Holder of such Global Security (or its
agent), and that ownership of a beneficial interest in the Global Security shall
be required to be reflected in a book-entry system.
SECTION 2.07 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Issuer shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. Such Holder must provide an
indemnity bond or other indemnity sufficient, in the judgment of the Issuer and
the Trustee, to protect the Issuer, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Issuer may charge such
Holder for its reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel. Every replacement Security
issued pursuant to this Section 2.07 shall constitute an obligation of the
Issuer.
SECTION 2.08 Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee or the Authenticating Agent except those
canceled by the Trustee, those delivered to it for cancellation and those
described in this Section as not outstanding. Subject to Section 2.09, a
Security does not cease to be outstanding because the Issuer or any of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If the principal amount of any Security is considered paid under
Section 4.01, it ceases to be outstanding and interest ceases to accrue.
If on a Redemption Date, a Change of Control Payment Date, an Asset
Sale Offer Date or the Maturity Date, the Paying Agent holds U.S. Legal Tender
or U.S. Government Obligations sufficient to pay all of the principal, premium,
if any, and interest due on the Securities payable on that date and is not
prohibited from paying such U.S. Legal Tender or U.S. Government Obligations to
the Holders thereof pursuant to the terms of this Indenture, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
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SECTION 2.09 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver, consent or notice, and for
purposes of determining the amount of Securities outstanding at the time of a
redemption made in accordance with paragraph 6(a)(ii) of the Securities,
Securities owned by the Issuer or an Affiliate of the Issuer shall be considered
as though they are not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any direction, waiver or
consent, only Securities which the Trustee actually knows are so owned shall be
so considered. The Issuer shall notify the Trustee, in writing, when it or any
of its Affiliates repurchases or otherwise acquires Securities, of the aggregate
principal amount of such Securities so repurchased or otherwise acquired. The
Trustee may require an Officers' Certificate listing Securities owned by the
Issuer, a Subsidiary of the Issuer or any Affiliate of the Issuer.
SECTION 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the Issuer may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Issuer in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Issuer considers
appropriate for temporary Securities. Without unreasonable delay, the Issuer
shall prepare and execute, and the Trustee shall authenticate upon receipt of a
written order of the Issuer pursuant to Section 2.02, definitive Securities in
exchange for temporary Securities.
SECTION 2.11 Cancellation.
The Issuer at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Issuer, shall
dispose of and deliver evidence of such disposal of (but shall not be required
to destroy) all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Issuer may not issue new Securities
to replace Securities that the Issuer has paid or delivered to the Trustee for
cancellation. If the Issuer shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the Debt
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12 Defaulted Interest.
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The Issuer will pay interest on overdue principal from time to time on
demand at the rate of interest then borne by the Securities. The Issuer shall,
to the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Securities. Interest will be computed 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.
If the Issuer defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Issuer for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. Prior to such
subsequent special record date, the Issuer shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments due
on such day in a timely manner which permits the Paying Agent to remit payment
to the Holders on such day. At least 15 days before the subsequent special
record date, the Issuer shall mail to each Holder, with a copy to the Trustee
and the Agents, a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid. Notwithstanding the foregoing, the
Issuer may make payment of any defaulted interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange.
SECTION 2.13 CUSIP Number.
The Issuer in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that no representation is hereby deemed to
be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Issuer shall
promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14 Deposit of Moneys.
Prior to 11:00 a.m. (New York City time) on each Interest Payment
Date, Maturity Date, Redemption Date, Change of Control Payment Date and Asset
Sale Offer Date, the Issuer 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, Maturity Date, Redemption Date, Change of Control
Payment Date or Asset Sale Offer Date, as the case may be, in a timely manner
which permits the Paying Agent to remit payment to the Holders on such Interest
Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date or
Asset Sale Offer Date, as the case may be.
SECTION 2.15 Book-Entry Provisions for Global Securities.
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(a) The Global Securities initially shall (i) be registered in the
name of Cede & Co., as the nominee of The Depository Trust Company, (ii) be
delivered to the Registrar as custodian for such Depositary and (iii) bear the
legend set forth in Exhibit B.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Registrar as its custodian, or under the
Global Security, and the Depositary may be treated by the Issuer, the Trustee
and any agent of the Issuer or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Certificated Securities in accordance with the
rules and procedures of the Depositary and the provisions of Section 2.16. In
addition, Certificated Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Issuer notifies the Registrar that the Depositary is unwilling or unable to
continue as Depositary for any Global Security and a successor depositary is not
appointed by the Issuer within 90 days of such notice or (ii) the Issuer, at its
option, notifies the Registrar in writing that it elects to cause the issuance
of Securities in definitive form under this Indenture.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Certificated Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Issuer shall execute, and the Trustee shall authenticate and cause to be
delivered, one or more Certificated Securities of like tenor and amount.
(d) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuer shall execute, and the Trustee shall authenticate
and cause to be delivered to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the Global Securities, an equal
aggregate principal amount of Certificated Securities of authorized
denominations.
(e) Any Certificated Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(c) or (d) shall, except as
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otherwise provided by paragraphs (a)(i)(x) and (z) of Section 2.16, bear the
Private Placement Legend.
(f) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.16 Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
U.S. Persons and other Transfers Exempt under the Securities Act. The following
provisions shall apply (x) with respect to the registration of any proposed
transfer of a Security constituting a Restricted Security to any Institutional
Accredited Investor which is not a QIB or to any Non-U.S. Person and (y) with
respect to the registration of any proposed transfer pursuant to another
available exemption from the registration requirements of the Securities Act:
(i) the Registrar shall register the transfer of any Securities
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the original issue date with respect thereto; provided,
however, that neither the Issuer nor any Affiliate of the Issuer has held
any beneficial interest in such security, or portion thereof, at any time
on or prior to the second anniversary of such issue date 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 C hereto
or (2) in the case of a transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit D or (3) in the case of a transfer pursuant to another
available exemption from the registration requirements of the Securities
Act, the proposed transferee has delivered to the Registrar a certificate
in form and substance reasonably acceptable to the Issuer and the Registrar
in connection with such transfer, together, in the case of clause (1),
clause (2) or clause (3) with such other certifications, legal opinions or
other information as the Issuer, the Trustee or the Registrar 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 Securities Act, or (z) the Trustee and Registrar have
received both an Opinion of Counsel and an Officers' Certificate directing
transfer without a Private Placement Legend; and
(ii) the Registrar shall register the transfer of any Securities
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if the proposed transferor is an Agent Member
holding a beneficial interest in a Global Security, upon, receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depositary's and the
Registrar's procedures,
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whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Certificated
Securities) a decrease in the principal amount of the Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security to be transferred (the "Transfer Amount"), (b) if the Securities to be
transferred are to be evidenced by Certificated Securities, the Issuer shall
execute and the Trustee shall authenticate upon receipt of a written order of
the Issuer in the form of an Officers' Certificate, and cause to be delivered
one or more Certificated Securities in an aggregate principal amount equal to
the Transfer Amount and (c) if the Securities to be transferred are to be
evidenced by an interest in a Global Security, upon receipt of instructions
given in accordance with the Depositary'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 Security in which the transferee will hold its
beneficial interest in an amount equal to the Transfer Amount.
If the Securities to be transferred consist of IAI Securities, the
following shall apply: (x) if such IAI Securities are proposed to be transferred
to an Institutional Accredited Investor which is not a QIB, (i) upon the
registration of such transfer such Securities shall continue to be IAI
Securities, and (ii) the Certificated Securities authenticated and delivered in
connection with such transfer shall be in denominations of $100,000 and any
integral multiple of $1,000 above that amount; and (y) if such IAI Securities
are proposed to be transferred to a Non-U.S. Person, (i) upon the registration
of such transfer such Securities shall cease to be IAI Securities, (ii) the
Certificated Securities authenticated and delivered in connection with such
transfer shall not contain the restriction on minimum denominations of $100,000
and (iii) such Certificated Securities shall be in denominations of $1,000 and
any integral multiple thereof.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security 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 Security stating, or has otherwise advised the Issuer 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 Security stating, or has otherwise advised the
Issuer and the Registrar in writing, that it is purchasing the Security for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a 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 Issuer as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the Issuer and the transferor are relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A; if the Trustee or the Issuer shall so request, such proposed
transferor shall have delivered an Opinion of Counsel, an Officers'
Certificate and such other information
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as the Trustee or the Issuer may reasonably require in connection with such
proposed transfer; and
(ii) if the proposed transferee is an Agent Member, and the Securities
to be transferred consist of Certificated Securities which after transfer
are to be evidenced by an interest in the Global Security, upon receipt by
the Registrar of instructions given in accordance with the Depositary'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
Security in an amount equal to the principal amount of the Certificated
Securities to be transferred, and the Trustee shall cancel the Certificated
Securities so transferred; and
(iii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of a beneficial interest in a Global
Security which after transfer is to continue to be evidenced by an interest
in a Global Security, upon receipt by the Registrar of instructions given
in accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records (A) the date, (B) a
decrease in the principal amount of the Global Security in which the
transferor owns the beneficial interest to be transferred in an amount
equal to the principal amount of the beneficial interest to be transferred
and (C) an increase in the principal amount of the Global Security in which
the transferee will hold its beneficial interest in a like amount; and
(iv) if the Securities to be transferred consist of IAI Securities,
upon the registration of such transfer according to this Section 2.16 such
Securities shall cease to be IAI Securities and may be evidenced by
Certificated Securities or interests in a Global Security in denominations
of $1,000 and any integral multiple thereof.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities 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 Securities that bear
the Private Placement Legend unless (i) the circumstances contemplated by
paragraph (a)(i) of this Section 2.16 exist, (ii) there is delivered to the
Issuer, the Registrar and the Trustee an Opinion of Counsel reasonably
satisfactory to the Issuer, the Registrar 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 Securities have been sold pursuant to an effective registration statement
under the Securities Act.
(d) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture and such Security.
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The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Issuer 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 written notice to the Registrar.
SECTION 2.17 Liquidated Damages under Registration Rights Agreement
Under certain circumstances, the Issuer shall be obligated to pay
certain liquidated damages to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement (or, with respect to any additional registration
rights agreement entered into in connection with Initial Securities issued
subsequent to the Issue Date pursuant to Section 2.02, the applicable section).
The terms thereof are incorporated herein by reference.
ARTICLE THREE
REDEMPTION
SECTION 3.01 Optional Redemption.
Optional Redemption. (i) The Securities will be redeemable at the
option of the Issuer, in whole or in part, at any time and from time to time on
or after August 1, 2003, upon not less than 30 nor more than 60 days notice, at
the Redemption Prices (expressed as percentages of principal amount) set forth
below (the "Redemption Price"), plus accrued and unpaid interest thereon to the
applicable Redemption Date, if redeemed during the 12-month period beginning on
August 1 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 ................................... 105.000%
2004 ................................... 103.333%
2005 ................................... 101.667%
2006 and thereafter........................ 100.000%
</TABLE>
(ii) At any time prior to August 1, 2001, the Issuer may on any one
or more occasions redeem from the net proceeds of one or more Equity Offerings
up to an aggregate of 35.0% in aggregate principal amount of the Securities at a
redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date; provided that at least $97.5
million in aggregate principal amount of the Securities remain outstanding
immediately after the occurrence of such redemption.
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SECTION 3.02 Applicability of Article.
Redemption of Securities at the election of the Issuer or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 3.03 Election To Redeem; Notice to Trustee.
The election of the Issuer to redeem any Securities pursuant to
Section 3.01(a) shall be evidenced by an Officers' Certificate. In case of any
redemption at the election of the Issuer pursuant to Section 3.01(a), the Issuer
shall, at least 45 days prior to the Redemption Date fixed by the Issuer (unless
a shorter notice period shall be satisfactory to the Trustee), notify the
Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed.
SECTION 3.04 Selection by Trustee of Securities To Be Redeemed.
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided that
no Securities of a principal amount of $1,000 or less shall be redeemed in part.
If any Security is to be redeemed in part only, a new Security in a principal
amount equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Security. On and after the
Redemption Date, if the Issuer does not default in the payment of the Redemption
Price, interest will cease to accrue on Securities or portions thereof called
for redemption.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 3.05 Notice of Redemption.
Notice of redemption shall be mailed by first-class mail, postage
prepaid, mailed at least 30 but no more than 60 days before the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
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(c) if less than all outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date
upon surrender of such Security, a new Security or Securities in the
aggregate principal amount equal to the unredeemed portion thereof will be
issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that (unless
the Issuer shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the paragraph or section of the Securities or this Indenture
pursuant to which the Securities are being redeemed.
Notice of redemption of Securities to be redeemed shall be given by
the Issuer or, as otherwise requested by the Issuer in writing, by the Trustee
in the name and at the expense of the Issuer.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
SECTION 3.06 Deposit of Redemption Price.
On or prior to 11:00 a.m. (New York City time) on any Redemption Date,
the Issuer shall deposit or cause to be deposited with the Trustee or with a
Paying Agent (or, if the Issuer is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 2.04) an amount of money in same day funds
sufficient to pay the Redemption Price of, and accrued interest on, all the
Securities or portions thereof which are to be redeemed on that date.
SECTION 3.07 Securities Payable on Redemption Date.
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Notice of Redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Issuer shall default in the payment of the Redemption Price) such Securities
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Issuer at the Redemption Price; provided, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more predecessor Securities, registered as
such on the relevant record dates according to the terms and the provisions of
the Securities.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate then borne by
such Security.
SECTION 3.08 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
to the Paying Agent at the office or agency maintained for such purpose pursuant
to Section 2.03 (with, if the Issuer, the Registrar or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to,
the Issuer, the Registrar or the Trustee duly executed by the Holder thereof or
such Holder's attorney duly authorized in writing), and the Issuer shall
execute, and the Trustee shall authenticate and cause to be delivered to the
Holder of such Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder in aggregate principal
amount equal to, and in exchange for, the portion of the principal of the
Security so surrendered that is not redeemed.
ARTICLE FOUR
COVENANTS
SECTION 4.01 Payment of Securities.
The Issuer shall pay the principal of and interest on the Securities
on the dates and in the manner provided in this Indenture and in the Securities.
An installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent holds at 11:00 a.m.
(New York City time) on that date U.S. Legal Tender designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture or otherwise.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months.
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SECTION 4.02 Maintenance of Office or Agency.
The Issuer shall maintain the office or agency required under Section
2.03. The Issuer shall give prior notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuer
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 set
forth in Section 13.02.
SECTION 4.03 Corporate Existence.
Except as otherwise permitted by Article Four or Article Five, the
Issuer shall do or cause to be done all things reasonably necessary to preserve
and keep in full force and effect its corporate or other existence and the
corporate or other existence of each of its Restricted Subsidiaries in
accordance with the respective organizational documents of each such Restricted
Subsidiary and the material rights (charter and statutory) and franchises of the
Issuer and each of its Restricted Subsidiaries; except for any such existence,
material right or franchise which are not in the aggregate reasonably likely to
have a material adverse effect on the financial condition or results of
operations of the Issuer and its Restricted Subsidiaries, taken as a whole.
SECTION 4.04 Payment of Taxes and Other Claims.
The Issuer shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Restricted
Subsidiaries or properties of it or any of its Restricted Subsidiaries and (ii)
all material lawful claims for labor, materials, supplies and services that, if
unpaid, might by law become a Lien upon the property of it or any of its
Restricted Subsidiaries; provided, however, that there shall not be required to
be paid or discharged any such tax, assessment, claim or charge, the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or where
the failure to effect such payment or discharge would not result in a material
adverse effect on the financial condition or results of operations of the Issuer
and its Restricted Subsidiaries, taken as a whole.
SECTION 4.05 Maintenance of Properties and Insurance.
(a) The Issuer shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in normal condition (subject
to ordinary wear and tear) and make all reasonably necessary repairs, renewals
or replacements thereto as in the judgment of the Issuer may be reasonably
necessary to the conduct of the business of the Issuer and its Restricted
Subsidiaries; provided, however, that nothing in this Section 4.05 shall prevent
the Issuer or any of its Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties, if such properties are no
longer reasonably necessary in the conduct of their respective businesses.
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(b) The Issuer shall provide or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the reasonable, good
faith opinion of the Issuer are reasonably adequate and appropriate for the
conduct of the business of the Issuer and its Restricted Subsidiaries.
SECTION 4.06 Compliance Certificate; Notice of Default.
(a) The Issuer shall deliver to the Trustee, within 120 days after the
end of the Issuer's fiscal year, an Officers' Certificate (provided, however,
that one of the signatories to each such Officers' Certificate shall be the
Issuer's principal executive officer, principal financial officer or principal
accounting officer) stating that a review of its activities and the activities
of its Restricted Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing officers with a view to determining whether
a Default or Event of Default has occurred and further stating, as to each such
officer signing such certificate, that to the best of his knowledge, no Default
or Event of Default occurred during such year and at the date of such
certificate there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event of Default, the
certificate shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Issuer elect to change the manner in which it fixes its fiscal year end.
(b) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Securities, the Issuer
shall deliver to the Trustee by registered or certified mail or by facsimile
transmission followed by hard copy by registered or certified mail an Officers'
Certificate specifying such event, notice or other action within five Business
Days of the actual knowledge by an Authorized Officer of such occurrence.
SECTION 4.07 Compliance with Laws.
The Issuer shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America and each other country in which the
Issuer or any of its Subsidiaries conducts business, all states and
municipalities thereof, and the SEC and any other governmental department,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as are
not in the aggregate reasonably likely to have a material adverse effect on the
financial condition or results of operations of the Issuer and its Restricted
Subsidiaries, taken as a whole.
SECTION 4.08 Reports.
Whether or not the Issuer is then subject to Section 13 or 15(d) of
the Exchange Act, the Issuer will file with the SEC, so long as any Securities
are outstanding, the annual reports
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(including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual financial statements, a
report thereon by the Issuer's independent accountants), quarterly reports
(including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations") and other periodic reports which the Issuer would have
been required to file with the SEC pursuant to such Section 13 or 15(d) if the
Issuer were so subject, and such documents shall be filed with the SEC on or
prior to the respective dates (the "Required Filing Dates") by which the Issuer
would have been required so to file such documents if the Issuer were so
subject. The Issuer will also in any event, so long as any Securities are
outstanding and whether or not the filing of such documents by the Issuer with
the SEC is prohibited under the Exchange Act, within 15 days of each Required
Filing Date, (a) transmit by mail to all Holders of Securities, as their names
and addresses appear in the Registrar's books, without cost to such Holders and
(b) file with the Trustee, copies of the annual reports, quarterly reports and
other periodic reports which the Issuer would have been required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act if the Issuer were
subject to such Section 13 or 15(d). The Issuer will also comply with any other
periodic reporting provisions pursuant to TIA (S) 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 Issuer's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 4.09 Waiver of Stay, Extension or Usury Laws.
The Issuer will not (to the extent that it may lawfully do so) at any
time insist upon, plead, 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 that
would prohibit or forgive the Issuer from paying all or any portion of the
principal of, premium or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
obligations or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Issuer 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 Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.10 Limitation on Restricted Payments.
(a) The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, unless, at
the time of and immediately after giving effect to the proposed Restricted
Payment, (i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; (ii) the Issuer would, at
the time of such Restricted Payment and after giving pro forma effect thereto as
if such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional
Debt pursuant to the Consolidated Fixed Charge Coverage Ratio
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test set forth in Section 4.12(a); and (iii) such Restricted Payment, together
with the aggregate amount of all other Restricted Payments made by the Issuer
and its Restricted Subsidiaries after the Issue Date (including Restricted
Payments permitted by clauses (i) and (v) of Section 4.10(b) and excluding the
Restricted Payments permitted by the other clauses therein), is less than or
equal to the sum of (A) 50% of the Consolidated Net Income of the Issuer (or if
Consolidated Net Income shall be a loss, minus 100% of such loss) earned during
the period beginning on the first day of the first fiscal quarter immediately
following the Issue Date and ending on the last day of the fiscal quarter
immediately preceding the date the Restricted Payment is made (the "Reference
Date") (treating such period as a single accounting period) plus (B) 100% of the
aggregate net proceeds (including the fair market value of property other than
cash) received by the Issuer from any Person (other than a Subsidiary of the
Issuer) from the issuance and sale subsequent to the Issue Date of Equity
Interests of the Issuer (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Issuer that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Issuer); plus (C) without duplication of any amounts included in clause (B)
above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Issuer from a holder of the Issuer's Capital Stock (excluding,
in the case of clauses (B) and (C), any net cash proceeds from an Equity
Offering to the extent used to redeem the Securities and any net cash proceeds
received by the Issuer from the sale of Equity Interests of the Issuer or equity
contribution which has been financed, directly or indirectly using funds (1)
borrowed from the Issuer or any of its Subsidiaries, unless and until and to the
extent such borrowing is repaid or (2) contributed, extended, guaranteed or
advanced by the Issuer or by any of its Subsidiaries), plus (D) to the extent
that any Restricted Investment that was made after the Issue Date is sold by
Issuer or any Restricted Subsidiary for cash or otherwise liquidated or repaid
for cash, the lesser of (1) the fair market value of such Restricted Investment
as of the date of such Restricted Investment or (2) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any), to the extent any such amount was not otherwise included in Consolidated
Net Income, plus (E) 50% of any dividends received by the Issuer or a Restricted
Subsidiary after the Issue Date from an Unrestricted Subsidiary of the Issuer,
to the extent that such dividends were not otherwise included in Consolidated
Net Income of the Issuer for such period, plus (F) to the extent that any
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the
Issue Date, the fair market value of the Investment made by the Issuer or any of
its Restricted Subsidiaries in such Subsidiary as of the date of such
redesignation, plus (G) $10.0 million.
For purposes of this Section 4.10(a), the fair market value of property other
than cash shall be determined in good faith by the Board of Directors and
evidenced by an Officers' Certificate filed with the Trustee, except that in the
event the value of any non-cash consideration shall be $10.0 million or more,
the value shall be determined based on an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing.
(b) The provisions of Section 4.10(a) will not prohibit (i) the
payment of any dividend or the consummation of any irrevocable redemption within
60 days after the date of declaration thereof or giving of irrevocable
redemption notice, if at said date of declaration or giving
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of notice such payment or redemption would have complied with the provisions of
this Indenture; (ii) if no Default or Event of Default shall have occurred and
be continuing, the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Issuer or any Restricted Subsidiary of the Issuer or
any Subordinated Debt of the Issuer or any Restricted Subsidiary, in each case
in exchange for, or out of the net proceeds of, the substantially concurrent
sale (other than to a Restricted Subsidiary of the Issuer) of other Equity
Interests of the Issuer (other than any Disqualified Stock); provided, however,
that the amount of any such net proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clauses (iii) (B) and (iii) (C) of Section 4.10(a); (iii) the redemption,
repurchase, refinancing or defeasance of Subordinated Debt in exchange for, or
with the net cash proceeds from, an incurrence of Permitted Refinancing Debt;
(iv) the payment to Parent of any amounts required under the Tax Sharing
Agreement; (v) if no Default or Event of Default shall have occurred and be
continuing, the payment of dividends to Parent in an amount up to $1.0 million
in any period of four consecutive quarters to fund repurchases by Parent (or its
successor) of Equity Interests therein or Debt of Parent issued in connection
with such Equity Interests held by Persons who have ceased to be bona fide
officers or employees of the Issuer or one of its Restricted Subsidiaries,
provided that any unused amount thereof may be carried forward to subsequent
periods so long as the total amount of such Restricted Payments shall not exceed
$5.0 million in the aggregate (which shall be increased by the amount of any net
cash proceeds (after deducting any premiums) to the Issuer from (A) sales of
Equity Interests of Parent to management employees subsequent to the Issue Date
and (B) any ''key-man'' life insurance policies which are used to make such
redemptions and repurchases); (vi) the payment of dividends to Parent in an
amount necessary to fund Parent's bona fide corporate overhead and similar fees
and expenses relating to the ownership or operation of the Issuer; (vii)
repurchases of Equity Interests deemed to occur upon the exercise of stock
options if such Equity Interests represent a portion of the exercise price
thereof; and (viii) distributions to Parent to fund the Transactions (as such
term is defined in and as described in the Final Offering Memorandum) and to pay
fees and expenses incurred in connection with the Transactions and the Unit
Offering.
(c) The Board of Directors of the Issuer may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default or an Event of Default. For purposes of making such determination, all
outstanding Investments by the Issuer and its Restricted Subsidiaries (except to
the extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under Section 4.10(a). All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greater of (i) the net book value of such Investments at the time of such
designation and (ii) the fair market value of such Investments at the time of
such designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
SECTION 4.11 Limitation on Transactions with Related Persons.
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The Issuer will not, nor will it permit any of its Restricted
Subsidiaries to, directly or indirectly (i) sell, lease, transfer or otherwise
dispose of any of its property to, (ii) purchase any property from, (iii) make
any Investment in, or (iv) enter into or amend any contract, agreement or
understanding with, or for the benefit of, any of its Related Persons (each a
"Related Person Transaction"), other than Related Person Transactions that are
no less favorable to the Issuer or such Restricted Subsidiary than those that
could be obtained in a comparable arm's length transaction by the Issuer or such
Restricted Subsidiary from an unrelated party; provided that the Issuer delivers
to the Trustee (A) with respect to any Related Person Transaction (or series of
Related Person Transactions which are similar or part of a common plan)
involving aggregate payments in excess of $5.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Related Person Transaction complies with the preceding sentence and such Related
Person Transaction was approved by a majority of the disinterested members of
the Board of Directors of the Issuer and (B) with respect to any Related Person
Transaction (or series of Related Person Transactions which are similar or part
of a common plan) involving aggregate payments in excess of $10.0 million, an
affirmative opinion as to the fairness to the Issuer or such Restricted
Subsidiary, as the case may be, from a financial point of view issued by a
nationally recognized accounting, appraisal, investment banking or consulting
firm that is, in the judgment of the Board of Directors of the Issuer,
independent and qualified to render such opinion. The foregoing restrictions
shall not apply to: (i) any transactions between Wholly Owned Restricted
Subsidiaries of the Issuer, or between the Issuer and any Wholly Owned
Restricted Subsidiary of the Issuer, if such transaction is not otherwise
prohibited by the terms of this Indenture; (ii) Restricted Payments permitted
under Section 4.10; (iii) customary directors' fees, indemnification and similar
arrangements, employee salaries, bonuses or employment agreements, compensation
or employee benefit arrangements and incentive arrangements with any officer,
director or employee of the Issuer or any Restricted Subsidiary entered into in
the ordinary course of business (including customary benefits thereunder); (iv)
transactions undertaken pursuant to the Management Agreement and the Tax Sharing
Agreement; (v) the issue and sale by the Issuer to its stockholders of Equity
Interests other than Disqualified Stock; (vi) the incurrence of intercompany
Debt permitted pursuant to Section 4.12; (vii) customary indemnification and
similar arrangements with any officer, director or employee of Parent relating
to the business, operations or ownership of the Issuer; (viii) the pledge of
Equity Interests of Unrestricted Subsidiaries to support the Debt thereof; (ix)
transactions that are permitted by Section 5.01; (x) transactions effected as a
part of a Qualified Securitization Transaction; (xi) transactions with
customers, clients, suppliers, joint venture partners or purchasers or sellers
of goods and services, in each case in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in compliance with the terms of this Indenture which are on terms at
least as favorable as might reasonably have been obtained at such time from an
unaffiliated party; and (xii) transactions undertaken on the Issue Date pursuant
to the Asset Drop Down (as defined in the Final Offering Memorandum).
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SECTION 4.12 Limitation on Incurrence of Debt and Issuance of Preferred Stock.
(a) The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Debt (including Acquired Debt) and
the Issuer will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that if no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence thereof, the Issuer may incur Debt
(including Acquired Debt) or issue shares of Disqualified Stock and any
Guarantor may incur Debt (including Acquired Debt) or issue preferred stock if
the Consolidated Fixed Charge Coverage Ratio for the Issuer's most recently
ended four full fiscal quarters for which financial statements are available
immediately preceding the date on which such additional Debt is incurred or such
Disqualified Stock or preferred stock is issued would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Debt had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, at
the beginning of such four-quarter period.
(b) The provisions of Section 4.12(a) will not apply to the incurrence
of any of the following items of Debt (collectively, "Permitted Debt"):
(i) the incurrence by the Issuer or any of the Guarantors of
Debt under the Senior Credit Facility (or if the Senior Credit
Facility has matured or been terminated or repaid in whole or in part,
any other Credit Facility) in an aggregate principal amount at any
time outstanding not to exceed $165.0 million, which amount shall be
reduced by (A) any required permanent repayments pursuant to the
provisions of Section 4.16 (which are accompanied by a corresponding
permanent commitment reduction thereunder), (B) the aggregate amount
of any Debt constituting Limited Originator Recourse outstanding
pursuant to clause (xi) below and (C) the principal amount of Debt
outstanding pursuant to clause (x) below;
(ii) the incurrence by the Issuer and its Restricted
Subsidiaries of Existing Debt;
(iii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Debt represented by the Securities issued on the Issue
Date (or any Securities issued in exchange therefor) or any Guarantee;
(iv) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net
proceeds of which are used to refund, refinance or replace, Debt that
was permitted by this Indenture to be incurred;
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(v) the incurrence by the Issuer or any of its Restricted
Subsidiaries of intercompany Debt between or among the Issuer and any
of its Restricted Subsidiaries; provided, however, that (A) if the
Issuer or a Guarantor is the obligor on such Debt, such Debt is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Securities or such Guarantor's
Guarantee, as the case may be, and (B) (1) any subsequent issuance or
transfer (other than any bona fide pledge under the Senior Credit
Facility) of Equity Interests that results in any such Debt being held
by a Person other than the Issuer or a Restricted Subsidiary and (2)
any sale or other transfer (other than any bona fide pledge under the
Senior Credit Facility) of any such Debt to a Person that is not
either the Issuer or a Restricted Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Debt by the Issuer or such
Subsidiary, as the case may be;
(vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Debt that is permitted by the terms of this Indenture to be
outstanding or for the purpose of fixing or hedging currency exchange
risk with respect to any currency exchanges;
(vii) Capitalized Lease Obligations and Purchase Money
Obligations of the Issuer and the Guarantors not to exceed $5.0
million in aggregate principal amount (or accrued value, as
applicable) at any time outstanding;
(viii) Guarantees by the Issuer of Debt of any Restricted
Subsidiaries otherwise permitted by this Section 4.12 and guarantees
by any of the Issuer's Restricted Subsidiaries of Debt of the Issuer
or any other Restricted Subsidiary permitted to be incurred under
Section 4.18;
(ix) Debt of the Issuer or any Restricted Subsidiary in
respect of performance bonds, bankers' acceptances, trade letters of
credit, workers' compensation or self-insurance, surety bonds and
guarantees provided by the Issuer or any Restricted Subsidiary in the
ordinary course of business;
(x) Debt of Foreign Restricted Subsidiaries incurred for
working capital purposes in an aggregate principal amount outstanding
at any one time not to exceed the sum of 85% of the net book value of
such Subsidiaries' accounts receivable determined in accordance with
GAAP and 60% of the net book value of their inventory determined in
accordance with GAAP and guarantees by Foreign Restricted Subsidiaries
of such Debt (which Debt shall reduce the aggregate Debt permitted
pursuant to clause (i) above in the manner contemplated thereby);
(xi) the incurrence by (A) a Securitization Entity of Debt in
a Qualified Securitization Transaction that is Non-Recourse Debt with
respect to the Issuer and
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its other Restricted Subsidiaries (except for Standard Securitization
Undertakings and Limited Originator Recourse) or (B) the Issuer or any
Restricted Subsidiary of Debt constituting Limited Originator Recourse
(which Debt shall reduce the aggregate Debt permitted pursuant to
clause (i) above in the manner contemplated thereby);
(xii) Debt arising from agreements of the Issuer or a Restricted
Subsidiary of the Issuer providing for indemnification, adjustment of
purchase price, earn-out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Issuer, other than
guarantees of Debt incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition; and
(xiii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of additional Debt in an aggregate principal amount (or
accrued value, as applicable) at any time outstanding, including all
Permitted Refinancing Debt incurred to refund, refinance or replace
any other Debt incurred pursuant to this clause (xiii), not to exceed
$40.0 million (which amount may, but need not, be incurred in whole or
in part under the Senior Credit Facility).
(c) For purposes of determining compliance with this Section 4.12, in
the event that an item of Debt meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) of Section
4.12(b) or is entitled to be incurred pursuant to Section 4.12(a), the Issuer
shall, in its sole discretion, classify such item of Debt in any manner that
complies with this Section 4.12 and such item of Debt will be treated as having
been incurred pursuant to only one of such clauses of Section 4.12(b) or
pursuant to Section 4.12(a). Accrual of interest, the accretion of accrued value
and the payment of interest in the form of additional Debt will not be deemed to
be an incurrence of Debt for purposes of this Section 4.12.
SECTION 4.13 Payment Restrictions Affecting Restricted Subsidiaries.
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) (A) pay dividends or make any other distributions
to the Issuer or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (B) pay any indebtedness owed to the Issuer or any of its Restricted
Subsidiaries, (ii) make loans or advances to the Issuer or any of its Restricted
Subsidiaries or (iii) transfer any of its properties or assets to the Issuer or
any of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (A) Existing Debt, (B) the Senior Credit Facility
as in effect on the date of this Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not
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materially more restrictive taken as a whole with respect to such dividend and
other payment restrictions than those contained in the Senior Credit Facility as
in effect on the date of this Indenture (as determined by the Board of Directors
of the Issuer in its reasonable and good faith judgment), (C) this Indenture and
the Securities, (D) applicable law, (E) any instrument governing Debt or Capital
Stock of a Person acquired by the Issuer or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such Debt was
incurred or such encumbrance or restriction was established in connection with
or in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, provided
that, in the case of Debt, such Debt was permitted by the terms of this
Indenture to be incurred, (F) customary non-assignment provisions in leases and
other agreements entered into in the ordinary course of business and consistent
with past practices, restricting assignment or restricting transfers of non-cash
assets, (G) Purchase Money Obligations for property acquired in the ordinary
course of business and other Liens permitted by this Indenture, in each case
that impose restrictions of the nature described in clause (iii) above on the
property so acquired (or subject to such Liens), (H) Debt permitted under
clause (x) of Section 4.12(b), (I) Permitted Refinancing Debt, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Debt are not materially more restrictive taken as a whole than those
contained in the agreements governing the Debt being refinanced (as determined
by the Board of Directors of the Issuer in its reasonable and good faith
judgment), (J) contracts for the sale of assets or Equity Interests to the
extent that any such contract imposes restrictions of the nature described in
clause (iii) above on the property to be sold, (K) any pledge by the Issuer or a
Restricted Subsidiary of the Equity Interests of an Unrestricted Subsidiary to
support the Debt thereof, (L) secured Debt otherwise permitted to be incurred
pursuant to Section 4.17 that limits the right of the debtor to dispose of
the assets securing such Debt, (M) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, (N) restrictions on
cash or other deposits or net worth imposed by customers under contracts entered
into in the ordinary course of business, (O) any Debt or other contractual
requirements of a Securitization Entity in connection with a Qualified
Securitization Transaction; provided that such restrictions apply only to such
Securitization Entity, (P) other Debt of a Restricted Subsidiary that is a
Guarantor permitted to be incurred subsequent to the date of this Indenture
pursuant to Section 4.12; provided that any such restrictions are
ordinary and customary with respect to the type of Debt or preferred stock being
incurred or issued (under the relevant circumstances), or (Q) any encumbrances
or restrictions imposed by any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings of
the contracts, instruments or obligations referred to in clauses (A) through (P)
above, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are, in the
good faith judgment of the Board of Directors of the Issuer, not materially more
restrictive with respect to such dividend and other payment restrictions than
those contained in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Debt.
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(a) The Issuer will not, directly or indirectly, incur, create, issue,
assume, guarantee or otherwise become liable for any Debt that is expressly
subordinated or junior in right of payment to any Senior Debt of the Issuer and
senior in any respect in right of payment to the Securities; and
(b) The Issuer will not, directly or indirectly, permit any Guarantor
to incur, create, issue, assume, guarantee or otherwise become liable for any
Debt that is expressly subordinated or junior in right of payment to any
Guarantor Senior Debt of such Guarantor and senior in any respect in right of
payment to such Guarantor's Guarantee.
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Securities may require the Issuer to repurchase all or a portion of such
Holder's Securities pursuant to the offer described in Section 4.15(b) (the
"Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof and accrued and unpaid interest thereon, if
any, to the date of purchase (the "Change of Control Payment"). Prior to the
mailing of the notice referred to in Section 4.15(b), but in any event within 90
days following the date on which a Change of Control occurs, the Issuer
covenants to (i) repay in full in cash all outstanding Senior Debt under the
Senior Credit Facility (and terminate all commitments thereunder) and all other
Senior Debt the terms of which require repayment upon a Change of Control, or
(ii) obtain the requisite consents under the Senior Credit Facility and all such
other Senior Debt to permit the repurchase of the Securities as provided in this
Section 4.15. The Issuer shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase the Securities
pursuant to the provisions described in this Section 4.15; provided that the
Issuer's failure to comply with such covenant resulting in a failure to mail the
notice referred to in Section 4.15(b) shall constitute an Event of Default under
Section 6.01(3) and not under Section 6.01(2).
(b) Within 30 days following the date upon which a Change of Control
occurs (the "Change of Control Date"), the Issuer shall send, by first class
mail, a notice to each Holder of the Securities, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender the Securities pursuant to the Change of Control Offer.
Such notice shall state:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Issuer to repurchase all or a portion (equal
to $1,000 principal amount or an integral multiple thereof) of such
Holder's Securities at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest
to the date of purchase (the "Change of Control Payment Date"), which
shall be a Business Day, specified in such notice, that is not earlier
than 30 days or later than 60 days from the date such notice is
mailed;
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(2) the amount of accrued and unpaid interest as of the Change of
Control Payment Date;
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Issuer defaults in the payment of the
purchase price for the Securities payable pursuant to the Change of
Control Offer, any Securities 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 electing to have Securities purchased pursuant to
a Change of Control Offer will be required to surrender the
Securities, with the forms entitled "Option of Holder to Elect
Purchase" on the reverse of the Securities completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than five Business Days prior to
the Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount and
certificate number of the Security or Securities the Holder delivered
for purchase and a statement that such Holder is withdrawing his
election to have such Security or Securities purchased;
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered, provided that each
new Security will be in a principal amount of $1,000 or an integral
multiple thereof; and
(8) such other information as may be required by applicable laws
and regulations.
(c) On the Change of Control Payment Date, the Issuer will, to
the extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Trustee an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered, and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted pursuant to such Change of
Control Offer together with an Officers' Certificate stating the aggregate
principal amount of Securities or portions thereof being purchased by the
Issuer. The Paying Agent shall promptly mail to each Holder of Securities or
portions thereof accepted for payment an amount equal to the Change of Control
Payment for such Securities or portion thereof, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to such Holder
of Securities accepted for payment in part a new Security or Securities equal in
principal amount to any unpurchased portion of such Holder's Securities,
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provided that each such new Security will be in a principal amount of $1,000 or
an integral multiple thereof, and any Security not accepted for payment in whole
or in part shall be promptly returned to the Holder of such Security. On and
after a Change of Control Payment Date, interest will cease to accrue on the
Securities or portions thereof accepted for payment, unless the Issuer defaults
in the payment of the purchase price therefor. The Issuer will announce the
results of the Change of Control Offer to Holders of the Securities on or as
soon as practicable after the Change of Control Payment Date.
(d) The Issuer will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.15 applicable to a Change of Control
Offer made by the Issuer and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
(e) The Issuer will comply with the requirements of Rule 14e-l
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Securities pursuant to a Change of Control Offer. To the
extent the provisions of any such rule conflict with the provisions of this
Section 4.15, the Issuer shall comply with the provisions of such rule and be
deemed not to have breached its obligations under this Section 4.15.
SECTION 4.16. Limitation on Asset Sales.
(a) The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuer (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors of the Issuer set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Issuer or such Restricted Subsidiary is in the form of
cash, Cash Equivalents or properties and assets to be used in the Issuer's
business or Equity Interests in a Person that becomes a Restricted Subsidiary
and is received at the time of such disposition; provided that the amount of any
Senior Debt or Guarantor Senior Debt (as shown on the most recent consolidated
balance sheet of the Issuer) of the Issuer or any Guarantor that is assumed by
the transferee of any such assets pursuant to a customary novation agreement or
other agreement that releases or indemnifies the Issuer or such Guarantor from
further liability shall be deemed to be cash for purposes of this Section
4.16(a).
(b) Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Issuer or such Restricted Subsidiary may apply such Net Proceeds
at its option, (i) to permanently repay, reduce, or secure letters of credit in
respect of, Senior Debt and/or Guarantor Senior Debt (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings),
and/or (ii) to the acquisition of a controlling interest in another business,
the making of a capital expenditure or Permitted Investment or the acquisition
of other assets, in each case, for use in the
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same or a similar line of business as the Issuer or any Restricted Subsidiary
was engaged in on the date of such Asset Sale or reasonable extensions thereof.
Pending the final application of any such Net Proceeds, the Issuer or such
Restricted Subsidiary may temporarily reduce indebtedness under the Senior
Credit Facility (or any alternative or subsequent revolving credit agreement
where borrowings thereunder constitute Senior Debt and/or Guarantor Senior Debt)
or otherwise invest such Net Proceeds in any manner that is not prohibited by
this Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this Section 4.16(b) will be
deemed to constitute "Excess Proceeds."
(c) Within 15 days after the date on which the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Issuer will be required to make an
offer (an "Asset Sale Offer") to all Holders of Securities and holders of any
other Pari Passu Debt outstanding with provisions requiring the Issuer to make
an offer to purchase or redeem such indebtedness with the proceeds from any
Asset Sale as follows: (i) the Issuer will make a written offer to purchase from
all Holders of the Securities in accordance with the procedures set forth in
this Indenture in the maximum principal amount (expressed as a multiple of
$1,000) of Securities that may be purchased out of an amount (the "Security
Amount") equal to the product of such Excess Proceeds multiplied by a fraction,
the numerator of which is the outstanding principal amount of the Securities,
and the denominator of which is the sum of the outstanding principal amount of
the Securities and such Pari Passu Debt (subject to proration in the event such
amount is less than the aggregate Asset Sale Offered Price of all Securities
tendered), and (ii) to the extent required by such Pari Passu Debt to
permanently reduce the principal amount of such Pari Passu Debt, the Issuer will
make an offer to purchase or otherwise repurchase or redeem Pari Passu Debt (an
"Asset Sale Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal
to the excess of the Excess Proceeds over the Security Amount; provided that in
no event will the Issuer be required to make an Asset Sale Pari Passu Offer in a
Pari Passu Debt Amount exceeding the principal amount of such Pari Passu Debt
plus the amount of any premium required to be paid to repurchase such Pari Passu
Debt. The offer price for the Securities will be payable in cash in an amount
equal to 100% of the principal amount of the Securities, plus accrued and unpaid
interest, if any, to the date (the "Asset Sale Offer Date") such Asset Sale
Offer is consummated (the "Asset Sale Offered Price"). To the extent that the
aggregate Asset Sale Offered Price of the Securities tendered pursuant to the
Asset Sale Offer is less than the Security Amount relating thereto or the
aggregate amount of Pari Passu Debt that is purchased in an Asset Sale Pari
Passu Offer is less than the Pari Passu Debt Amount, the Issuer may use any
remaining Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Securities and Pari Passu Debt
surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Securities to be purchased on a pro rata basis. Upon
the completion of the purchase of all the Securities tendered pursuant to an
Asset Sale Offer and the completion of a Pari Passu Offer, the amount of Excess
Proceeds, if any, shall be reset at zero.
(d) If the Issuer becomes obligated to make an Asset Sale Offer
pursuant to Section 4.16(c), the Securities and the Pari Passu Debt shall be
purchased by the Issuer, at the option of the holders thereof, in whole or in
part in integral multiples of $1,000, on a date that is not earlier
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than 30 days and not later than 60 days from the date the notice of the Asset
Sale Offer is given to holders, or such later date as may be necessary for the
Issuer to comply with the requirements under the Exchange Act.
(e) The Issuer will comply with the requirements of Rule 14e-1
under the Exchange Act and any other applicable securities laws or regulations
in connection with an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.16, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.16 by virtue
thereof.
SECTION 4.17. Limitation on Liens.
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) that secures Debt or trade payables unless
(i) in the case of Liens securing Subordinated Debt, the Securities are secured
on a senior basis to the obligations so secured until such time as such
obligations are no longer secured by a Lien and (ii) in the case of Liens
securing obligations under Pari Passu Debt, the Securities are equally and
ratably secured with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
SECTION 4.18. Guarantees by Restricted Subsidiaries.
(a) The Issuer will not permit any of its Restricted Subsidiaries,
directly or indirectly, by way of the pledge of any intercompany note or
otherwise to assume, guarantee or in any other manner become liable with respect
to any Debt of the Issuer or any other Restricted Subsidiary (other than any
guarantee by a Foreign Restricted Subsidiary of Debt of another Foreign
Restricted Subsidiary permitted under Section 4.12) unless, in any such case (i)
such Restricted Subsidiary, if it is not a Guarantor, executes and delivers a
supplemental indenture to this Indenture, providing a Guarantee and (ii) (A) if
any such assumption, guarantee or other liability of such Restricted Subsidiary
is provided in respect of Senior Debt or Guarantor Senior Debt, the guarantee or
other instrument provided by such Restricted Subsidiary in respect of such
Senior Debt or Guarantor Senior Debt may be superior to the Guarantee pursuant
to subordination provisions no less favorable in any material respect to the
Holders than those contained in this Indenture and (B) if such assumption,
guarantee or other liability of such Restricted Subsidiary is provided in
respect of Debt that is expressly subordinated to the Securities, the guarantee
or other instrument provided by such Restricted Subsidiary in respect to such
subordinated Debt shall be subordinated to the Guarantee pursuant to
subordination provisions no less favorable in any material respect to the
Holders than those contained in this Indenture.
(b) Notwithstanding Section 4.18(a), any such Guarantee by a
Restricted Subsidiary of the Securities pursuant to Section 4.18(a) shall
provide by its terms that it shall be automatically and unconditionally released
and discharged, without any further action required on the part of the Trustee
or any Holder, upon: (i) the unconditional release of such Restricted
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Subsidiary from its liability in respect of the Debt in connection with which
such Guarantee was executed and delivered pursuant to Section 4.18(a) (including
any Debt in respect of the Senior Credit Facility); or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Issuer of all of the Issuer's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary or the parent of
such Restricted Subsidiary; provided that (A) such sale or disposition of such
Capital Stock or assets is otherwise in compliance with the terms of this
Indenture and (B) such assumption, guarantee or other liability of such
Restricted Subsidiary has been released by the holders of the other Debt so
guaranteed; or (iii) such Guarantor becoming an Unrestricted Subsidiary in
accordance with this Indenture.
SECTION 4.19. Conduct of Business of the Issuer and Its Restricted Subsidiaries.
The Issuer and its Restricted Subsidiaries will not engage in
any businesses which are not the same, similar or related to the businesses in
which the Issuer and its Restricted Subsidiaries are engaged as of the Issue
Date (or any reasonable extension or expansion thereof), except to such extent
as would not be material to the Issuer and its Restricted Subsidiaries taken as
a whole.
SECTION 4.20. Guarantors.
(a) So long as any Securities remain outstanding, any Restricted
Domestic Subsidiary shall (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Domestic Subsidiary shall unconditionally guarantee all of the
Issuer's obligations under the Securities and this Indenture on the terms set
forth in this Indenture and (ii) deliver to the Trustee an Opinion of Counsel
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Domestic Subsidiary and constitutes a legal, valid,
binding and enforceable obligation of such Restricted Domestic Subsidiary.
Thereafter, such Restricted Domestic Subsidiary shall be a Guarantor for all
purposes of this Indenture.
(b) If all the Capital Stock of any Guarantor is sold to a Person
(other than the Issuer or any of its Restricted Subsidiaries) and the Net
Proceeds from such Asset Sale are used in accordance with the terms of Section
4.16, then such Guarantor will be released and discharged from all of its
obligations under its Guarantee of the Securities and this Indenture.
SECTION 4.21. Rule 144A Information Requirement.
The Issuer will furnish to the Holders or beneficial holders of the
Securities and prospective purchasers of Securities designated by the Holders of
Securities, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act for so long as is required
for an offer or sale of the Securities to qualify for an exemption under Rule
144A.
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SECTION 4.22. Issuance and Sale of Capital Stock of Restricted Subsidiaries.
The Issuer (i) will not, and will not permit any of its
Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Restricted Subsidiary to any Person (other than to
the Issuer or a Wholly Owned Restricted Subsidiary) and (ii) will not permit any
Restricted Subsidiary to issue any of its Capital Stock to any Person other than
to the Issuer or a Wholly Owned Restricted Subsidiary, in each case unless the
Net Proceeds from such transfer, sale or other disposition are applied in
accordance with Section 4.16.
SECTION 4.23. Limitation on Sale and Lease-Back Transactions.
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale and Lease-Back Transaction; provided that
the Issuer or any Guarantor may enter into a Sale and Lease-Back Transaction if:
(i) the Issuer could have (A) incurred Debt in an amount equal to the
Attributable Debt relating to such Sale and Lease-Back Transaction pursuant to
the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a)
and (B) incurred a Lien to secure such Debt pursuant to Section 4.17; (ii) the
gross cash proceeds of such Sale and Lease- Back Transaction are at least equal
to the fair market value (as determined in good faith by the Board of Directors
pursuant to a Board Resolution) of the property that is the subject of such Sale
and Lease-Back Transaction; and (iii) the transfer of assets in such Sale and
Lease-Back Transaction is permitted by, and the Issuer applies the proceeds of
such transaction in compliance with, Section 4.16.
SECTION 4.24. Payments for Consent.
Neither the Issuer nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Securities unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Securities that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement, which solicitation documents must
be mailed to all Holders of the Securities a reasonable length of time prior to
the expiration of the solicitation.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation or Sale of Assets.
(a) The Issuer will not consolidate or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the Issuer's consolidated properties
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or assets in one or more related transactions, to another corporation or other
Person unless: (i) the Issuer is the surviving corporation or the Person (if
other than the Issuer) formed by such consolidation or into which the Issuer is
merged or the Person that acquires by conveyance, transfer or lease
substantially all of the properties and assets of the Issuer (the "Surviving
Entity") shall be a corporation organized and validly existing under the laws of
the United States or any state thereof or the District of Columbia; (ii) if the
Issuer is not the surviving corporation, the Surviving Entity assumes all the
obligations of the Issuer under the Securities and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction, no Default or Event of Default exists; (iv)
except in the case of a merger of the Issuer with or into a Wholly Owned
Restricted Subsidiary of the Issuer or a merger entered into solely for the
purpose of reincorporating the Issuer in another jurisdiction, the Issuer or the
Surviving Entity, as the case may be, (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Issuer immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Debt pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a); and
(v) the Issuer or the Surviving Entity, as the case may be, shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment transfer, lease, conveyance or
other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of this Indenture and that all conditions precedent in this Indenture
relating to such transaction have been satisfied.
(b) Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
will not, and the Issuer will not cause or permit any Guarantor to, consolidate
with or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets to any
Person other than the Issuer or any other Guarantor unless: (i) such Guarantor
is the surviving corporation or the Person (if other than a Guarantor) formed by
such consolidation or into which such Guarantor is merged or the Person that
acquires by conveyance, transfer or lease substantially all of the properties
and assets of such Guarantor shall be a corporation organized and existing under
the laws of the United States or any State thereof or the District of Columbia;
(ii) such entity or Person formed by or surviving any such consolidation or
merger (if other than the Guarantor) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all of the obligations of the Guarantor under the Guarantee
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iv) immediately after giving effect to such
transaction, the Issuer could satisfy the provisions of clause (iv) of Section
5.01(a). Any merger or consolidation of a Guarantor with and into the Issuer
(with the Issuer being the surviving entity) or another Guarantor need only
comply with clauses (iv)(A) and (v) of Section 5.01(a).
SECTION 5.02. Successor Corporation Substituted.
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Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Issuer in accordance with Section
5.01, in which the Issuer is not the continuing corporation, the successor
Person formed by such consolidation or into which the Issuer is merged or to
which such sale, assignment, transfer or other disposition is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture and the Securities with the same effect as if such
successor had been named as the Issuer herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default":
(1) the failure to pay interest on any Securities when the same
becomes due and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by Article Ten);
(2) the failure to pay the principal of or premium, if any, on any
Securities, when such principal or premium, if any, becomes due and
payable, at maturity, upon acceleration, upon optional or mandatory
redemption, upon required repurchase or otherwise (including the failure to
make a payment to repurchase Securities tendered pursuant to a Change of
Control Offer or an Asset Sales Offer) (whether or not such payment shall
be prohibited by Article Ten);
(3) the failure to conform or comply with any covenant, agreement or
warranty contained in Sections 4.15 or 4.16 or Article Five, or the
corresponding provisions of the Securities, for 30 days after notice
thereof has been given to the Issuer by the Trustee or by the Holders of at
least 25% in principal amount of the then outstanding Securities;
(4) the failure to conform or comply with any other covenant,
agreement or warranty in the Securities or this Indenture for 60 days after
notice thereof has been given to the Issuer by the Trustee or by the
Holders of at least 25% in principal amount of the then outstanding
Securities;
(5) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantor that is a Significant Subsidiary denies
its liability under its Guarantee (other than by reason of a release of a
Guarantee in accordance with the terms of this Indenture or such
Guarantee);
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(6) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any Debt
for money borrowed by the Issuer or any of its Restricted Subsidiaries
(other than a Securitization Entity) (or the payment of which is guaranteed
by the Issuer or any of its Restricted Subsidiaries (other than a
Securitization Entity)) whether such Debt or guarantee now exists, or is
created after the date of this Indenture, which default (a) is caused by a
failure to pay principal of such Debt at the final Stated Maturity thereof
(giving effect to any applicable grace periods and any extensions thereof)
(a "Payment Default") or (b) results in the acceleration of such Debt prior
to its final Stated Maturity and, in the case of either clause (a) or (b),
the principal amount of any such Debt, together with the principal amount
of any other such Debt under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $7.5 million or more;
(7) the failure by the Issuer or any of its Significant Subsidiaries
to pay final judgments aggregating in excess of $7.5 million (to the extent
not covered by third party insurance as to which the insurance company has
acknowledged coverage), which judgments are not paid, discharged or stayed
for a period of 60 days after their entry;
(8) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Issuer
or any of its Significant Subsidiaries in an involuntary case or proceeding
under any applicable Bankruptcy Law or (b) a decree or order adjudging the
Issuer or any of its Significant Subsidiaries bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Issuer or any of its Significant Subsidiaries under any
applicable federal, state or foreign law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Issuer or any of its Significant Subsidiaries or of
substantially all of their respective properties, or ordering the winding
up or liquidation of their affairs, and any such decree or order for relief
shall continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 days, provided that if any order
is dismissed on appeal then such Event of Default shall be deemed cured; or
(9) (a) the Issuer or any of its Significant Subsidiaries commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Issuer or any of its Significant Subsidiaries consents to the entry of a
decree or order for relief in respect of the Issuer or such Significant
Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, (c) the Issuer or any of its Significant
Subsidiaries files a petition or answer or consent seeking reorganization
or relief under any applicable federal, state or foreign bankruptcy law,
(d) the Issuer or any of its Significant Subsidiaries (x) consents to the
filing of such petition or the appointment of or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Issuer or such Significant Subsidiary or of
substantially all of their respective property, or (y) makes an assignment
for the benefit of
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creditors or (e) the Issuer or any of its Significant Subsidiaries takes
any corporate action in furtherance of any such actions in this paragraph
(9).
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the Securities pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Securities. If an Event of Default occurs by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Issuer with the intention of avoiding the prohibition on redemption of the
Securities, then the premium specified in this Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Securities. If an Event of Default occurs prior to August 1, 2003, by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Issuer with the intention of avoiding the prohibition on redemption of
the Securities prior to such date, then the amount payable for purposes of this
paragraph will be 110.0%, expressed as a percentage of the amount that would
otherwise be due but for the provisions of this sentence, plus accrued interest,
if any, to the date of payment.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
paragraph (8) or (9) of Section 6.01 with respect to the Issuer, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidary) occurs and is continuing and has not been
waived pursuant to Section 6.04, the Trustee or the Holders of at least 25% in
principal amount of the Securities then outstanding may declare the aggregate
principal amount of the Securities outstanding, together with accrued but unpaid
interest, if any, on all Securities to be due and payable by notice in writing
to the Issuer and the Trustee specifying the respective Event of Default and
that it is a "notice of acceleration" (the "Acceleration Notice"), and, if the
applicable Event of Default is then continuing, the Securities outstanding (i)
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Senior Credit Facility, shall become due and payable upon
the first to occur of an acceleration under the Senior Credit Facility or five
Business Days after receipt by the Issuer and the Representative under the
Senior Credit Facility of such Acceleration Notice (unless all Events of Default
specified in such Acceleration Notice have been cured or waived). In the event
of a declaration of acceleration because an Event of Default set forth in
paragraph (6) of Section 6.01 has occurred and is continuing, such declaration
of acceleration shall be automatically annulled if (i) the missed payments in
respect of the applicable Debt have been paid or if the holders of the Debt that
is subject to acceleration have rescinded their declaration of acceleration, in
each case within 30 days thereof and (ii) all existing Events of Default, except
non-payment of principal or interest which have become due solely because of the
acceleration of the Securities, have been cured or waived. If an Event of
Default specified in paragraph (8) or (9) of Section 6.01 occurs and is
continuing with respect to the Issuer, any Significant Subsidiary or any group
of Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all unpaid principal, premium, if any, and accrued interest on the
Securities
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then outstanding shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the Securities then outstanding
(by written notice to the Trustee and the Issuer) may rescind and cancel a
declaration of acceleration and its consequences if (i) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default have been cured or waived, except non-payment of
the principal or interest on the Securities which have become due solely by such
declaration of acceleration, (iii) to the extent the payment of such interest is
lawful, interest (at the same rate as specified in the Securities) on overdue
installments of interest and overdue payments of principal and premium, if any,
which has become due otherwise than by such declaration of acceleration, has
been paid, and (iv) in the event of the cure or waiver of a Default or Event of
Default of the type described in paragraphs (8) and (9) of Section 6.01, the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Default or Event of Default has been cured or waived and the Trustee
shall be entitled to conclusively rely upon such Officers' Certificate and
Opinion of Counsel. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
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, premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Securities and subject
to Sections 6.07 and 9.02, the Holders of a majority in principal amount of the
outstanding Securities by notice to the Trustee may waive an existing Default or
Event of Default and its consequences, except (i) a Default or Event of Default
specified in Section 6.01(1) or (2) (which may only be waived with the consent
of each Holder of Securities affected) or (ii) in respect of any covenant or
provision hereunder which cannot be modified or amended without the consent of
the Holder of each Security outstanding.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the
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Trustee or exercising any trust or power conferred on it, including, without
limitation, any remedies provided for in Section 6.03. Subject to Section 7.01,
however, the Trustee may, in its discretion, refuse to follow any direction that
conflicts with any law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of another Securityholder, or that may involve
the Trustee in personal liability; provided that the Trustee may take any other
action deemed proper by the Trustee, in its discretion, which is not
inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity or security against
any loss, liability or expense to be incurred in compliance with such
request which is reasonably satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of satisfactory indemnity or security;
and
(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of, premium, if any,
and interest on such Security, on or after the respective due dates expressed in
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in paragraphs (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment
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in its own name and as trustee of an express trust against the Issuer or any
other obligor on the Securities for the whole amount of principal, premium 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 at the rate set forth in the Securities and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
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 reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Issuer or
any other obligor upon the Securities, any of their respective creditors or any
of their respective 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, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder 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 Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07. The Issuer's payment obligations under this Section 6.09 shall be
secured in accordance with the provisions of Section 7.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 6.10. Priorities.
Subject to Article Ten, if the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Sections 6.09 and 7.07;
Second: if the Holders are forced to proceed against the Issuer
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Securities for
principal (including premium) and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal (including premium) and interest, respectively;
and
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Fourth: to the Issuer or any other obligor on the Securities, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Issuer, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as 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 and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in principal amount of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Security and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Issuer, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default or an Event of Default actually known to the Trustee
has occurred and is continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in its exercise thereof as a prudent person would exercise or use under
the circumstances in the conduct of its own affairs.
(b) Except during the continuance of a Default or an Event of Default
actually known to the Trustee:
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(1) The Trustee need perform only those duties as are specifically set
forth in this Indenture and the TIA and no duties, covenants,
responsibilities or obligations shall be implied in this Indenture that are
adverse to the Trustee.
(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 (including Officers'
Certificates) or opinions (including Opinions of Counsel) furnished to the
Trustee and conforming to the requirements of this Indenture. However, as
to any certificates or opinions which are required by any provision of this
Indenture to be delivered or provided to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture, but not to verify the
contents thereof.
(c) Notwithstanding anything to the contrary herein contained, 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 Section 6.02, 6.04 or 6.05.
(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 duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Issuer. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
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(a) The Trustee may request and rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.04 and 13.05. The Trustee shall
not be liable for and shall be fully protected in respect of any action it
takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate (including any
Officers' Certificate), statement, instrument, opinion (including any
Opinion of Counsel), notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Issuer, to examine the books, records, and premises of the Issuer,
personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of the Securities pursuant to the
provisions of this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability with respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Issuer, any
Subsidiary of the Issuer, or their respective
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Affiliates, with the same rights it would have if it were not Trustee, subject
to Section 7.10. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Disclaimer of Trustee.
The Trustee does not make any representation as to the validity,
effectiveness or adequacy of this Indenture or the Securities, and it shall not
be accountable for the Issuer's use of the proceeds from the Securities, the
Trustee shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement of the Issuer in this Indenture, the Securities
other than the Trustee's certificate of authentication or any document issued in
connection with the sale of the Securities.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Security, including an accelerated
payment and the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer or on the Asset Sale Offer Purchase Date
pursuant to an Asset Sale Offer, and, except in the case of a failure to comply
with Article Five, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders. This Section 7.05
shall be in lieu of the proviso to (S)315(b) of the TIA and such proviso to
(S)315(b) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA. The Trustee shall not be deemed to have
knowledge of a Default or Event of Default other than (i) any Event of Default
occurring pursuant to Section 6.01(1), 6.01(2) or 4.01; or (ii) any Default or
Event of Default of which a Trust Officer shall have received written
notification or obtained actual knowledge.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with May 15, 1999,
the Trustee shall, to the extent that any of the events described in TIA (S)
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Issuer and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
The Issuer shall promptly notify the Trustee if the Securities become
listed on any stock exchange and the Trustee shall comply with TIA (S) 313(d).
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SECTION 7.07. Compensation and Indemnity.
The Issuer shall pay to the Trustee in its capacity as such from time
to time such compensation as may be agreed upon in writing by the Issuer and the
Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. Subject to the limitations set
forth in the following paragraph, the Issuer shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by it in connection with the performance of its duties and the
discharge of its obligations under this Indenture. Such expenses shall include
the reasonable fees and expenses of the Trustee's agents and counsel.
The Issuer shall indemnify the Trustee and its agents, employees,
officers, stockholders and directors for and hold them harmless against any
loss, liability, damage, claim or expense incurred by them except for such loss,
liability, damage, claims or expenses or actions to the extent caused by any
negligence, bad faith or willful misconduct on any of their part, arising out of
or in connection with the acceptance or administration of this trust including
the reasonable costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of their rights,
powers or duties hereunder. The Trustee shall notify the Issuer promptly of any
claim asserted against the Trustee, its agents, employees, officers,
stockholders or directors for which indemnity may be sought. The Issuer shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Issuer shall pay the reasonable fees and
expenses of one such counsel. The Issuer need not pay for any settlement made
without its written consent, which consent shall not be unreasonably withheld.
The Issuer need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee, its agents, employees,
officers, stockholders or directors through its negligence, bad faith or willful
misconduct.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all assets or money held or
collected by the Trustee, in its capacity as Trustee, as the case may be, except
assets or money held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(8) or (9) occurs, such expenses and the
compensation for such services shall be paid to the extent allowed under any
Bankruptcy Law.
The provisions of this Section 7.07 shall survive the resignation or
removal of the Trustee, the discharge of the Issuer's obligations under Article
Eight or any rejection or the termination of this Indenture under any Bankruptcy
Law or otherwise.
SECTION 7.08. Replacement of Trustee.
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The Trustee may resign by so notifying the Issuer in writing. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Issuer in writing and the Trustee and may
appoint a successor trustee. The Issuer may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee 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 Issuer shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuer.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Promptly after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, 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
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
Person, the resulting, surviving or
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transferee Person without any further act shall, if such resulting, surviving or
transferee Person is otherwise eligible hereunder, be the successor Trustee;
provided that such Person shall be otherwise qualified and eligible under this
Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee (or in the case
of a corporation included in a bank holding company system, the related bank
holding company) 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. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall
comply with TIA (S) 310(b); provided, however, that there shall be excluded from
the operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Issuer are outstanding, if the requirements for such exclusion set forth in
TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the
Issuer and any other obligor of the Securities.
SECTION 7.11. Preferential Collection of Claims Against the Issuer.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall apply to the Issuer and any other obligor of the
Securities.
ARTICLE EIGHT
DISCHARGE OF THIS INDENTURE; DEFEASANCE
SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance.
The Issuer may, at its option, at any time, with respect to the
Securities, elect to have either Section 8.02 or Section 8.03 be applied to all
Securities upon compliance with the conditions set forth below in this Article
Eight.
SECTION 8.02. Defeasance and Discharge.
Upon the Issuer's exercise under Section 8.01 of the option applicable
to this Section 8.02, the Issuer shall be deemed to have been discharged from
its obligations with respect to all Securities on the date the conditions set
forth below are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Issuer shall be deemed to have paid and discharged the
entire amount of Debt represented by the Securities, which shall thereafter be
deemed to be
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"outstanding" until paid in full in cash only for the purposes of Section 8.05
and the other Sections of this Indenture referred to in clauses (A) and (B)
below, and to have satisfied all its other obligations under such Securities and
this Indenture (and the Trustee, on demand of and at the expense of the Issuer,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until the Securities are paid in full in cash
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Securities to receive solely from the trust fund described in Section 8.04 and
as more fully set forth in such Section, payments in respect of the principal of
(and premium, if any) and interest on such Securities when such payments are
due, (B) the Issuer's obligations with respect to such Securities under Sections
2.03 through and including 2.11 and 2.14, (C) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Issuer's obligations in
connection therewith and (D) this Article Eight. Subject to compliance with
this Article Eight, the Issuer may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 with respect
to the Securities.
SECTION 8.03. Covenant Defeasance.
Upon the Issuer's exercise under Section 8.01 of the option applicable to this
Section 8.03, the payment of the Securities may not be accelerated pursuant to
Section 6.02 upon, or as a result of, an Event of Default set forth in Sections
6.01(3), (4), (5) or (6) with respect to the Securities on and after the date
the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Securities shall not be deemed
outstanding for financial accounting purposes). Except as specified above, the
remainder of this Indenture and the Securities shall be unaffected by a covenant
defeasance.
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
8.02 or Section 8.03 to the Securities:
(a) The Issuer shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article Eight applicable to it) as trust 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 such Securities, (A)
cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than one day before
the due date of any payment, cash in U.S. Dollars 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
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trustee) to pay and discharge, (i) the principal of (and premium, if any)
and interest on the Securities on the Stated Maturity of such principal or
installment of principal (and premium, if any) or interest and (ii) any
mandatory sinking fund payments or analogous payments applicable to the
Securities on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of the Securities; provided
that the Trustee shall have been irrevocably instructed to apply such money
or the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States of
America for the timely payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act), as custodian with respect to any
such 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. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(b) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or would
occur as a consequence thereof (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or,
insofar as Section 6.01(8) or 6.01(9) is concerned, at any time during the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(c) No event or condition shall exist that, pursuant to the
provisions of Section 10.02 or 10.03, would prevent the Issuer from making
payments of the principal of (and premium, if any) or interest on the
Securities on the date of such deposit or at any time during the period
ending on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period).
(d) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument to which the Issuer or any of its Restricted
Subsidiaries is a party or by which the Issuer or any of its Restricted
Subsidiaries is bound.
(e) In the case of an election under Section 8.02, the Issuer shall
have delivered to the Trustee an Opinion of Counsel in the United States
stating that (x) the Issuer has
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received from, or there has been published by, the Internal Revenue Service
a ruling or (y) otherwise since the date hereof, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of the
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred.
(f) In the case of an election under Section 8.03, the Issuer shall
have delivered to the Trustee an Opinion of Counsel in the United States to
the effect that the Holders of the Securities will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
(g) In the case of an election under either Section 8.02 or 8.03, the
Issuer shall have delivered to the Trustee an Opinion of Counsel in the
United States to the effect that after the 91st day following the date of
such deposit, such trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(h) In the case of an election under either Section 8.02 or 8.03, the
Issuer shall represent to the Trustee that the deposit made by the Issuer
pursuant to its election under Section 8.02 or 8.03 was not made by the
Issuer with the intent of preferring the Holders over other creditors of
the Issuer or with the intent of defeating, hindering, delaying or
defrauding creditors of the Issuer or others.
(i) The Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the
defeasance under Section 8.02 or the covenant defeasance under Section 8.03
(as the case may be) have been complied with.
SECTION 8.05. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of Section 12 of the Securities, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (collectively for purposes of this
Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent, to the Holders of such Securities of all
sums due and to become due thereon in respect of principal (and premium, if any)
and interest, but such money need not be segregated from other
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funds except to the extent required by law. Money and U.S. Government
Obligations so held in trust are not subject to Article Ten or Article Twelve
hereof.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 8.04 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Securities.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon Issuer's
request together with an Officers' Certificate any money or U.S. Government
Obligations held by it as provided in Section 8.04 which are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent defeasance or covenant defeasance. If any money or U.S. Government
Obligations held by the Trustee for the payment of principal or interest remains
unclaimed on the first anniversary of the Maturity Date of the Securities, the
Trustee shall promptly, or shall cause the prompt, return of such money or U.S.
Government Obligations. After the return of such money or U.S. Government
Obligations, all liability of the Trustee with respect to such money or U.S.
Government Obligations shall cease.
SECTION 8.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.02 or 8.03, as the case may be, by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Issuer's and the Guarantors'
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03,
as the case may be, until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03, as the case may
be; provided, however, that, if the Issuer makes any payment of principal of (or
premium, if any) or interest on any Security following the reinstatement of its
obligations, the Issuer shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Issuer and the Guarantors, when authorized by a Board Resolution,
and the Trustee, together, may amend or supplement this Indenture or the
Securities without notice to or consent of any Holder:
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(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any of the Holders in any material respect;
(2) to comply with Article V of this Indenture;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any change that would provide any additional rights or
benefits to the Holders of the Securities or that does not adversely affect
the legal rights under this Indenture of any such Holder;
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act;
(6) to provide for the issuance of the Exchange Securities (which
will have terms identical in all material respects to the Securities issued
on the Issue Date except that the transfer restrictions contained in the
Securities issued on the Issue Date will be modified or eliminated, as
appropriate), and which will be treated together with any outstanding
Securities issued on the Issue Date, as a single issue of Securities;
(7) to reflect the release of a Guarantor from its Obligations with
respect to its Guarantee or to add a Guarantor, in each case in accordance
with the terms of this Indenture;
(8) to surrender any right or power conferred on the Issuer or any
Guarantor in accordance with the terms of this Indenture; or
(9) to secure the Securities in accordance with Section 4.17;
provided that the Issuer has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Issuer and the Guarantors, when
authorized by a Board Resolution, and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in principal amount of
the outstanding Securities may amend or supplement this Indenture or the
Securities, without notice to any other Holders. Subject to Sections 6.04 and
6.07, the Holder or Holders of a majority in aggregate principal amount of the
outstanding Securities may waive compliance by the Issuer or the Guarantors with
any provision of this Indenture, the Securities or the Guarantees without notice
to any other Holders.
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Notwithstanding any other provision of this Indenture or the
Securities, no amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, shall, directly or indirectly, without the consent of each Holder
of each Security affected thereby:
(1) reduce the principal amount of the Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Security, or alter the provisions with respect to the redemption or
repurchase of the Securities in a manner adverse to the Holders of the
Securities (other than provisions relating to Section 4.15);
(3) reduce the rate of or change the time for payment of interest on
any Security;
(4) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on, the Securities (except that Holders of
at least a majority in aggregate principal amount of the then outstanding
Securities may (a) rescind an acceleration of the Securities that resulted
from a non-payment default, and (b) waive the payment default that resulted
from such acceleration);
(5) make any Security payable in money other than that stated in the
Securities;
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal of, or premium, if any, or interest on, the
Securities;
(7) waive a redemption payment with respect to any Security;
(8) make any change to the subordination provisions of this Indenture
that adversely affects Holders;
(9) release any Guarantor from any of its obligations under its
Guarantee or hereunder other than in accordance with the terms hereunder;
or
(10) make any change in the foregoing amendment and waiver provisions.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective (as provided in Section 9.04), the Issuer shall mail to the
Holders affected thereby a notice briefly describing the amendment, supplement
or waiver.
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SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
No amendment of this Indenture shall adversely affect in any material
respect the rights of any holder of Senior Debt under Article Ten or Guarantor
Senior Debt under Article Twelve without the consent of such holder.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of his Security by
notice to the Trustee or the Issuer received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver (at which time such
amendment, supplement or waiver shall become effective).
The Issuer 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, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled 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 120 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (6) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security; provided that any such waiver shall
not impair or affect the right of any Holder to receive payment of principal of,
premium, if any, and interest on a Security, on or after the respective due
dates expressed in such Security, or to bring suit for the enforcement of any
such payment on or after such respective dates without the consent of such
Holder.
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SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Issuer or the Trustee
so determine, the Issuer in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
provided that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture. The Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel and an
Officers' Certificate each stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture. Such Opinion of Counsel shall not be an expense of
the Trustee.
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinated to Senior Debt.
The Issuer, for itself and its successors, covenants and agrees and
the Trustee and each Holder of the Securities, by its acceptance thereof,
likewise covenants and agrees, that all Securities shall be issued subject to
the provisions of this Article Ten; and the Trustee and each Person holding any
Security, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the
Securities by the Issuer shall, to the extent and in the manner herein set
forth, be subordinated and junior in right of payment to the prior payment and
satisfaction in full in cash of all Obligations on the Senior Debt; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt, and that each holder of Senior Debt, whether now
outstanding or hereafter created, incurred, assumed or guaranteed, shall be
deemed to have acquired such Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Securities.
SECTION 10.02. No Payment on Securities in Certain Circumstances.
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(a) Neither the Issuer nor any Person on behalf of the Issuer may
make any payment of any kind or character upon or in respect of the Securities
(except from the trust described under Article Eight) if (i) a default in the
payment of the principal of, premium, if any, interest on, unpaid drawings for
letters of credit issued in respect of, or regularly accruing fees with respect
to, any Designated Senior Debt occurs and is continuing or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and, in the case of clause (ii), the Trustee receives
a notice of such default (a "Payment Blockage Notice") from the Representative
of any Designated Senior Debt. Payments on the Securities may and shall be
resumed (A) in the case of a payment default described in clause (i) above, upon
the date on which such default is cured or waived and (B) in case of a default
described in clause (ii) above, the earliest of (1) the date on which all such
defaults have been cured or waived, (2) 179 days after the date on which the
applicable Payment Blockage Notice is received, (3) the date such Designated
Senior Debt shall have been paid in full in cash or (4) the date such Payment
Blockage Period shall have been terminated by written notice to the Trustee from
the Representative of the Designated Senior Debt initiating such Payment
Blockage Period, after which, in the case of clauses (1), (2), (3) and (4), the
Issuer shall resume making any and all required payments in respect of the
Securities, including any payments not made to the Holders of the Securities
during the Payment Blockage Period due to the foregoing prohibitions, unless the
provisions described in clause (i) above or the provisions of Section 10.03 are
then applicable. No new Payment Blockage Period may be commenced unless and
until 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice. No default that existed or was continuing on the date
of delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 90 consecutive days (it
being acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such Payment
Blockage Period, that, in either case, would give rise to such a default
pursuant to any provision under which such default previously existed or was
continuing shall constitute a new default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held for the benefit of, and shall be
paid over or delivered to, the holders of Senior Debt (pro rata to such holders
on the basis of the respective amount of Senior Debt held by such holders) or
their respective Representatives, as their respective interests may appear. The
Trustee shall be entitled to rely on information regarding amounts then due and
owing on the Senior Debt, if any, received from the holders of Senior Debt (or
their Representatives) or, if such information is not received from such holders
or their Representatives, from the Issuer and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior Debt.
(c) Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Senior Debt thereafter
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due or declared to be due shall first be paid in full in cash before the Holders
are entitled to receive any payment with respect to Obligations on the
Securities.
SECTION 10.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets of the Issuer of any
kind or character, whether in cash, property or securities, to creditors upon
any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Issuer or
in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Issuer or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt
(including interest accruing after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt whether or not such interest is
an allowed claim in any such proceeding) shall first be paid in full in cash
before any payment or distribution of any kind or character is made on account
of any Obligations on the Securities, or for the acquisition of any of the
Securities for cash or property or otherwise (except that Holders of the
Securities may receive Permitted Junior Securities and payments made from the
trust described in Article Eight). Upon any such dissolution, winding-up,
liquidation, reorganization, receivership or similar proceeding, any payment or
distribution of assets of the Issuer of any kind or character, whether in cash,
property or securities, to which the Holders of the Securities or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by the Issuer or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Holders of the Securities or by the Trustee under this Indenture if received by
them, directly to the holders of Senior Debt (pro rata to such holders on the
basis of the respective amounts of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of Senior Debt (except that Holders of the Securities may
receive Permitted Junior Securities and payments made from the trust described
in Article Eight).
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Issuer of any kind or character, whether in cash,
property or securities, shall be received by the Trustee or any Holder when such
payment or distribution is prohibited by Section 10.03(a), such payment or
distribution shall be held for the benefit of, and shall be paid over or
delivered to, the holders of Senior Debt (pro rata to such holders on the basis
of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Debt.
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(c) To the extent any payment of Senior Debt (whether by or on behalf
of the Issuer, as proceeds of security or enforcement of any right of set-off or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(d) The consolidation of the Issuer with, or the merger of the Issuer
with or into, another corporation or the liquidation or dissolution of the
Issuer following the conveyance or transfer of all or substantially all of its
assets to another corporation upon the terms and conditions provided in Article
Five and as long as permitted under the terms of the Designated Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 10.03 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, assume the Issuer's
obligations hereunder in accordance with Article Five.
SECTION 10.04. Payments May Be Paid Prior to Dissolution.
Subject to Sections 10.02(b) and 10.03(b), nothing contained in this
Article Ten or elsewhere in this Indenture shall prevent (i) the Issuer, except
under the conditions described in Sections 10.02 and 10.03, from making payments
at any time for the purpose of making payments of principal of, premium and
interest on the Securities, or from depositing with the Trustee any moneys for
such payments, or (ii) in the absence of actual knowledge by the Trustee that a
given payment would be prohibited by Section 10.02 or Section 10.03, the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of, and interest on, the Securities to the
Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment would otherwise become due and payable, the Trustee
shall have actually received the written notice provided for in clause (ii) of
the first sentence of Section 10.02(a) or in Section 10.07. The Issuer shall
give prompt written notice to the Trustee of any dissolution, winding-up,
liquidation or reorganization of the Issuer.
SECTION 10.05. Subrogation.
Subject to the payment in full in cash of all Senior Debt, the Holders
of the Securities shall be subrogated to the rights of the holders of Senior
Debt to receive payments or distributions of cash, property or securities of the
Issuer applicable to the Senior Debt until the Senior Debt shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Debt by or on behalf of the Issuer or
by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Issuer and the Holders
of the Securities, be deemed to be a payment by the Issuer to or on account of
the Senior Debt, it being understood that the provisions of this Article Ten are
and are intended
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solely for the purpose of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of the Senior Debt, on the other
hand.
SECTION 10.06. Obligations of the Issuer Unconditional.
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Issuer, its
creditors other than the holders of Senior Debt, and the Holders of the
Securities, the obligation of the Issuer, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of and any interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Issuer other than the holders of
the Senior Debt, nor shall anything herein or therein prevent the Holder of any
Security or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, of the holders of Senior Debt in respect of cash, property or
securities of the Issuer received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
The Issuer shall give prompt written notice to the Trustee of any
fact known to the Issuer which would prohibit the making of any payment to or by
the Trustee in respect of the Securities pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trust Officer of the Trustee
shall have received notice in writing from the Issuer, or from a holder of
Senior Debt or a Representative therefor, and, prior to the receipt of any such
written notice, the Trustee shall be entitled to assume (in the absence of
actual knowledge to the contrary) that no such facts exist; provided, however,
that if a Trust Officer of the Trustee shall not have received, at least two
Business Days prior to the date upon which by the terms hereof any such money
may become payable for any purpose, the notice with respect to such money
provided for in this Section 10.07, then, anything herein contained to the
contrary notwithstanding, but otherwise subject to the provisions of Sections
10.02(b) and 10.03(b), 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 two Business Days prior to such date.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of
Senior Debt (or a trustee or agent on behalf of such holder) to establish that
such notice has been given by a holder of Senior Debt (or a trustee or agent on
behalf of any such holder). In the event that the Trustee determines in good
faith that any evidence is required with respect to the right of any Person as a
holder of Senior Debt to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such
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Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amounts of Senior Debt held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Ten, 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 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent
Upon any payment or distribution of assets of the Issuer referred to
in this Article Ten, the Trustee, subject to the provisions of Article Seven,
and the Holders of the Securities shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered to
the Trustee or the Holders of the Securities, for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Debt of the Issuer, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
The Trustee, any Agent and any agent of the Issuer, the Trustee or any
Agent shall be entitled to all the rights set forth in this Article Ten with
respect to any Senior Debt which may at any time be held by it in its individual
or any other capacity to the same extent as any other holder of Senior Debt and
nothing in this Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.
Nothing in this Article Ten shall apply to claims of, or payments to,
the Trustee in its capacity as such under or pursuant to Section 6.09 or to the
Trustee or any Agent in its capacity as such under or pursuant to Section 7.07.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its duties, covenants, responsibilities and
obligations as are specifically set forth in this Article Ten, and no implied
duties, covenants, responsibilities or obligations with respect to the holders
of Senior Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt and shall not be liable to any such holders if the Trustee shall in good
faith mistakenly pay over or distribute to Holders of Securities or to the
Issuer or to any other Person cash, property or securities to which any holders
of Senior Debt shall be entitled by virtue of this Article Ten or otherwise.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may be made and the notice may be given
to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired by Acts or
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Omissions of the Issuer or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Issuer or
by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Issuer with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Securities and without impairing or releasing the
subordination provided in this Article Ten or the obligations hereunder of the
Holders of the Securities to the holders of the Senior Debt, do any one or more
of the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt, or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Issuer and any other Person.
SECTION 10.11. Securityholders Authorize Trustee To
Effectuate Subordination of Securities.
Each Holder of Securities by its acceptance of such Security
authorizes and expressly directs the Trustee on such Holder's behalf to take
such action as may be necessary or appropriate to effectuate, as between the
holders of Senior Debt and the Holders of Securities, the subordination provided
in this Article Ten, and appoints the Trustee such Holder's attorney-in-fact to
act for and on behalf of each such Holder of Securities for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Issuer (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Issuer, the filing of a claim for the unpaid balance of its Securities
and accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Debt or their Representative to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
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SECTION 10.12. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of, premium or
interest on the Securities by reason of any provision of this Article Ten will
not be construed as preventing the occurrence of an Event of Default.
ARTICLE ELEVEN
GUARANTEES OF THE SECURITIES
SECTION 11.01. Guarantees.
Subject to the provisions of this Article Eleven, each Guarantor
hereby jointly and severally unconditionally guarantees to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Securities or the obligations of the Issuer or any of the other
Guarantors to the Holders or the Trustee hereunder or thereunder, that: (a) the
principal of, premium, if any, and interest on the Securities will be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on the overdue principal and (to the extent permitted by
law) interest, if any, on the Securities and all other Obligations on the
Securities will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Securities or any of such other Obligations on the
Securities, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at final Stated
Maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed, for whatever reason, each Guarantor will be obligated to pay the
same immediately. An Event of Default under this Indenture or the Securities
shall constitute an event of default under the Guarantees, and shall entitle the
Holders of Securities to accelerate the obligations of the Guarantors hereunder
in the same manner and to the same extent as the Obligations of the Issuer on
the Securities.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any holder of the Securities with
respect to any provisions hereof or thereof, any release of any other Guarantor,
the recovery of any judgment against the Issuer, any action to enforce the same,
whether or not a
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Guarantee is affixed to any particular Security, or any other circumstance
(other than payment) which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each of the Guarantors hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Issuer, any right to
require a proceeding first against the Issuer, protest, notice and all demands
whatsoever and covenants that its Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture and the Guarantees. If any Holder or the Trustee is required by any
court or otherwise to return to the Issuer or to any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Issuer or such Guarantor, any amount paid by the Issuer or such Guarantor to
the Trustee or such Holder, the Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor further
agrees that, as between it, on the one hand, and the Holders of Securities and
the Trustee, on the other hand, (a) subject to this Article Eleven, the maturity
of the obligations guaranteed hereby may be accelerated as provided in Section
6.02 for the purposes of the Guarantees, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such obligations
as provided in Section 6.02, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantors for the purpose of the
Guarantees.
The Guarantees shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Issuer for
liquidation or reorganization, should the Issuer become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Issuer's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Securities
are, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on the Securities, whether as a
"voidable preference," "fraudulent transfer" or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Securities shall,
to the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
No stockholder, officer, director, employee or incorporator, past,
present or future, of any Guarantor, as such, shall have any personal liability
under the Guarantees by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
The Guarantors shall have the right to seek contribution from the
Issuer and any non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantees.
Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that in no event shall any
Guarantor's obligations under its Guarantee be subject to avoidance under any
applicable fraudulent conveyance or similar law of any relevant jurisdiction.
Therefore, in the event that the Guarantees would, but for this sentence, be
subject to
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avoidance, then the liability of the Guarantors under the Guarantees shall be
reduced to the extent necessary such that such Guarantees shall not be subject
to avoidance under the applicable fraudulent conveyance or similar law. Subject
to the preceding limitation on liability, the Guarantee of each Guarantor
constitutes a guarantee of payment in full when due and not merely a guarantee
of collectability.
SECTION 11.02. Execution and Delivery of the Guarantees.
If an officer of a Guarantor whose signature is on this Indenture or
on a supplemental indenture no longer holds that office at any time hereafter,
such Guarantor's Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantees set forth in
this Indenture on behalf of the Guarantors.
SECTION 11.03. Additional Guarantors.
If a Restricted Subsidiary is required to become a Guarantor pursuant
to Section 4.18 or Section 4.20, such Restricted Subsidiary shall (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Issuer's obligations under the Securities
and this Indenture on the terms set forth in this Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of this Indenture.
SECTION 11.04. Limitation of Guarantors' Liability.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (other than liabilities of such Guarantor under Debt which constitutes
Guarantor Subordinated Debt with respect to its Guarantee) and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to Section 11.06, result in the obligations of such
Guarantor under such Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the Adjusted Net Assets
of each Guarantor.
SECTION 11.05. Release from Guarantee.
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(a) Upon the release of any Guarantee in connection with a merger or
consolidation in accordance with Article Five hereof, the Trustee shall, at the
Issuer's expense, deliver an appropriate instrument evidencing such release upon
receipt of a request by the Issuer accompanied by an Officers' Certificate
certifying as to the compliance with such provisions. Any Guarantor not so
released remains liable for the full amount of principal of, premium, if any,
and interest on the Securities as provided in this Article Eleven.
(b) Upon (i) the circumstances described in Section 4.18, (ii) the
sale or disposition (whether by merger, stock purchase, asset sale or otherwise)
of a Guarantor (or substantially all of its assets) to an entity which is not a
Restricted Domestic Subsidiary of the Issuer and which is not required to become
a Guarantor pursuant to Section 4.18 (which sale or disposition is otherwise in
compliance with this Indenture) or (iii) in connection with the defeasance of
the Securities upon compliance with the conditions set forth in Article Eight
hereof, such Guarantor shall be deemed released from all of its obligations
under its Guarantee; provided, however, that any such termination shall occur
only to the extent that all obligations of such Guarantor under the Senior
Credit Facility and all of its guarantees of, and all of its pledges of assets
or other security interests which secure, such Debt of the Issuer shall also
terminate upon such release, sale or transfer.
SECTION 11.06. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled, so long as the exercise of
such right does not impair the rights of the Holders under the Guarantees, to a
contribution from all other Guarantors in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Issuer's obligations with respect to the Securities or any other Guarantor's
obligations with respect to the Guarantees; provided that such Funding
Guarantor's contribution right with respect to any such Guarantor shall be
subordinated in right of payment to such Guarantor's Guarantor Senior Debt on
the same basis as its Guarantee is subordinated to Guarantor Senior Debt
pursuant to Article Twelve.
SECTION 11.07. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Issuer that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under the Guarantees and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Securities against the
Issuer, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Issuer, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights until payment in full of the Securities. If any
amount shall be paid to any
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Guarantor in violation of the preceding sentence and the Securities shall not
have been paid in full, such amount shall have been deemed to have been paid to
such Guarantor for the benefit of, and held in trust for the benefit of, the
Holders of the Securities, and shall, subject to the provisions of Article
Twelve, forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Securities, whether matured or unmatured, in
accordance with the terms of this Indenture. Each Guarantor acknowledges that it
will receive direct or indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.07 is knowingly made in contemplation of such benefits.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEES
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.
Each Guarantor, for itself and its successors, covenants and agrees,
and the Trustee and each Holder of the Securities, by its acceptance thereof,
likewise covenants and agrees, that all Guarantees shall be issued subject to
the provisions of this Article Twelve; and the Trustee and each Person holding
any Guarantee, whether upon original issue or upon transfer, assignment or
exchange thereof, accepts and agrees that the payment of all Obligations on the
Securities pursuant to the Guarantees made by or on behalf of any Guarantor
shall, to the extent and in the manner herein set forth, be subordinated and
junior in right of payment to the prior payment in full in cash of all existing
and future Obligations on the Guarantor Senior Debt of such Guarantor; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Guarantor Senior Debt of such Guarantor, and that each holder of
Guarantor Senior Debt of such Guarantor whether now outstanding or hereafter
created, incurred, assumed or guaranteed shall be deemed to have acquired
Guarantor Senior Debt of such Guarantor in reliance upon the covenants and
provisions contained in this Indenture and the Guarantees.
This Section 12.01 and the following Sections 12.02 through and
including 12.15 of this Article Twelve shall constitute a continuing offer to
all Persons who, in reliance upon such provisions, become holders of, or
continue to hold Guarantor Senior Debt of any Guarantor and, to the extent set
forth in Section 12.02, holders of Designated Senior Debt; and such provisions
are made for the benefit of the holders of Guarantor Senior Debt of each
Guarantor and, to the extent set forth in Section 12.02, holders of Designated
Senior Debt; and such holders (to such extent) are made obligees hereunder and
they or each of them may enforce such provisions.
SECTION 12.02. No Payment on Guarantees in Certain Circumstances.
(a) No payment of any kind or character shall be made by or on
behalf of any Guarantor or any other Person on behalf of such Guarantor with
respect to any Obligations of such Guarantor on the Securities or under the
Guarantee of the Securities of such Guarantor or to acquire
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any of the Securities for cash or property or otherwise if (i) any default
occurs and is continuing in the payment when due, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of, premium, if any,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Designated Senior Debt of any
Guarantor, or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt of any Guarantor that permits holders of such Designated
Senior Debt then outstanding to accelerate the maturity thereof and, in the case
of this clause (ii), the Trustee receives a notice of such default (a "Guarantor
Default Notice") from the Representative for the respective issue of Designated
Senior Debt. Payments may and shall be resumed with respect to any Obligations
of such Guarantor on the Securities or under the Guarantee of such Guarantor in
respect of the Securities or with respect to the acquisition of any of the
Securities for cash or property or otherwise (x) in the case of a payment
default described in clause (i) above, upon the date on which such default is
cured or waived and (y) in the case of a default described in clause (ii) above,
the earliest of (a) the date on which all such defaults have been cured or
waived, (b) 179 days after the date on which the applicable Guarantor Default
Notice is received, (c) the date such Designated Senior Debt shall have been
paid in full in cash or (d) the date such Guarantor Blockage Period shall have
been terminated by written notice to the Trustee from the Representative of the
Designated Senior Debt initiating such Guarantor Blockage Period, after which,
in the case of clauses (a), (b), (c) and (d), such Guarantor shall resume making
any and all required payments in respect of the Securities, including any
payments not made to the Holders of the Securities during the Guarantor Blockage
Period due to the foregoing prohibitions, unless the provisions described in
clause (i) above or the provisions of Section 12.03 are then applicable. No new
Guarantor Blockage Period may be commenced unless and until 360 days have
elapsed since the effectiveness of the immediately prior Guarantor Blockage
Period. No default which existed or was continuing on the date of delivery of
any Guarantor Default Notice with respect to the Designated Senior Debt shall
be, or be made, the basis of a subsequent Guarantor Default Notice by the
Representative of such Designated Senior Debt, unless such default shall have
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Guarantor Blockage Period, that, in either case, would give rise to such a
default pursuant to any provision under which such default previously existed or
was continuing shall constitute a new default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder of a Guarantee when such payment
is prohibited by Section 12.02(a), such payment shall be held for the benefit
of, and shall be paid over or delivered to, the holders of such Guarantor Senior
Debt (pro rata to such holders on the basis of the respective amount of such
Guarantor Senior Debt held by such holders) or their respective Representatives,
as their respective interests may appear. The Trustee shall be entitled to rely
on information regarding amounts then due and owing on such Guarantor Senior
Debt, if any, received from the holders of such Guarantor Senior Debt (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from the Issuer or the Guarantors and only amounts
included in the information provided to the Trustee shall be paid to the holders
of such Guarantor Senior Debt.
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(c) Nothing contained in this Article Twelve shall limit the right of
the Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Guarantor Senior Debt thereafter due or
declared to be due shall first be paid in full in cash before the Holders are
entitled to receive any payment with respect to Obligations on the Guarantees.
SECTION 12.03. Payment Over of Proceeds Upon Dissolution, etc.
(a) Upon any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of any Guarantor
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to any Guarantor or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Guarantor Senior Debt
of such Guarantor (including interest accruing after the commencement of any
such proceeding at the rate specified in the applicable Guarantor Senior Debt
whether or not such interest is an allowed claim in any such proceeding) shall
first be paid in full in cash before any payment or distribution of any kind or
character is made on account of any Obligations of such Guarantor on its
Guarantee, or for the acquisition of any of the Securities for cash or property
or otherwise (except that Holders of the Securities may receive Permitted Junior
Securities and payments made from the trust described in Article Eight). Upon
any such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to which the
Holders of the Guarantees or the Trustee under this Indenture would be entitled,
except for the provisions hereof, shall be paid by such Guarantor or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders of the Guarantees or by
the Trustee under this Indenture if received by them, directly to the holders of
Guarantor Senior Debt of such Guarantor (pro rata to such holders on the basis
of the respective amounts of such Guarantor Senior Debt held by such holders) or
their respective Representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Guarantor Senior Debt may have been
issued, as their respective interests may appear, for application to the payment
of such Guarantor Senior Debt remaining unpaid until all such Guarantor Senior
Debt has been paid in full in cash after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such
Guarantor Senior Debt (except that Holders of the Securities may receive
Permitted Junior Securities and payments made from the trust described in
Article Eight).
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of any Guarantor of any kind or character, whether in
cash, property or securities, shall be received by the Trustee or any Holder
when such payment or distribution is prohibited by Section 12.03(a), such
payment or distribution shall be held for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Debt of such Guarantor (pro
rata to such holders on the basis of the respective amount of such Guarantor
Senior Debt held by such holders) or their respective Representatives, or to the
trustee or trustees under any indenture pursuant to which any
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of such Guarantor Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of such Guarantor Senior
Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full
in cash, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Debt.
(c) To the extent any payment of Guarantor Senior Debt (whether by or
on behalf of any Guarantor, as proceeds of security or enforcement of any right
of set-off or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Guarantor Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
(d) The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of all or substantially all
of its assets, to another corporation which complies with the terms and
conditions provided in Article Five and which does not violate any other
Obligation of such Guarantor under this Indenture or Guarantee of such Guarantor
and as long as permitted under the terms of the Designated Senior Debt of such
Guarantor shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 12.03 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, assume
such Guarantor's obligations hereunder in accordance with Article Five.
SECTION 12.04. Payments May Be Paid Prior to Dissolution.
Subject to Sections 12.02(b) and 12.03(b), nothing contained in
this Article Twelve or elsewhere in this Indenture shall prevent (i) a
Guarantor, except under the conditions described in Sections 12.02 and 12.03,
from making payments at any time for the purpose of making payments of principal
of, premium and interest on the Securities, or from depositing with the Trustee
any moneys for such payments, or (ii) in the absence of actual knowledge by the
Trustee that a given payment would be prohibited by Sections 12.02 and 12.03,
the application by the Trustee of any moneys deposited with it for the purpose
of making such payments of principal of, and interest on, the Securities to the
Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment would otherwise become due and payable, the Trustee
shall have actually received the written notice provided for in the second
sentence of Section 12.02(a) or in Section 12.09. A Guarantor shall give prompt
written notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of such Guarantor.
SECTION 12.05. Subrogation.
Subject to the payment in full in cash of all Guarantor Senior Debt of
a Guarantor, the Holders of the Guarantees shall be subrogated to the rights of
the holders of such Guarantor
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Senior Debt to receive payments or distributions of cash, property or securities
of such Guarantor applicable to the Guarantor Senior Debt of a Guarantor until
the Securities shall be paid in full; and, for the purposes of such subrogation,
no such payments or distributions to the holders of such Guarantor Senior Debt
by or on behalf of such Guarantor or by or on behalf of the Holders of the
Guarantees by virtue of this Article Twelve which otherwise would have been made
to such Holders of the Guarantees shall, as between such Guarantor and the
Holders of the Guarantees, be deemed to be a payment by such Guarantor to or on
account of the Guarantor Senior Debt of a Guarantor.
SECTION 12.06. Guarantee Provisions Solely To Define Relative Rights.
The subordination provisions of this Article Twelve are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities on the one hand and the holders of Guarantor Senior Debt of
each Guarantor and, to the extent set forth in Section 12.02, holders of
Designated Senior Debt of each Guarantor, on the other hand. Nothing contained
in this Article Twelve or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among any Guarantor, its creditors other
than holders of its Guarantor Senior Debt and the Holders of the Securities, the
obligation of such Guarantor, which is absolute and unconditional, to make
payments to the Holders in respect of its obligations under its Guarantee as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against such Guarantor of the Holders of the
Securities and creditors of such Guarantor other than the holders of the
Guarantor Senior Debt of such Guarantor; or (c) prevent the Trustee or the
Holder of any Security 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 the subordination provisions of this
Article Twelve of the holders of Guarantor Senior Debt of such Guarantor
hereunder and, to the extent set forth in Section 12.02, holders of Designated
Senior Debt of such Guarantor (1) in any case, proceeding, dissolution,
liquidation or other winding-up, assignment for the benefit of creditors or
other marshalling of assets and liabilities of such Guarantor referred to in
Section 12.03, 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 12.02, to prevent
any payment prohibited by such Section or enforce their rights pursuant to
Section 12.02(c).
The failure by any Guarantor to make a payment in respect of its
obligations under its Guarantee by reason of any provision of this Article
Twelve shall not be construed as preventing the occurrence of a Default or an
Event of Default hereunder.
SECTION 12.07. Trustee To Effectuate Subordination of Obligations Under the
Guarantees.
Each Holder of a Security by its acceptance of such Security
authorizes and expressly directs the Trustee to take on behalf of such Holder of
Securities such action as may be necessary or appropriate to effectuate as
between the holders of Guarantor Senior Debt and Holders of Securities, the
subordination provided in this Article Twelve, and appoints the Trustee its
attorney-in-fact to act for it and on its behalf for such purposes, including,
in the event of any
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dissolution, winding-up, liquidation or reorganization of any Guarantor (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or, otherwise) tending
towards liquidation of the business and assets of such Guarantor, the filing of
a claim for the unpaid balance of its Guarantee and accrued interest in the form
required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior Debt
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee or the holders of Guarantor Senior Debt or their Representative to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 12.08. No Waiver of Guarantee Subordination Provisions.
No right of any present or future holder of any Guarantor Senior Debt
of any Guarantor to enforce subordination as provided herein shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Issuer or such Guarantor or by any act or failure to act, in good faith, by
any such holder, or by any non-compliance by the Issuer or such Guarantor with
the terms of this Indenture, regardless of any knowledge thereof any such holder
may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Debt of any Guarantor may, at any time and from
time to time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Securities and without
impairing or releasing the subordination provided in this Article Twelve or the
obligations hereunder of the Holders of the Guarantees to the holders of such
Guarantor Senior Debt, 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, such Guarantor Senior Debt or any Senior Debt as to which such Guarantor
Senior Debt relates, or otherwise amend or supplement in any manner such
Guarantor Senior Debt or any Senior Debt to which such Guarantor Senior Debt
relates; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Guarantor Senior Debt or any
Senior Debt as to which such Guarantor Senior Debt relates; (3) release any
person liable in any manner for the collection or payment of such Guarantor
Senior Debt or any Senior Debt as to which such Guarantor Senior Debt relates;
and (4) exercise or refrain from exercising any rights against such Guarantor
and any other Person.
SECTION 12.09. Guarantors To Give Notice to Trustee.
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The Issuer and each Guarantor shall give prompt written notice to the
Trustee of any fact known to the Issuer or such Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Twelve. Notwithstanding the
subordination provisions of this Article Twelve or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior Debt or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
the Issuer, such Guarantor or from a holder of Guarantor Senior Debt or a
Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist; provided, however, that if a Trust
Officer of the Trustee shall not have received, at least two Business Days prior
to the date upon which by the terms hereof any such money may become payable for
any purpose, the notice with respect to such money provided for in this Section
12.09, then, anything herein contained to the contrary notwithstanding, but
otherwise subject to the provisions of Sections 12.02(b) and 12.03(b), 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 two
Business Days prior to such date.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of
Guarantor Senior Debt (or a trustee or agent on behalf of such holder) to
establish that such notice has been given by a holder of Guarantor Senior Debt
(or a trustee or agent on behalf of any such holder). In the event that the
Trustee determines in good faith that any evidence is required with respect to
the right of any Person as a holder of Guarantor Senior Debt of any Guarantor to
participate in any payment or distribution pursuant to this Article Twelve, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Guarantor Senior Debt of such
Guarantor 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 Twelve, and if such evidence is not
furnished the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 12.10. Reliance on Judicial Order or Certificate of Liquidating Agent
Regarding Dissolution, etc., of Guarantors.
Upon any payment or distribution of assets of a Guarantor referred to
in this Article Twelve, the Trustee, subject to the provisions of Article Seven,
and the Holders shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such bankruptcy, liquidation or
reorganization, dissolution, winding-up proceedings are pending, or upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the Holders of the Guarantees, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of
Guarantor Senior Debt of such Guarantor and other Debt of such Guarantor, the
amount
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<PAGE>
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve.
SECTION 12.11. No Suspension of Remedies.
Nothing contained in this Article Twelve shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Twelve of the holders, from time to time, of Guarantor Senior Debt
of the Guarantors.
SECTION 12.12. Trustee's Relation to Guarantor Senior Debt.
The Trustee, any Agent and any agent of the Trustee or any Agent shall
be entitled to all the rights set forth in this Article Twelve with respect to
any Guarantor Senior Debt which may at any time be held by it in its individual
or any other capacity to the same extent as any other holder of such Guarantor
Senior Debt and nothing in this Indenture shall deprive the Trustee or any Agent
or any of their agents of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee and
any Agent undertake to perform or to observe only such of their duties,
covenants, responsibilities and obligations as are specifically set forth in
this Article Twelve, and no implied covenants or obligations with respect to the
holders of Guarantor Senior Debt shall be read into this Indenture against the
Trustee or any Agent. Neither the Trustee nor any Agent shall be deemed to owe
any fiduciary or other duty to the holders of Guarantor Senior Debt and shall
not be liable to any such holders if the Trustee or any Agent shall in good
faith mistakenly pay over or distribute to Holders of Securities or to the
Issuer or to any other Person cash, property or securities to which any holders
of Senior Debt shall be entitled by virtue of this Article Twelve or otherwise.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice may
be given to their Representative, if any.
SECTION 12.13. No Subordination of Certain Claims.
Nothing within Article Twelve shall apply to claims of or payments to
the Trustee in its capacity as such under or pursuant to Section 6.09 or to the
Trustee or any Agent in its capacity as such under or pursuant to Section 7.07.
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ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA 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 13.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telecopier or first class mail, postage prepaid, addressed as follows:
if to the Issuer:
Globe Manufacturing Corp.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Lawrence R. Walsh
Facsimile: (508) 679-9458
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
Facsimile: (312) 861-2200
if to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
The Issuer, the Guarantors and the Trustee by written notice to each
other such Person may designate additional or different addresses for notices to
such Person. Any notice or communication to the Issuer, the Guarantors or the
Trustee shall be deemed to have been given or
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<PAGE>
made as of the date so delivered if personally delivered; when receipt is
acknowledged, if faxed; and five Business Days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The Issuer,
the Guarantors, the Trustee, the Registrar and any other Person shall have the
protection of TIA (S)(S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer to the Trustee to take
any action under this Indenture, other than with respect to the authentication
of the Securities for original issuance on the Issue Date, the Issuer shall
furnish to the Trustee upon the Trustee's request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent to be performed by the Issuer, if any, provided
for in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Issuer, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
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(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, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 13.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 13.08. Governing Law.
THIS INDENTURE AND THE SECURITIES 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
CONFLICT OF LAWS OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Issuer or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
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<PAGE>
A past, present or future director, officer, employee, incorporator,
stockholder or limited or general partner, as such, of the Issuer or any of its
Subsidiaries shall not have any liability for any obligations of the Issuer or
any of its Subsidiaries under the Securities or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creations.
Each Holder by accepting a Security waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
All agreements of the Issuer in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 13.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
[signature page follows]
101
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
ISSUER:
GLOBE MANUFACTURING CORP., an Alabama corporation
By /s/ Thomas A. Rodgers, III
----------------------------------------------
Name: Thomas A. Rodgers, III
Title: President
TRUSTEE:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By /s/ Curtis D. Schwegman
----------------------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
102
<PAGE>
EXHIBIT A-1
[Form of Security]
THE NOTE EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER
OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT PROVIDED THAT IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (d)
SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE
SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS
MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY THE REGISTRAR (AND
THE ISSUER, IF ITS SO REQUESTS) OF A CERTIFICATION OF THE TRANSFEROR AND AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (ii) TO THE ISSUER OR (iii) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITIES EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
<PAGE>
Globe Manufacturing Corp.
10% Senior Subordinated Note Due 2008
CUSIP No. _______
No. $
Globe Manufacturing Corp., an Alabama corporation (the "Issuer"), for
value received, promises to pay to __________ or registered assigns, the
principal sum of __________ Dollars, on August 1, 2008.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 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.
IN WITNESS WHEREOF, the Issuer has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Globe Manufacturing Corp.,
an Alabama corporation
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
A-1-2
<PAGE>
Trustee's Certificate of Authentication
This is one of the 10% Senior Subordinated Notes due 2008 referred to
in the within-mentioned Indenture.
Date of Authentication:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By_________________________________
Authorized Signatory
A-1-3
<PAGE>
(REVERSE OF SECURITY)
10% Senior Subordinated Note Due 2008
1. Interest. Globe Manufacturing Corp., an Alabama corporation (the
"Issuer"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. Interest on the Securities will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from July 31, 1998. The Issuer will pay interest semi-annually in arrears
on each Interest Payment Date, commencing February 1, 1999. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Issuer shall pay interest on overdue principal and on overdue
installments of interest from time to time in accordance with Section 2.12 of
the Indenture at the rate borne by the Securities to the extent lawful.
2. Method of Payment. The Issuer shall pay interest on the Securities
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the record date immediately preceding the Interest Payment
Date even if the Securities are canceled on registration of transfer or
registration of exchange after such record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuer shall 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
("U.S. Legal Tender"). However, the Issuer may pay principal, premium, if any,
and interest by its check payable in such U.S. Legal Tender unless a Holder of
Securities has given wire transfer instructions in which case the Issuer will be
required to make payment of principal, premium, if any, and interest by wire
transfer of immediately available funds to the accounts specified by such
Holder. The Issuer may deliver any such payments to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Issuer or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar or co-Registrar.
4. Indenture and Guarantees. The Issuer issued the Securities under an
Indenture dated as of July 31, 1998 (the "Indenture"), among the Issuer, each of
the Guarantors party thereto from time to time and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"). This Security is one of a duly
authorized issue of Securities of the Issuer designated as its 10% Senior
Subordinated Notes due 2008 issued on the Issue Date (the "Initial Securities"),
limited (except as otherwise provided in the Indenture) in aggregate principal
amount to $300.0 million, which may
A-1-4
<PAGE>
be issued under the Indenture. The Securities include the Initial Securities,
the Private Exchange Securities and the Unrestricted Securities, as defined
below, issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement, or with respect to Securities issued after the
Issue Date pursuant to Section 2.02 of the Indenture, a registration rights
agreement substantially identical to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Unrestricted
Securities are treated as a single class of securities under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general unsecured obligations of
the Issuer. Payment on each Security is guaranteed on an unsecured senior
subordinated basis, jointly and severally, by the Guarantors pursuant to Article
Eleven of the Indenture. Each Holder, by accepting a Security, agrees to be
bound by all terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
5. Subordination. The Securities are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. To the extent
and in the manner provided in the Indenture, Senior Debt must be paid before any
payment may be made to any Holder of this Security. Each Holder by its
acceptance hereof 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 purposes.
6. Optional Redemption. (i) The Securities will be redeemable at the
option of the Issuer, in whole or in part, at any time and from time to time on
or after August 1, 2003, at the Redemption Prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest thereon to
the applicable Redemption Date, if redeemed during the 12-month period beginning
on August 1, of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003........................................ 105.000%
2004........................................ 103.333%
2005........................................ 101.667%
2006 and thereafter......................... 100.000%
</TABLE>
(ii) At any time prior to August 1, 2001, the Issuer may on any one or
more occasions redeem from the net proceeds of one or more Equity Offerings up
to an aggregate of 35.0% in
A-1-5
<PAGE>
aggregate principal amount of the Securities at a redemption price of 110% of
the principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date; provided that at least $97.5 million in aggregate principal
amount of Securities remain outstanding immediately after the occurrence of such
redemption.
7. Notice of Redemption. Notice of redemption shall be mailed by first-
class mail, postage prepaid, mailed to such Holder's registered address, at
least 30 but not more than 60 days before the Redemption Date. Securities in
denominations larger than $1,000 may be redeemed in part.
8. Change of Control Offer. In the event of a Change of Control, upon
the satisfaction of the conditions set forth in the Indenture, the Issuer shall
be required to offer to repurchase all or a portion of the then outstanding
Securities pursuant to a Change of Control Offer at a purchase price equal to
101% of the principal amount thereof, plus accrued interest to the date of
repurchase. Holders of Securities which are the subject of such an offer to
repurchase shall receive an offer to repurchase and may elect to have such
Securities repurchased in accordance with the provisions of the Indenture
pursuant to and in accordance with the terms of the Indenture.
9. Limitation on Disposition of Assets. Under certain circumstances the
Issuer is required to apply the net cash proceeds from Asset Sales to offer to
repurchase Securities at a price equal to 100% of the aggregate principal amount
thereof, plus accrued interest to the date of repurchase.
10. Denominations; Transfer; Exchange. The Securities are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar or co-Registrar shall not
be required to register the transfer of or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing, (ii) selected for redemption in whole or in part pursuant
to Article Three of the Indenture, except the unredeemed portion of any Security
being redeemed in part and (iii) during a Change of Control Offer or an Asset
Sale Offer if such Security is tendered pursuant to such Change of Control Offer
or Asset Sale Offer and not withdrawn.
11. Persons Deemed Owners. The registered Holder of a Security shall be
treated as the owner of it for all purposes.
A-1-6
<PAGE>
12. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Issuer at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Securities to redemption
or maturity and complies with the other provisions of the Indenture relating
thereto, the Issuer will be discharged from certain provisions of the Indenture
and the Securities (including certain covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
14. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Securities then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, provide for the assumption
of the Issuer's obligations to Holders of the Securities in the event of any
Disposition involving the Issuer in which the Issuer is not a Surviving Person,
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under TIA, provide for the issuance of Exchange
Securities or make any other change that does not adversely affect in any
material respect the legal rights under the Indenture of any Holder of a
Security.
15. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Issuer and its Restricted Subsidiaries to, among other
things, incur additional Debt, make payments in respect of its Equity Interests
or certain Debt, enter into transactions with Related Persons, create dividend
or other payment restrictions affecting Restricted Subsidiaries and merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Issuer must annually report to the Trustee on
compliance with such limitations.
16. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Securities and the
Indenture, the predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Securities then outstanding may
A-1-7
<PAGE>
declare all the Securities to be due and payable in the manner, at the time and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
is not obligated to enforce the Indenture or the Securities unless it has been
offered indemnity or security reasonably satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines in good
faith that withholding notice is in their interest.
18. Defeasance. The Indenture contains provisions (which provisions apply
to this Security) which provide that (a) the Issuer will be discharged from any
and all obligations in respect of the Securities and the Guarantors will be
released from their Guarantees and (b) the payment of the Securities may not be
accelerated upon certain Events of Default, in each case upon compliance by the
Issuer with certain conditions set forth therein.
19. Trustee Dealings with Issuer. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Issuer, Subsidiaries of the Issuer or their
respective Affiliates as if it were not the Trustee.
20. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or limited or general partner of
the Issuer or any of its Subsidiaries shall have any liability for any
obligations of the Issuer or any of its Subsidiaries under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Holder of a Security by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
21. Authentication. This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
22. Governing Law. The laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of law
other than Section 5-1401 of the New York General Obligations Law.
23. Abbreviations and Defined Terms. Customary abbreviations may be used
in the name of a Holder of a Security 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).
A-1-8
<PAGE>
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
25. Registration Rights.
Pursuant to the Registration Rights Agreement among the Issuer and the
Initial Purchasers on behalf of the Holders of the Securities, the Issuer will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Security shall have the right to exchange this Security for the Issuer's
[ ]% Senior Subordinated Notes due 2008 (the "Unrestricted Securities") which
will be registered under the Securities Act, in like principal amount and having
terms identical in all material respects as the Initial Securities. The Holders
of the Initial Securities 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. Additional interest which may be payable
pursuant to the Registration Rights Agreement shall be payable in the same
manner as set forth herein with respect to the stated interest. The provisions
of the Registration Rights Agreement relating to such additional interest are
incorporated herein by reference and made a part hereof as if set forth herein
in full.
26. Indenture. Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Capitalized terms used herein and not defined herein have
the meanings ascribed thereto in the Indenture.
The Issuer will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture, which has the text of this
Security in larger type. Requests may be made to:
Globe Manufacturing Corp.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: President
Facsimile: (508) 679-9458
A-1-9
<PAGE>
ASSIGNMENT FORM
I or we assign to and transfer this Security to
_________________________________________________________________________
_________________________________________________________________________
(please print or type name and address)
_________________________________________________________________________
(insert Social Security number or other identifying number of assignee)
and irrevocably appoint _____________ agent to transfer this Security on the
books of the Issuer. The agent may substitute another to act for him.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Act") covering resales of this Security (which effectiveness shall
not have been suspended or terminated at the date of the transfer) and (ii) July
31, 2000 (or such later date which is two years following the last date on which
the Issuer or an affiliate of the Issuer held this Security or any predecessor
Security), the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[Check One]
[_] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
[_] (b) this Security 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 Security and the Indenture.
A-1-10
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security 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 2.16 of the Indenture shall have
been satisfied.
Dated: ______________ Signed: ________________________________
(Signed exactly as name appears on the other
side of this Security)
Signature Guarantee: __________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
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 Issuer 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 the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: ________________ _________________________________________
NOTICE: To be executed by an executive officer
A-1-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 4.15 or 4.16 of the Indenture, check the appropriate Box:
Section 4.15 [_]
Section 4.16 [_]
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 4.15 or 4.16 of the Indenture, state the amount you wish to
have purchased:
US$_________
Date: __________________ Your Signature: _________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee: ____________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-1-12
<PAGE>
EXHIBIT A-2
Globe Manufacturing Corp.
10% Senior Subordinated Note Due 2008
CUSIP No. _______
No. $
Globe Manufacturing Corp., an Alabama corporation (the "Issuer"), for
value received, promises to pay to __________ or registered assigns, the
principal sum of __________ Dollars, on August 1, 2008.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 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.
IN WITNESS WHEREOF, the Issuer has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Globe Manufacturing Corp.,
an Alabama corporation
By____________________________________
Name:
Title:
<PAGE>
Trustee's Certificate of Authentication
This is one of the 10% Senior Subordinated Notes due 2008 referred to
in the within-mentioned Indenture.
Date of Authentication:
Norwest Bank Minnesota, National Association, as
Trustee
By____________________________
Authorized Signatory
A-2-2
<PAGE>
(REVERSE OF SECURITY)
10% Senior Subordinated Note Due 2008
1. Interest. Globe Manufacturing Corp., an Alabama corporation (the
"Issuer"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. Interest on the Securities will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from July 31, 1998. The Issuer will pay interest semi-annually in arrears
on each Interest Payment Date, commencing February 1, 1999. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Issuer shall pay interest on overdue principal and on overdue
installments of interest from time to time in accordance with Section 2.12 of
the Indenture at the rate borne by the Securities to the extent lawful.
2. Method of Payment. The Issuer shall pay interest on the Securities
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the record date immediately preceding the Interest Payment
Date even if the Securities are canceled on registration of transfer or
registration of exchange after such record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuer shall
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
("U.S. Legal Tender"). However, the Issuer may pay principal, premium, if any,
and interest by its check payable in such U.S. Legal Tender unless a Holder of
Securities has given wire transfer instructions in which case the Issuer will be
required to make payment of principal, premium, if any, and interest by wire
transfer of immediately available funds to the accounts specified by such
Holder. The Issuer may deliver any such payments to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Issuer or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar or co-Registrar.
4. Indenture and Guarantees. The Issuer issued the Securities under an
Indenture dated as of July 31, 1998 (the "Indenture"), among the Issuer, each of
the Guarantors party thereto from time to time and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"). This Security is one of a
duly authorized issue of Securities of the Issuer designated as its 10% Senior
Subordinated Notes due 2008 (the "Securities"), limited (except as otherwise
provided in the
A-2-3
<PAGE>
Indenture) in aggregate principal amount to $300.0 million, which may be issued
under the Indenture. The Securities include the Securities issued on the Issue
Date (the "Initial Securities"), the Private Exchange Securities and the
Unrestricted Securities, as defined below, issued in exchange for the Initial
Securities pursuant to the Registration Rights Agreement, or with respect to
Securities issued after the Issue Date pursuant to Section 2.02 of the
Indenture, a registration rights agreement substantially identical to the
Registration Rights Agreement. The Initial Securities, the Private Exchange
Securities and the Unrestricted Securities are treated as a single class of
securities under the Indenture. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture. Notwithstanding anything to the contrary herein,
the Securities are subject to all such terms, and Holders of Securities are
referred to the Indenture and the TIA for a statement of them. The Securities
are general unsecured obligations of the Issuer. Payment on each Security is
guaranteed on an unsecured senior subordinated basis, jointly and severally, by
the Guarantors pursuant to Article Eleven of the Indenture. Each Holder, by
accepting a Security, agrees to be bound by all terms and provisions of the
Indenture, as the same may be amended from time to time in accordance with its
terms.
5. Subordination. The Securities are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. To the extent
and in the manner provided in the Indenture, Senior Debt must be paid before any
payment may be made to any Holder of this Security. Each Holder by its
acceptance hereof 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 purposes.
6. Optional Redemption. (i)The Securities will be redeemable at the
option of the Issuer, in whole or in part, at any time and from time to time on
or after August 1, 2003, at the Redemption Prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest thereon to
the applicable Redemption Date, if redeemed during the 12-month period beginning
on August 1, of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003......................................... 105.000%
2004......................................... 103.333%
2005......................................... 101.667%
2006 and thereafter.......................... 100.000%
</TABLE>
A-2-4
<PAGE>
(ii) At any time prior to August 1, 2001, the Issuer may on any one
or more occasions redeem from the net proceeds of one or more Equity Offerings
up to an aggregate of 35.0% in aggregate principal amount of the Securities at a
redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date; provided that at least $97.5
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption.
7. Notice of Redemption. Notice of redemption shall be mailed by first-
class mail, postage prepaid, mailed to such Holder's registered address, at
least 30 but not more than 60 days before the Redemption Date. Securities in
denominations larger than $1,000 may be redeemed in part.
8. Change of Control Offer. In the event of a Change of Control, upon
the satisfaction of the conditions set forth in the Indenture, the Issuer shall
be required to offer to repurchase all or a portion of the then outstanding
Securities pursuant to a Change of Control Offer at a purchase price equal to
101% of the principal amount thereof, plus accrued interest to the date of
repurchase. Holders of Securities which are the subject of such an offer to
repurchase shall receive an offer to repurchase and may elect to have such
Securities repurchased in accordance with the provisions of the Indenture
pursuant to and in accordance with the terms of the Indenture.
9. Limitation on Disposition of Assets. Under certain circumstances the
Issuer is required to apply the net cash proceeds from Asset Sales to offer to
repurchase Securities at a price equal to 100% of the aggregate principal amount
thereof, plus accrued interest to the date of repurchase.
10. Denominations; Transfer; Exchange. The Securities are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar or co-Registrar shall not
be required to register the transfer of or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing, (ii) selected for redemption in whole or in part pursuant
to Article Three of the Indenture, except the unredeemed portion of any Security
being redeemed in part and (iii) during a Change of Control Offer or an Asset
Sale Offer if such Security is tendered pursuant to such Change of Control Offer
or Asset Sale Offer and not withdrawn.
11. Persons Deemed Owners. The registered Holder of a Security shall be
treated as the owner of it for all purposes.
A-2-5
<PAGE>
12. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Issuer at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Securities to redemption
or maturity and complies with the other provisions of the Indenture relating
thereto, the Issuer will be discharged from certain provisions of the Indenture
and the Securities (including certain covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
14. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Securities then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, provide for the assumption
of the Issuer's obligations to Holders of the Securities in the event of any
Disposition involving the Issuer in which the Issuer is not a Surviving Person,
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under TIA, provide for the issuance of Exchange
Securities or make any other change that does not adversely affect in any
material respect the legal rights under the Indenture of any Holder of a
Security.
15. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Issuer and its Restricted Subsidiaries to, among other
things, incur additional Debt, make payments in respect of its Equity Interests
or certain Debt, enter into transactions with Related Persons, create dividend
or other payment restrictions affecting Restricted Subsidiaries and merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Issuer must annually report to the Trustee
on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Securities and the
Indenture, the predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Securities then outstanding may
A-2-6
<PAGE>
declare all the Securities to be due and payable in the manner, at the time and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
is not obligated to enforce the Indenture or the Securities unless it has been
offered indemnity or security reasonably satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines in good
faith that withholding notice is in their interest.
18. Defeasance. The Indenture contains provisions (which provisions apply
to this Security) which provide that (a) the Issuer will be discharged from any
and all obligations in respect of the Securities and the Guarantors will be
released from their Guarantees and (b) the payment of the Securities may not be
accelerated upon certain Events of Default, in each case upon compliance by the
Issuer with certain conditions set forth therein.
19. Trustee Dealings with Issuer. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Issuer, Subsidiaries of the Issuer or their
respective Affiliates as if it were not the Trustee.
20. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or limited or general partner of
the Issuer or any of its Subsidiaries shall have any liability for any
obligations of the Issuer or any of its Subsidiaries under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Holder of a Security by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
21. Authentication. This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
22. Governing Law. The laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of law
other than Section 5-1401 of the New York General Obligations Law.
23. Abbreviations and Defined Terms. Customary abbreviations may be used
in the name of a Holder of a Security 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).
A-2-7
<PAGE>
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
25. Indenture. Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Capitalized terms used herein and not defined herein have
the meanings ascribed thereto in the Indenture.
The Issuer will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture, which has the text of this
Security in larger type. Requests may be made to:
Globe Manufacturing Corp.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: President
Facsimile: (508) 679-9458
A-2-8
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
_________________________________
_________________________________________________________________
(please print or type name and address)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
_________________________________________________________________
attorney to transfer the Security on the books of the Issuer with full power of
substitution in the premises.
Date: ________________ Your Signature: ________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within
Security in every particular without
alteration or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: _____________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-2-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 4.15 or 4.16 of the Indenture, check the appropriate Box:
Section 4.15 [ ]
Section 4.16 [ ]
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 4.15 or 4.16 of the Indenture, state the amount you wish to
have purchased:
US$_________
Date: ________________ Your Signature: ________________________
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee: ________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-2-10
<PAGE>
EXHIBIT B
Form of Legend For Global Securities
Any Global Security 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 SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY OR A
SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) 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 IT IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE
NOMINEES. INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE
TRANSFERRED OR EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE
RULES AND PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 2.16
OF THE INDENTURE. IN ADDITION, CERTIFICATED SECURITIES SHALL BE
TRANSFERRED TO ALL BENEFICIAL OWNERS IN EXCHANGE FOR THEIR
<PAGE>
BENEFICIAL INTERESTS IN GLOBAL SECURITIES IF (i) THE ISSUER NOTIFIES THE
REGISTRAR THAT THE DEPOSITARY IS UNWILLING OR UNABLE TO CONTINUE AS
DEPOSITARY FOR ANY GLOBAL SECURITY AND A SUCCESSOR DEPOSITARY IS NOT
APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE OR (ii) THE ISSUER,
AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING THAT IT ELECTS TO CAUSE
THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE INDENTURE.
B-2
<PAGE>
EXHIBIT C
Transferee Certificate for Institutional
Accredited Investors Who Are Not QIBs
__________, ____
Norwest Bank Minnesota, National Association, as Registrar
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
RE: GLOBE MANUFACTURING CORP.
10% SENIOR SUBORDINATED NOTES DUE 2008
--------------------------------------
Dear Sir or Madam:
In connection with our proposed purchase of 10% Senior Subordinated Notes
due 2008 and related guarantees (the "Securities") of Globe Manufacturing Corp.,
an Alabama corporation (the "Issuer"), we confirm that:
1. We are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act"), or an entity in which all of the equity owners are accredited
investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (an "Institutional Accredited Investor").
2. Any purchase of Securities by us will be for our own account or
for the account of one or more other Institutional Accredited Investors over
which we have sole investment discretion and authority to deliver this
certificate and to purchase the Securities.
3. In the event that we purchase any Securities, we will acquire
Securities having a minimum purchase price of as least $100,000 for our own
account and for each separate account for which we are acting.
4. We have such knowledge and experience in financial and business
matters that we are capable of evaluation the merits and risks of purchasing
Securities and we and any accounts for which we are acting are each able to bear
the economic risks for our or their investment.
<PAGE>
5. We have received a copy of the Offering Memorandum dated July 28,
1998, and acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Issuer and receive answers thereto, as we deem necessary
in connection with our decision to purchase Securities.
6. We are not purchasing Securities for or on behalf of, and will
not transfer Securities to, any pension or welfare plan (as defined in Section 3
of ERISA), except as may be permitted under ERISA and as described under "Notice
to Investors" in the Offering Memorandum.
We understand that the Securities are being offered in a transaction
not involving any public offering within the meaning of the Securities Act and
that the Securities have not been registered under the Securities Act or any
securities laws of any State of the United States, and we agree on our own
behalf and on behalf of each account for which we acquire any Securities, that
such Securities may be offered, resold, pledged or otherwise transferred only
(i) to a person whom we reasonably believe to be a qualified institutional buyer
(as defined in Rule 144A under the Securities Act), in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a non-U.S. person in a transaction meeting the requirements of Rule 904 under
the Securities Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Issue so requests), (ii) to the Issuer or (iii) pursuant to an effective
registration statement and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction. We understand that the Registrar will not be required to accept
for registration any Securities, except upon presentation of evidence
satisfactory to the Issuer that the foregoing restrictions on transfer have been
complied with. We further understand and agree that the Securities purchased by
us will bear a legend reflecting the substances of this paragraph. We agree to
notify any subsequent purchasers of the Securities from us of the resale
restrictions set forth above.
We acknowledge that you, the Issuer and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
C-2
<PAGE>
THIS CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
[Name of Purchaser]
By________________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_______________, _______
Norwest Bank Minnesota, National Association, as Registrar
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
RE: GLOBE MANUFACTURING CORP. (THE "ISSUER")
10% SENIOR SECURED NOTES DUE 2008
-------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the 10% Senior Subordinated Notes due 2008 and related guarantees (the
"Securities"), 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 the transfer restrictions set forth in the
Securities and, accordingly, we represent that:
1. The offer of the Securities was not made to a person in the
United States;
2. Either (a) at the time the buy order 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" (as defined in Rule 904 of the
Securities Act) 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;
<PAGE>
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 Securities.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this certificate 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_____________________________
Name:
Title:
D-2
<PAGE>
EXHIBIT 4.2
GLOBE MANUFACTURING CORP.
$150,000,000
10% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
July 28, 1998
BANCAMERICA ROBERTSON STEPHENS
MERRILL LYNCH & CO.
c/o BancAmerica Robertson Stephens
231 South LaSalle Street, 17th Floor
Chicago, Illinois 60697
Ladies and Gentlemen:
Globe Elastic Co., Inc. (to be renamed Globe Manufacturing Corp. in
connection with the transactions described below), an Alabama corporation (the
"Company"), hereby confirms its agreement with you (the "Initial Purchasers"),
as set forth below. As used in this Agreement, references to the business and
operations of the Company shall include the business and operations to be
contributed to the Company in connection with the Asset Drop Down (as defined in
the Final Memorandum described below).
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$150,000,000 aggregate principal amount of its 10% Senior Subordinated Notes due
2008 (the "Notes"). The Notes are to be issued under an indenture (the
"Indenture") to be dated as of July 31, 1998 by and among the Company, each of
the Guarantors party thereto from time to time, and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee").
The Notes are being issued and sold in connection with the
recapitalization of the Company (the "Recapitalization") pursuant to the
Agreement and Plan of Merger, dated June 23, 1998 (the "Merger Agreement"),
between Globe Acquisition Company and Globe Manufacturing Co. (to be renamed
Globe Holdings, Inc. in connection with the transactions described below), a
Massachusetts corporation ("Globe Holdings"). The Recapitalization will be
financed by (i) the proceeds from the issuance of the Notes, (ii) proceeds from
an investment by Code, Hennessy &
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Simmons III, L.P. and certain other investors in Globe Holdings, and (iii)
borrowings under the Senior Credit Facility (as defined in the Final
Memorandum).
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated July 15, 1998 (the "Preliminary
Memorandum"), and the Company will prepare a final offering memorandum dated
July 28, 1998 (the "Final Memorandum"); the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum") setting forth or
including a description of the terms of the Notes, the terms of the offering of
the Notes, a description of the Company and the Company's subsidiary listed in
Schedule 1 attached hereto (the "Subsidiary") and any material developments
relating to the Company and the Subsidiary occurring after the date of the most
recent historical financial statements included therein.
The Initial Purchasers and their direct and indirect transferees of
the Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Company has agreed, among other things, to
file a registration statement (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") in order to register the Notes or the
Exchange Notes (as defined in the Registration Rights Agreement) under the
Securities Act.
2. Representations and Warranties. The Company represents and
warrants to and agrees with, on the date hereof, each of the Initial Purchasers
that:
(a) Neither the Final Memorandum nor any amendment or supplement
thereto as of the date thereof and at all times subsequent thereto up to the
Closing Date (as defined in Section 3 below) contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information relating to
either of the Initial Purchasers furnished to the Company in writing by or on
behalf of such Initial Purchaser expressly for use in the Final Memorandum or
any amendment or supplement thereto.
(b) The Subsidiary is the only subsidiary of the Company; all of the
outstanding Equity Interests (as defined below) of the Company and the
Subsidiary have been, and as of the Closing Date will be, duly authorized and
validly issued, are fully paid and non-assessable and were
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not issued in violation of any preemptive or similar rights; as of the Closing
Date, Globe Holdings will own of record all of the outstanding Equity Interests
of the Company; as of the Closing Date, all of the outstanding Equity Interests
of each of the Company and the Subsidiary will be free and clear of all liens,
encumbrances, equities and claims or restrictions on voting or transferability
(other than those imposed by the Senior Credit Facility (as defined in the Final
Memorandum) or by the Securities Act and the securities or "Blue Sky" laws of
certain jurisdictions and other than those permitted under the Indenture);
except as set forth in the Final Memorandum, there are no (i) options, warrants
or other rights to purchase from the Company or the Subsidiary, (ii) agreements
or other obligations of the Company or the Subsidiary to issue or (iii) other
rights to convert any obligation into, or exchange any securities for, Equity
Interests in the Company or the Subsidiary outstanding. As used herein "Equity
Interest" of any person means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock or other equity participations, including
partnership interests, whether general or limited, of such person.
(c) Each of the Company and the Subsidiary has been duly organized, is
validly existing and is in good standing under the laws of the jurisdiction of
its organization, with all requisite power and authority to own its properties
and conduct its business as now conducted, and as described in the Final
Memorandum; each of the Company and the Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified, individually or in the aggregate, would not (i) have a material
adverse effect on the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the Company and
the Subsidiary, taken as a whole, or (ii) materially impair either of the
Company's or the Subsidiary's ability to perform the obligations contemplated by
the Transaction Documents (as defined below) to which it is a party and the
transactions contemplated to be performed by it described in the Final
Memorandum (any such event, a "Material Adverse Effect").
(d) The Company has all requisite power and authority to execute,
deliver and perform each of its obligations under the Notes, the Exchange Notes
(as defined in the Final Memorandum) and the Private Exchange Notes (as defined
in the Registration Rights Agreement). The Notes, the Exchange Notes and the
Private Exchange Notes have each been duly and validly authorized by the Company
and, when executed by the Company and authenticated by the Trustee in accordance
with the provisions of the Indenture and, in the case of the Notes, when
delivered to and paid for by the Initial Purchasers in accordance with the terms
of this Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy,
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insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity and the discretion of the court before which
any proceeding with respect thereto may be brought.
(e) The Company has all requisite power and authority to execute,
deliver and perform its obligations under the Indenture. The Indenture meets
the requirements for qualification under the Trust Indenture Act of 1939, as
amended (the "TIA"). The Indenture has been duly and validly authorized by the
Company and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee), will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding with respect thereto may be brought.
(f) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement, the Registration
Rights Agreement and the Senior Credit Facility. When executed and delivered by
the Company (assuming the due authorization, execution and delivery by each
other party thereto) each of this Agreement and the Registration Rights
Agreement will constitute the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
relating thereto may be brought and (B) any rights to indemnity or contribution
thereunder may be limited by federal or state securities laws or public policy
considerations. This Agreement, the Indenture, the Notes, the Exchange Notes,
the Private Exchange Notes and the Registration Rights Agreement are referred to
herein as the "Transaction Documents."
(g) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the performance by
the Company of its obligations under the Transaction Documents or the
consummation by the Company of the transactions contemplated thereby or hereby,
except such as shall have been made or obtained prior to the Closing Date, such
as may be required in connection with the registration of the Notes or the
Exchange Notes under the Securities Act in accordance with the Registration
Rights Agreement, such as may be required under state securities or "Blue Sky"
laws, such as may be required for qualification of the Indenture under the TIA
and such that the failure to obtain would not, singularly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor the Subsidiary is (i) in violation of its certificate of incorporation or
bylaws (or similar
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organizational documents), (ii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the representations
and warranties of the Initial Purchasers in Section 8 hereof) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable
to either of them or any of their respective properties or assets, except for
any such breach or violation which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, or (iii) in breach of
or default under (nor has any event occurred which, with notice or passage of
time or both, would constitute a default under) or in violation of any of the
terms or provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, distributor agreement, permit,
certificate, contract or other agreement or instrument to which either of them
is a party or to which either of them or their respective properties or assets
is subject (collectively, "Contracts"), except for any such breach, default,
violation or event which, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
(h) The issuance, sale and delivery of the Notes and the execution,
delivery and performance by the Company of each of the Transaction Documents,
and the consummation by the Company of the transactions contemplated thereby and
hereby, and the fulfillment of the terms thereof or hereof, will not conflict
with or constitute or result in a breach of or a default under or an event which
with notice or passage of time or both would constitute a default under or
violation of or cause an acceleration of any material obligation under, or
result in the imposition or creation of (or the obligation to create or impose)
a lien on any property or assets of the Company with respect to (i) any of the
terms or provisions of any Contract, except for any such conflict, breach,
violation, default or event which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, (ii) the certificate
of incorporation or bylaws (or similar organizational documents) of the Company
or the Subsidiary, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the representations
and warranties of the Initial Purchasers in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation applicable to the Company or the
Subsidiary or any of their respective properties or assets, except for any such
conflict, breach or violation which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(i) The historical consolidated financial statements (including the
related notes thereto) of Globe Holdings, the sole stockholder of the Company,
included in the Final Memorandum present fairly in all material respects the
financial position, results of operations and cash flows of Globe Holdings at
the dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis except as otherwise stated therein. The financial data in the Final
Memorandum under the headings "Offering Memorandum Summary--Summary Consolidated
Financial Data" and "Selected Consolidated Financial Data" present fairly in all
material respects the information purported to be
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shown therein and have been prepared and compiled on a basis consistent with the
financial statements included therein, except as otherwise stated therein. Ernst
& Young LLP (the "Independent Accountants") is an independent public accounting
firm with respect to each of Globe Holdings and the Company within the meaning
of Rule 101 of the Code of Professional Conduct of the American Institute of
Certified Public Accountants ("AICPA") and its interpretations and rulings
thereunder, as of the dates of above-referenced financial statements.
(j) The pro forma financial information included in the Final
Memorandum (i) has been properly computed on the bases described therein and the
assumptions used in the preparation of the pro forma financial data and other
pro forma financial information included in the Final Memorandum are reasonable,
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein; and (ii) presents fairly, in
all material respects, the information purported to be shown therein.
(k) Except as described in the Final Memorandum, there is not pending
or, to the knowledge of the Company or the Subsidiary, threatened any action,
suit or proceeding to which any of the Company, the Subsidiary or any of their
respective affiliates is a party, or to which the property or assets of any of
the Company, the Subsidiary or their respective affiliates are subject, before
or brought by any court, arbitrator or governmental agency or body which, if
determined adversely to either the Company or the Subsidiary, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect or
which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder or the
consummation of the other transactions on the Closing Date contemplated by the
Transaction Documents or otherwise described in the Final Memorandum. Neither
the Company nor the Subsidiary has received any notice or claim of any default
(or event, condition or omission which with notice or lapse of time or both
would result in a default) under any of their respective Contracts, including
those referred to in the Final Memorandum, or any other Transaction Document to
which it is a party or has knowledge of any breach of any of such Contracts by
the other party or parties thereto, except such defaults or breaches as would
not reasonably be expected to result in a Material Adverse Effect.
(l) Each of the Company and the Subsidiary owns or possesses adequate
licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Final Memorandum except where
the failure to possess or make the same would not reasonably be expected to have
a Material Adverse Effect, and neither the Company nor the Subsidiary has
received any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with respect to any
patents, trademarks, service marks, trade names, copyrights or know-how which,
if such assertion of infringement or conflict were sustained,
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individually or in the aggregate, would have a Material Adverse Effect.
(m) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein or as contemplated by the
Transaction Documents or the Merger Agreement, (i) neither the Company nor the
Subsidiary has incurred any liabilities or obligations, direct or contingent, or
entered into or agreed to enter into any transactions or contracts (written or
oral) not in the ordinary course of business which liabilities, obligations,
transactions or contracts, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, (ii) neither the Company nor the
Subsidiary has purchased any of its outstanding Equity Interests, or declared,
paid or otherwise made any dividend or distribution of any kind on its Equity
Interests and (iii) there has not been any change in the long term indebtedness
of the Company or the Subsidiary that, individually or in the aggregate, would
have a Material Adverse Effect. Since the respective dates as of which
information is given in the Final Memorandum, except as described therein, there
has been no occurrence or any fact or event known to the Company which has had,
or would reasonably be expected to have, a Material Adverse Effect.
(n) Each of the Company and the Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns required to be filed
through the date hereof except where the failure to so file such returns,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect, and has paid all taxes shown as due thereon prior to
the date upon which penalties attach thereto, except for taxes which the Company
or the Subsidiary is contesting in good faith for which adequate reserves have
been established; and other than tax deficiencies which the Company or the
Subsidiary is contesting in good faith and for which the Company or the
Subsidiary has provided adequate reserves, there is no tax deficiency that has
been asserted against the Company or the Subsidiary that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(o) The statements set forth under the heading "Description of the
Notes" in the Final Memorandum, insofar as such statements purport to summarize
certain provisions of the Notes and the Indenture, provide a fair summary of
such provisions and information with respect thereto; the statements set forth
under the heading "Description of Senior Credit Facility" in the Final
Memorandum, insofar as such statements purport to summarize certain provisions
of the Senior Credit Facility provide a fair summary of such provisions and
information with respect thereto; the statements set forth under the heading
"Certain Relationships and Related Transactions" in the Final Memorandum,
insofar as such statements purport to summarize certain provisions of the
Recapitalization, the Merger Agreement, the Management Agreement, the
Stockholders Agreement, the Registration Agreement and the Tax Sharing Agreement
(each as defined in the Final Memorandum), provide a fair summary of such
provisions and information with respect thereto; the statements set forth under
the subheading "Recapitalization" under the heading "Certain
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Relationships and Related Transactions" in the Final Memorandum, insofar as such
statements purport to summarize certain provisions of the Recapitalization (as
defined in the Final Memorandum), provide a fair summary of such provisions and
information with respect thereto.
(p) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes to be
reliable and accurate.
(q) No part of the proceeds of the sale of the Notes will be used,
directly or indirectly, for any purpose that violates any provision of
Regulation T, U or X of the Board of Governors of the Federal Reserve System, in
each case as in effect, or as the same may hereafter be in effect, on the
Closing Date.
(r) Each of the Company and the Subsidiary has good and marketable
title in fee simple to all real property and owns all personal property
described in the Final Memorandum as being owned by it and holds a leasehold
estate in the real and personal property described in the Final Memorandum as
being leased by it, in each case, free and clear of all liens, charges,
encumbrances or restrictions, except (i) liens, encumbrances and claims securing
the Senior Credit Facility or otherwise permitted under the Indenture, (ii) as
described in the Final Memorandum or (iii) to the extent the failure to have
such title or the existence of such liens, charges, encumbrances or
restrictions, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. All leases, contracts and agreements to
which either the Company or the Subsidiary is a party or by which either of them
is bound are valid and enforceable against the Company or the Subsidiary, as the
case may be, and, to the Company's knowledge, are valid and enforceable against
the other party or parties thereto (in each case, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity and the discretion of the court before which
any proceeding with respect thereto may be brought) and are in full force and
effect with only such exceptions as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(s) Except as described in the Final Memorandum or as, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect (A) each of the Company and the Subsidiary is in compliance with and not
subject to liability under applicable Environmental Laws (as defined below), (B)
each of the Company and the Subsidiary has made all filings and provided all
notices required under any applicable Environmental Law, and has and is in
compliance with all permits required under any applicable Environmental Laws and
each of them is in full force and effect, (C) there is no civil, criminal or
administrative action, suit, claim, hearing, notice of violation, investigation,
proceeding, written notice or demand letter or request for information pending
or, to the knowledge of the Company or the Subsidiary, threatened against the
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Company or the Subsidiary under any Environmental Law, (D) no lien, encumbrance
or restriction has been recorded under any Environmental Law with respect to any
assets, facility or property owned, operated, leased or controlled by the
Company or the Subsidiary, (E) none of the Company or the Subsidiary has
received notice that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA") or any comparable state law, (F) no property or
facility of the Company or the Subsidiary is (i) listed or proposed for listing
on the National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information System
List promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous substances as defined by CERCLA, including, without limitation,
petroleum, crude oil or any fraction thereof (collectively, "Hazardous
Materials"), into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) and (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(t) There is no strike, labor dispute, slowdown or work stoppage with
the employees of any of the Company or the Subsidiary which is pending or, to
the knowledge of the Company or the Subsidiary, threatened, which would
reasonably be expected to have a Material Adverse Effect. No employees of the
Company or the Subsidiary are covered by a collective bargaining agreement nor
is any union organizing effort or campaign pending or, to the knowledge of the
Company or the Subsidiary, threatened with respect to any such employees.
(u) Each of the Company and the Subsidiary maintains insurance in such
amounts and covering such risks as are reasonable and customary given the nature
of the Company's business and the value of its properties.
(v) Neither the Company nor the Subsidiary has any liability for any
prohibited transaction or accumulated funding deficiency (as defined in Section
412 of the Code) or any complete or partial withdrawal liability with respect to
any pension, profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to which either of
the Company or the Subsidiary makes or ever has made a contribution and in which
any employee of the Company or the Subsidiary is or has ever been a participant.
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With respect to such plans, the Company and the Subsidiary is in compliance in
all material respects with all applicable provisions of ERISA.
(w) Each of the Company and the Subsidiary (i) makes and keeps
reasonably accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are executed
in accordance with management's general or specific authorizations, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's general or specific
authorizations and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals and appropriate action has been
taken with respect to any differences.
(x) Neither the Company nor the Subsidiary is or will be an
"investment company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(y) Neither the Company nor the Subsidiary does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes 1985, as amended, and all
regulations promulgated thereunder.
(z) No condition, omission, event or act has occurred with respect to
the Company or the Subsidiary which, had the Indenture already been executed and
delivered, would (or, with the giving of notice and/or the lapse of time and/or
the issuance of a certificate, could) constitute a Default (as defined in the
Indenture).
(aa) Except as described in the Final Memorandum, no holder of
securities of the Company or the Subsidiary will be entitled to have such
securities registered under the registration statement required to be filed by
the Company pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(bb) Immediately after the consummation of the transactions
contemplated by this Agreement (including the Related Transactions (as defined
below)), the fair value and present fair saleable value of the assets of the
Company (on a consolidated and going concern basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; the Company (on a
consolidated basis) is not, nor will the Company (on a consolidated basis) be,
after giving effect to the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (including the
Transactions (as defined below)), (a) left with unreasonably small capital with
which to carry on its business as it is proposed to be conducted, or (b) unable
to pay its debts
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(contingent or otherwise) as they mature.
(cc) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 8 hereof and their compliance with
the agreements set forth therein, none of the Company, the Subsidiary or any of
their respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act) has directly, or through any authorized agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
"security" (as defined in the Securities Act) which is or will be integrated
with the sale of the Notes in a manner that would require the registration under
the Securities Act of the Notes or (ii) engaged in any form of general
solicitation or general advertising (as those terms are used in Rule 502(C)
under the Securities Act) in connection with the offering of the Notes or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(dd) Assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof and their compliance with the
agreements set forth therein, it is not necessary in connection with the offer,
sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by this Agreement to register any of the Notes under the Securities
Act or to qualify the Indenture under the TIA.
(ee) No securities of the Company or the Subsidiary are of the same
class (within the meaning of Rule 144A under the Securities Act) as the Notes
and listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a United States automated inter-dealer quotation
system.
(ff) Neither the Company nor the Subsidiary has taken, nor will either
of them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of the Notes in violation of Regulation M under the Exchange Act.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and each of the Initial Purchasers,
acting severally and not jointly, agrees to purchase from the Company the Notes
at 97% of their principal amounts, in the respective principal amounts set forth
opposite its name on Schedule 2 hereto. One or more certificates in definitive
form for the Notes that the Initial Purchasers have agreed to purchase
hereunder, and in such denomination or denominations and registered in such name
or names as the Initial Purchasers request upon notice to the Company at least
thirty-six (36) hours prior to the Closing Date, shall be delivered by or on
behalf of the Company to the Initial Purchasers on the Closing Date, against
payment by or on behalf of the Initial
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Purchasers of the purchase price therefor by wire transfer (same day funds), to
such account or accounts as the Company shall specify prior to the Closing Date,
or by such means as the parties hereto shall agree prior to the Closing Date.
The Notes will be represented by one or more definitive global securities in
book-entry form which will be deposited by or on behalf of the Company with The
Depository Trust Company or its designated custodian. For purposes of Rule 15c6-
1 under the Exchange Act, the Closing Date shall be the date for payment of
funds and delivery of securities for all the Notes sold pursuant to the offering
of the Notes. Such delivery of and payment for the Notes shall be made at the
offices of Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois, at 10:00
A.M., Chicago time, on July 31, 1998, or at such other place, time or date as
the Initial Purchasers, on the one hand, and the Company, on the other hand, may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date." The Company will make such certificate or certificates
for the Notes available for checking and packaging by the Initial Purchasers at
the offices of Winston & Strawn in Chicago, Illinois, or at such other place as
BancAmerica Robertson Stephens may designate, at least twenty-four (24) hours
prior to the Closing Date.
The Company hereby agrees to pay any transfer taxes payable in
connection with the initial delivery to the Initial Purchasers of the Notes.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Company. The Company covenants and agrees with
each of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall have objected to by notice to the Company, unless the Company
is advised by counsel that such amendment or supplement is legally required. The
Company will promptly, upon the reasonable request of the Initial Purchasers or
counsel for the Initial Purchasers, make any amendments or supplements to the
Preliminary Memorandum or the Final Memorandum that may be necessary or
advisable in connection with the resale of the Notes by the Initial Purchasers.
(b) The Company will cooperate with the Initial Purchasers in
arranging for the qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of such
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jurisdictions as the Initial Purchasers may reasonably designate and will
continue such qualifications in effect for as long as may be necessary to
complete the resale of the Notes; provided, however, that in connection
herewith, the Company shall not be required to qualify as a foreign entity or to
execute a general consent to service of process in any jurisdiction or subject
itself to taxation in any such jurisdiction where it is not then so subject or
qualified.
(c) If, at any time prior to the completion of the resale by the
Initial Purchasers of the Notes, any event occurs or information becomes known
as a result of which, in the reasonable opinion of counsel for the Company, the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made and at the time made, not misleading, or if for any other reason it is
necessary, in the reasonable opinion of counsel for the Company, at any time to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchasers thereof and will prepare, at
the expense of the Company, an amendment or supplement to the Final Memorandum
that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) For and during the period commencing on the date hereof and ending
on the date that no Notes are outstanding, the Company will furnish to the
Initial Purchasers copies of all reports and other communications (financial or
otherwise) furnished by the Company to the Trustee, or the holders of the Notes
and, as soon as available, copies of any reports or financial statements
furnished to or filed by the Company with the Commission or any national
securities exchange or governing body of any automated quotation system on which
any class of securities of the Company may be listed.
(f) Prior to the Closing Date, the Company will furnish to the Initial
Purchasers, as soon as they are available to the Company, a copy of any
unaudited interim financial statements of Globe Holdings, the Company and the
Subsidiary, for any period subsequent to the period covered by the most recent
financial statements appearing in the Final Memorandum.
(g) None of the Company, the Subsidiary or any of their respective
affiliates will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Securities Act) which
could be integrated with the sale of the Notes in a manner which would require
the registration under the Securities Act of the Notes.
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(h) None of Globe Holdings, the Company or the Subsidiary shall, for
a period of 120 days following the date hereof, without the prior written
consent of the Initial Purchasers, offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any debt securities of Globe Holdings, the
Company or the Subsidiary, other than the Notes, the Exchange Notes, the Private
Exchange Notes, and debt securities evidencing indebtedness under the Senior
Credit Facility, indebtedness otherwise permitted under the Senior Credit
Facility , indebtedness of Globe Holdings pursuant to the Discount Note Offering
(as defined in the Final Memorandum) or indebtedness under a loan or similar
agreement entered into between the Company or the Subsidiary and banks or
banking or other financial institutions or otherwise relating to receivables or
inventory financings entered into by the Company or the Subsidiary.
(i) Prior to the effectiveness of the Exchange Registration Statement
(as defined in the Registration Rights Agreement) or the Shelf Registration
Statement (as defined in the Registration Rights Agreement), as the case may be,
and thereafter only to the extent contemplated by such registration statements,
none of the Company or its affiliates will engage in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) in connection with the offering of the Notes or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(j) For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company will make available, upon request, to any holder of
such Notes the information specified in Rule 144A(d)(4) under the Act, unless
the Company is then subject to Section 13 or 15(d) of the Exchange Act.
(k) The Company will use its reasonable best efforts to (i) permit
the Notes to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers (the
"NASD") relating to trading in the Private Offerings, Resales and Trading
through Automated Linkages Market (the "Portal Market") and (ii) permit the
Notes to be eligible for clearance and settlement through The Depository Trust
Company and its participants.
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any amendment
or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchasers of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation
(including printing), issuance
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and delivery to the Initial Purchasers of the Notes, (v) the qualification of
the Notes under state securities and "Blue Sky" laws, including filing fees and
reasonable fees and expenses of counsel for the Initial Purchasers relating
thereto, (vi) reasonable fees and expenses of the Trustee including reasonable
fees and expenses of counsel thereto, (vii) all expenses and listing fees
incurred in connection with the application for quotation of the Notes on the
PORTAL Market and (viii) any fees charged by investment rating agencies for the
rating of the Notes; provided, however, that except as expressly provided in the
last sentence of this Section 6, the Initial Purchasers shall pay their own
costs and expenses. If the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 11 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder (other than solely
by reason of a default by either of the Initial Purchasers of its obligations
hereunder after all conditions hereunder have been satisfied in accordance
herewith), the Company agrees to promptly reimburse the Initial Purchasers upon
demand for all out-of-pocket expenses (including reasonable fees and expenses of
Winston & Strawn, counsel for the Initial Purchasers) that shall have been
incurred by the Initial Purchasers in connection with the proposed purchase and
sale of the Notes.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Maynard, Cooper & Gale, special counsel for the Company,
substantially in the form set forth on Exhibit B hereto, with such changes
thereto as are acceptable to counsel for the Initial Purchasers.
(b) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Kirkland & Ellis, counsel for the Company, substantially in the
form set forth on Exhibit C hereto, with such changes thereto as are acceptable
to counsel for the Initial Purchasers. In addition, the Initial Purchasers
shall have received a letter or letters permitting it to rely on any opinions
rendered by counsel to MergerCo, the Company and Globe Holdings in connection
with the Transactions.
(c) On the Closing Date, the Initial Purchasers shall have received
the opinion, in form and substance satisfactory to the Initial Purchasers, dated
as of the Closing Date and addressed to the Initial Purchasers, of Winston &
Strawn, counsel for the Initial Purchasers, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchasers may reasonably require. In rendering such opinion, Winston & Strawn
shall have
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<PAGE>
received and may rely upon such certificates and other documents and information
as it may reasonably request to pass upon such matters.
(d) The Initial Purchasers shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance reasonably satisfactory to counsel for the Initial
Purchasers.
(e) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date; the statements
of the Company's officers made pursuant to any certificate delivered in
accordance with the provisions hereof shall be true and correct and as of the
date made and on and as of the Closing Date; the Company shall have performed
all covenants and agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior the Closing Date; and, except as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no event or
development that, individually or in the aggregate, has or would reasonably be
expected to have a Material Adverse Effect.
(f) Neither the sale of the Notes hereunder nor any of the Related
Transactions shall be enjoined (temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), the conduct of the business and operations of the Company or the
Subsidiary shall not have been interfered with by strike, fire, flood,
hurricane, accident or other calamity (whether or not insured) or by any court
or governmental action, order or decree, and, except as otherwise stated
therein, the properties of the Company or the Subsidiary shall not have
sustained any loss or damage (whether or not insured) as a result of any such
occurrence, except any such interference, loss or damage which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(h) The Initial Purchasers shall have received a certificate of the
Company, dated the Closing Date, signed by its Chairman of the Board, President
or any Vice President and the Chief Financial Officer (in their respective
capacities as such), to the effect that:
(i) The representations and warranties of the Company contained
in this Agreement are true and correct as of the date hereof and as of
the Closing Date, and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
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<PAGE>
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or events have occurred, no information has become
known nor does any condition exist that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect;
(iii) Neither the sale of the Notes nor any of the Related
Transactions hereunder has been enjoined (temporarily or permanently);
and
(iv) The Related Transactions have been consummated or are being
consummated on the Closing Date concurrently with the closing
hereunder. As used herein, "Related Transactions" means (i) the
Recapitalization of Globe Holdings (as defined in the Final
Memorandum) pursuant to the Merger Agreement (as defined below), (ii)
the Merger (as defined in the Final Memorandum), (iii) the Asset Drop
Down (as defined in the Final Memorandum), (iv) the entry by the
Company into the Senior Credit Facility and the initial borrowing by
the Company of approximately $120 million thereunder, (v) the
repayment of all outstanding obligations under the Old Credit Facility
(as defined in the Final Memorandum) and the release of all liens on
property of the Company granted in connection therewith and (vi) the
other transactions contemplated by the Merger Agreement. As used
herein, the Merger Agreement means the Agreement and Plan of Merger
dated June 23, 1998, by and among Globe Holdings and Globe Acquisition
Company, a newly formed affiliate of Code Hennessy & Simmons III,
L.P., as amended through the date hereof.
(i) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by the Company and such agreement
shall be in full force and effect at all times from and after the Closing Date
except as otherwise terminated in accordance with its terms.
(j) MergerCo shall have received an investment from Code, Hennessy &
Simmons, other investors and certain existing stockholders in the aggregate
amount of $75.0 million (the "Gross Proceeds") through (i) a bridge loan of
$25.0 million, (ii) a cash investment of approximately $42.8 million and (iii)
the conversion of capital stock of Globe Holdings which, for purposes of the
Recapitalization, is valued at approximately $7.2 million.
(k) The conditions to the obligations of Globe Acquisition Company
under the Merger Agreement shall have been satisfied in all material respects,
and the Merger shall have been consummated in accordance with the terms of the
Merger Agreement and as described in the Final Memorandum.
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<PAGE>
(l) The Related Transactions shall have been consummated, or shall be
consummated on the Closing Date concurrently with the closing hereunder, and
counsel to the Initial Purchasers shall have received such documents relating
thereto and other evidence thereof as they may request in form and substance
reasonably satisfactory to such counsel.
(m) On the Closing Date, the Initial Purchasers shall have received
certified copies of the Tax Sharing Agreement, the Management Agreement, the
Registration Agreement, the Senior Credit Facility, the Merger Agreement and the
agreement effecting the Asset Drop Down, each executed by the Company and the
other signatories thereto and in form and substance reasonably satisfactory to
the Initial Purchasers.
(n) On the Closing Date, the Initial Purchasers shall have received
the opinion dated as of the Closing Date and addressed to the Initial Purchasers
of Valuation Research Corporation, addressed to the Initial Purchasers,
regarding the solvency of the Company after giving effect to the Transactions,
together with copies of all officers' certificates and other documents referred
to therein, and such opinion and other documents shall be in form and substance
reasonably satisfactory to the Initial Purchasers.
On or before the Closing Date, the Initial Purchasers and counsel for
the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiary as they
shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. Each of the Initial
Purchasers agrees with the Company, severally and not jointly, that (i) it has
not and will not solicit offers for, or offer or sell, the Notes by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act; and (ii) it
has and will solicit offers for the Notes only from, and has offered or sold and
will offer, sell or deliver, the Notes only to (A) in the case of offers inside
the United States, (x) persons whom the Initial Purchasers reasonably believe to
be QIBs or, if any such person is buying for one or more institutional accounts
for which such person is acting as fiduciary or agent, only when such person has
represented to the Initial Purchasers
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<PAGE>
that each such account is a QIB, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A or (y) a limited number of other institutional
investors reasonably believed by the Initial Purchasers to be Accredited
Investors that, prior to their purchase of the Notes, deliver to the Initial
Purchasers a letter containing the representations and agreements set forth in
Annex A to the Final Memorandum and (B) in the case of offers outside the United
States, to persons other than U.S. persons, in each case, in compliance with
Regulation S under the Securities Act ("foreign purchasers," which term shall
include dealers or other professional fiduciaries in the United States acting on
a discretionary basis for foreign beneficial owners (other than an estate or
trust)); provided, however, that, in the case of this clause (B), in purchasing
such Notes such persons are deemed to have represented and agreed as provided
under the caption "Notice to Investors" contained in the Final Memorandum.
9. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers, and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which any Initial Purchaser or such controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or
supplement thereto or any application, or any amendment or supplement
thereto, prepared or executed by the Company or the Subsidiary or
based upon written information furnished by or on behalf of the
Company or the Subsidiary filed in any jurisdiction in order to
qualify the Notes under the securities or "Blue Sky" laws thereof or
filed with any securities association or securities exchange (each an
"Application"); or
(ii) the omission or alleged omission to state, in any Memorandum
or any amendment or supplement thereto or any Application, a material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made, not
misleading,
and will reimburse, promptly after demand, the Initial Purchasers and each such
controlling person for any reasonable legal or other expenses reasonably
incurred by the Initial Purchasers or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, the Company will not be liable in any
such case to the extent that any such loss, claim, damage, or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in any Memorandum or any amendment or
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supplement thereto or any Application in reliance upon and in conformity with
written information concerning the Initial Purchasers furnished to the Company
by the Initial Purchasers specifically for use therein; and further provided,
that the indemnity agreement provided in this Section 9(a) with respect to any
such untrue statement in or omission from the Preliminary Memorandum shall not
inure to the benefit of any Initial Purchaser (or to the benefit of any person
controlling such Initial Purchaser or any officer, director, partner, employee,
representative or agent of such Initial Purchaser) on account of any loss,
claim, damage or liability arising from the sale of Notes by such Initial
Purchaser to any person if the untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state therein a material fact
in the Preliminary Memorandum was corrected in the Final Memorandum and such
Initial Purchaser sold Notes to that person without sending or giving at or
prior to the written confirmation of such sale, a copy of the Final Memorandum
(as then amended or supplemented) if the Company had previously furnished copies
thereof to the Initial Purchasers in accordance with the terms of this
Agreement. This indemnity agreement will be in addition to any liability that
the Company may otherwise have to the indemnified parties. The Company shall not
be liable under this Section 9 for any settlement of such claim or action
effected without its consent, which shall not be unreasonably withheld.
(b) Each of the Initial Purchasers severally agrees to indemnify and
hold harmless the Company and its directors, officers, employees,
representatives, affiliates and agents and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer, employee, representative, affiliate,
agent or controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Memorandum or any amendment or supplement thereto or any Application, or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in any Memorandum or any amendment or supplement thereto
or any Application, or necessary to make the statements therein in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial Purchaser, furnished
to the Company by or on behalf of such Initial Purchaser specifically for use
therein; and subject to the limitation set forth immediately preceding this
clause, will reimburse, promptly after demand, any reasonable legal or other
expenses reasonably incurred by the Company or any such director, officer,
employee, representative, affiliate, agent or controlling person in connection
with investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchasers may otherwise have to the indemnified parties. The Initial
Purchasers shall not be liable under this Section 9 for any settlement of any
claim or
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action effected without their consent, which shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action (which approval shall not be
unreasonably withheld), the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchasers in the case of paragraph (a) of this
Section 9 or the Company in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the
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employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received by
the Company on the one hand and any Initial Purchaser on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the total discounts and
commissions received by such Initial Purchaser on the other hand, bear to the
total gross proceeds from the sale of the Notes. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand, or such Initial Purchaser on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Initial Purchasers agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Initial Purchaser
shall be obligated to make contributions hereunder that in the aggregate exceed
the total discounts, commissions and other compensation received by such Initial
Purchaser under this Agreement, less the aggregate amount of any damages that
such Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and 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. For purposes
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of this paragraph (d), each person, if any, who controls an Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Initial
Purchasers, and each director, officer, employee, representative, affiliate and
agent of the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, shall have the same rights to contribution as the Company.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and directors and the Initial Purchasers set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect until termination of this Agreement, except as set forth in the
following sentence, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Initial Purchasers or any
controlling person referred to in Section 9 hereof and (ii) delivery of and
payment for the Notes. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6, 9 and 15 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if on and after the
date hereof and at or prior to the Closing Date:
(i) the Company or the Subsidiary shall have sustained any loss
or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any strike, labor dispute, slowdown or
work stoppage or any legal or governmental proceeding, which loss or
interference, in the sole judgment of the Initial Purchasers, has had
or could be reasonably likely to have a Material Adverse Effect, or
there shall have been, in the sole judgment of the Initial Purchasers,
any event or development that, individually or in the aggregate, has
or could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of any of the
Company), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market System
shall have been suspended or minimum or maximum prices shall have been
established on any such exchange or market;
23
<PAGE>
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial Purchasers, makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Notes as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The statements
set forth (i) in the last paragraph on the front cover page of the Final
Memorandum, (ii) in the first paragraph on page i of the Final Memorandum and
(iii) in the third, fifth and sixth paragraphs and in the second sentence of the
fourth paragraph under the heading "Plan of Distribution" of the Final
Memorandum constitute the only information furnished by the Initial Purchasers
to the Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed or delivered to (i)
BancAmerica Robertson Stephens, 231 S. LaSalle Street, 17th Floor, Chicago,
Illinois 60697, Attention: Thomas J. McGrath, with a copy to Winston & Strawn,
35 W. Wacker, Chicago, Illinois 60601, Attention: Steven J. Gavin; if sent to
the Company, shall be mailed or delivered to Globe Manufacturing Corp., 456
Bedford Street, Fall River, Massachusetts 02720, Attention: President, with a
copy to Code, Hennessy & Simmons LLC, 10 South Wacker Drive, Chicago, Illinois
60606, Attention: Peter M. Gotsch, and to Kirkland & Ellis, 200 East Randolph
Drive, Chicago, Illinois 60601, Attention: Laurie T. Gunther.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; and one business day
after being timely delivered to a next-day air courier.
24
<PAGE>
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchasers within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Initial Purchasers contained in Section 9 of
this Agreement shall also be for the benefit of the directors, officers,
employees, representatives, affiliates and agents and any person or persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act. No purchaser of Notes from the Initial
Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature pages follow]
25
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company and
the Initial Purchasers.
Very truly yours,
Globe Elastics Co., Inc.
(to be renamed Globe Manufacturing Corp.),
an Alabama corporation
By /s/ T.A. Rodgers, III
------------------------------------------
Name: T.A. Rodgers, III
Title: President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Daniel J. Kelly
--------------------------------
Title: Director
MERRILL LYNCH & CO.
By: /s/ illegible
--------------------------------
Title: Vice President
<PAGE>
SCHEDULE 1
SUBSIDIARY OF THE COMPANY
JURISDICTION OF
NAME INCORPORATION
- ------------------------------------------- ---------------------------------
Globe Manufacturing FSC Ltd. Barbados
<PAGE>
SCHEDULE 2
PRINCIPAL AMOUNT
INITIAL PURCHASERS OF NOTES
- -------------------------------------------------- -------------------------
BancAmerica Robertson Stephens $ 97,500,000
Merrill Lynch & Co. $ 52,500,000
------------
TOTAL $150,000,000
============
<PAGE>
Exhibit A: Form of Registration Rights Agreement
Exhibit B: Form of Opinion of Maynard, Cooper, & Gale, P.C., special counsel
to Globe Manufacturing Corp.
Exhibit C: Form of Opinion of Kirkland & Ellis, special counsel to Globe
Manufacturing Corp.
<PAGE>
EXHIBIT 4.3
________________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of July 31, 1998
Among
GLOBE MANUFACTURING CORP.
and
BANCAMERICA ROBERTSON STEPHENS
and
MERRILL LYNCH & CO.,
as Initial Purchasers
________________________________________________________________________________
$150,000,000
10% SENIOR SUBORDINATED NOTES DUE 2008
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions........................................................ 1
2. Exchange Offer..................................................... 5
3. Shelf Registration................................................. 8
4. Additional Interest................................................ 8
5. Registration Procedures............................................ 10
6. Registration Expenses.............................................. 18
7. Indemnification.................................................... 19
8. Rule 144 and 144A.................................................. 22
9. Underwritten Registrations......................................... 22
10. Miscellaneous...................................................... 23
(a) No Inconsistent Agreements.................................... 23
(b) Adjustments Affecting Registrable Notes....................... 23
(c) Amendments and Waivers........................................ 23
(d) Notices....................................................... 23
(e) Successors and Assigns........................................ 25
(f) Counterparts.................................................. 25
(g) Headings...................................................... 25
(h) Governing Law................................................. 25
(i) Severability.................................................. 26
(j) Notes Held by the Company or its Affiliates................... 26
(k) Third Party Beneficiaries..................................... 26
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
July 31, 1998, by and among Globe Manufacturing Corp., an Alabama corporation
(the "Company"), and BancAmerica Robertson Stephens and Merrill Lynch & Co.(the
"Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 28, 1998, among the Company and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale to the
Initial Purchasers of $150,000,000 aggregate principal amount of the 10% Senior
Subordinated Notes due 2008 of the Company (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 for the
benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the obligation of
the Initial Purchasers 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) hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the first introductory paragraph hereto.
Applicable Period: See Section 2(b) hereof.
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the first introductory paragraph hereto.
Effectiveness Date: The 150th day after the Issue Date; provided,
however, that with respect to any Shelf Registration, the Effectiveness Date
shall be the 90th day after the Filing Date with respect thereto.
<PAGE>
Effectiveness Period: See Section 3(a) hereof.
Event Date: See Section 4(b) hereof.
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) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Registration Statement: See Section 2(a) hereof.
Expiration Date: See Section 2(a) hereof.
Filing Date: (A) In the case of an Exchange Registration Statement,
the 60th day after the Issue Date; or (B) in the case of a Shelf Registration
(which may be applicable notwithstanding the consummation of the Exchange
Offer), the 60th day after a Shelf Notice is required to be delivered pursuant
to this Agreement.
Guarantors: The domestic subsidiaries of the Company, if any, who
guarantee the Company's obligations under the Notes, the Exchange Notes, the
Private Exchange Notes or the Indenture in accordance with the terms of the
Indenture.
Holder: Any record holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of July 31, 1998 by and among the
Company, each of the Guarantors party thereto from time to time, 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 first introductory paragraph hereto.
Inspectors: See Section 5(o) hereof.
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<PAGE>
Issue Date: July 31, 1998, the date of original issuance of the
Notes.
NASD: See Section 5(s) hereof.
Offering Memorandum: The final offering memorandum of the Company
dated July 28, 1998, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership, limited
liability company, limited liability limited partnership, joint stock company,
trust, unincorporated association, union, business association, firm or other
legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any 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, and all other amendments
and supplements to the Prospectus, with respect to the terms of the offering of
any portion of the Registrable Notes covered by such Registration Statement
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph hereto.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(iv) hereof is applicable, the Exchange
3
<PAGE>
Registration Statement) covering such Note, Exchange Note or Private Exchange
Note, as the case may be, has been declared effective by the SEC and such Note
(unless such Note was not tendered for exchange by the Holder thereof), Exchange
Note or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Registration Statement, (ii) such Note, Exchange
Note or Private Exchange Note, as the case may be, is sold in compliance with
Rule 144, or (iii) such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that 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.
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.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
Shelf Registration Statement: See Section 3(a) hereof.
4
<PAGE>
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 for reoffering to the
public.
2. Exchange Offer
(a) The Company agrees to file with the SEC no later than the Filing
Date a registration statement with respect to an offer to exchange (the
"Exchange Offer") any and all of the Registrable Notes (other than the Private
Exchange Notes, if any) for a like aggregate principal amount of senior
subordinated debt securities of the Company, guaranteed by the Guarantors (if
any), which are identical in all material respects to the Notes (the "Exchange
Notes") and which are entitled to the benefits of the Indenture or a trust
indenture which is identical in all material respects 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 Private
Exchange Notes, if any) shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Offer shall be registered under the Securities Act
on the appropriate form (the "Exchange Registration Statement") and shall 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 be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20
business days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders (the last day of such period,
the "Expiration Date"); and (z) consummate the Exchange Offer on or prior to the
180th day following the Issue Date. Each Holder who participates in the
Exchange Offer will be required to represent to the Company that any Exchange
Notes to be 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 any of the Company
within the meaning of the Securities Act and that such Holder 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 Company shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in respect
of any Exchange Notes as to which clause 2(c)(iv) hereof applies)
5
<PAGE>
pursuant to Section 3 hereof. No securities other than the Exchange Notes (and
the guarantees, if any, made by the Guarantors) shall be included in the
Exchange Registration Statement.
(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 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
judgment of the Initial Purchasers, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit
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 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 any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 180 days following the
first bona fide offering of securities under such Registration Statement (or
such longer period if extended pursuant to the last paragraph of Section 5
hereof)(the "Applicable Period"). Notwithstanding the foregoing, the Company
shall have no obligation to keep the Exchange Registration Statement effective
or to amend and supplement the Prospectus contained therein in the event that
the Company has not received written notice within 30 days following the
completion of the Exchange Offer that a Participating Broker-Dealer received
Exchange Notes in the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having the status of an unsold
allotment in the initial distribution, the Company shall, upon the request of
any of the Initial Purchasers, 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 such Notes held by the Initial Purchasers
a like principal amount of debt securities of the Company, guaranteed by the
Guarantors, that are identical 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 such Private Exchange
Notes. The Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes.
6
<PAGE>
Interest on the Exchange Notes and the 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:
(1) mail or cause to be mailed 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;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, the City of New York;
(3) 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; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) 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 of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that (1) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (2) the Private Exchange Notes shall 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 and the Notes shall
vote and consent together on all matters as one class and that
7
<PAGE>
none of the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company reasonably determines in
good faith that it is not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any
holder of Private Exchange Notes so requests at any time after the consummation
of the Private Exchange, or (iv) in the case of any Holder that participates in
the Exchange Offer, such Holder does not receive Exchange Notes on the date of
the exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such Holder as an
affiliate of the Company within the meaning of the Securities Act) and any such
Holder so requests in writing to the Company, then the Company shall promptly
(and, in any event, within five business days) deliver to the Holders and the
Trustee written notice thereof (the "Shelf Notice") and shall file a Shelf
Registration pursuant to Section 3 hereof; provided, that the Company shall have
no obligation to deliver a Shelf Notice or file a Shelf Registration Statement
pursuant to clause (ii) above if the Exchange Registration Statement has been
declared effective by the SEC and the scheduled expiration date of the Exchange
Offer is less than 195 days after the Issue Date.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Company shall as promptly as reasonably
practicable 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 "Shelf Registration"). The Company shall use its best efforts to file
with the SEC the Shelf Registration on or before the applicable Filing Date. The
Shelf Registration shall be on Form S-1 or another appropriate form (the "Shelf
Registration Statement") permitting registration of such Registrable Notes for
resale by 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 (and the guarantees, if
any, made by the Guarantors) to be included in the Shelf Registration.
The Company shall use its commercially reasonable efforts to cause the
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
date on which the SEC declares such Shelf Registration Statement effective,
subject to extension pursuant to the last paragraph of Section 5 hereof (the
"Effectiveness
8
<PAGE>
Period"), or such shorter period ending when all Registrable Notes covered by
the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration.
(b) Withdrawal of Stop Orders. If the Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the Company
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(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 reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter 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, as liquidated damages, additional interest on the
Notes ("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect):
(i) if the Exchange Registration Statement or the Shelf
Registration has not been filed on or prior to the applicable Filing Date,
Additional Interest shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days immediately
following such date, such Additional Interest rate increasing by an
additional 0.25% per annum at the beginning of each subsequent 90-day
period;
(ii) if (A) the Exchange Registration Statement is not declared
effective by the SEC on or prior to the relevant Effectiveness Date or (B)
notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company is required to file a Shelf Registration and
such Shelf Registration is not declared effective by the SEC on or prior to
the Effectiveness Date in respect of such Shelf Registration, then,
commencing on the day after either such Effectiveness Date, Additional
Interest shall accrue on the Notes over and above the stated interest at a
rate of 0.50% per annum for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional 0.25% per
annum at the beginning of each subsequent 90-day period; and
9
<PAGE>
(iii) if (A) the Company has not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 180th day after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the
Expiration Date 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 (unless all Notes have been sold
thereunder), then Additional Interest shall accrue (over and above any
interest otherwise payable on such Notes) at a rate of 0.50% per annum for
the first 90 days commencing on (x) the 181st day after the Issue Date in
the case of (A) above, or (y) the day the Exchange Registration Statement
ceases to be effective in the case of (B) above, or (z) the day such Shelf
Registration ceases to be effective in the case of (C) above, such
Additional Interest rate increasing by an additional 0.25% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes as a result of
the provisions of clauses (i), (ii) and (iii) above may not exceed in the
aggregate 2.0% per annum; and provided, further, that (1) upon the filing of the
Exchange Registration Statement or a Shelf Registration (in the case of clause
(i) of this Section 4(a)), (2) upon the effectiveness of the Exchange
Registration Statement or the Shelf Registration (in the case of clause (ii) of
this Section 4(a)), or (3) upon the exchange of Exchange Notes for all Notes
tendered and not withdrawn (in the case of clause (iii)(A) of this Section
4(a)), or upon the effectiveness of the Exchange Registration Statement which
had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)),
or upon the effectiveness of the Shelf Registration which had ceased to remain
effective (in the case of (iii)(C) of this Section 4(a)), Additional Interest on
the Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within five business days
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 clauses (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable to the Holders of affected Notes in cash semi-annually
on each February 1 and August 1 (to the holders of record on the January 15 and
July 15 immediately preceding such dates), commencing with the first such date
occurring after any such Additional Interest commences to accrue. The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the 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.
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5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company (and the Guarantors, if any) shall effect
such registration(s) to permit the sale of the securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company hereunder, the Company shall (and shall cause any Guarantor to):
(a) Prepare and file with the SEC prior to the applicable Filing Date
a Registration Statement or Registration Statements as prescribed by Sections 2
or 3 hereof, and use its best efforts to cause each such Registration Statement
to become effective and remain effective as provided herein; provided, however,
that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
hereof 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 or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, 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 (in each case
at least five business days prior to such filing). The Company shall not file
any Shelf Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders 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 Shelf
Registration Statement, their counsel, or the managing underwriters, 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 may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period or
until consummation of the Exchange Offer, 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) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to it 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
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Registration Statement effective during the Applicable Period if it 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
paragraph 5(j) hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period and who has notified the Company in writing
that it will be a Participating Broker-Dealer on or prior to 30 days following
the completion of the Exchange Offer, the Company shall notify the selling
Holders of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any, promptly (but
in any event within five business days), and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment 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(l) hereof
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, the existence of any condition
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
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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 determination by the Company that a post-effective
amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use its 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 for sale in any jurisdiction, and, if any such order is issued,
to use its 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 or underwriters (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 about the
Company as the managing underwriter or underwriters (if any), such Holders, or
counsel for any of them 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
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof 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 and to each such Participating Broker-Dealer who so requests
and upon request to counsel and each managing underwriter, if any, at the sole
expense of the Company, 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.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to
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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 respective counsel, and the underwriters, if any, at the sole expense
of the Company, 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 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 its best efforts to register or qualify such
Registrable Notes (and to cooperate with 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 (or exemption from such registration or
qualification) of 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 reasonably request in writing; provided, however, that where
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the 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); use its best
efforts to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective hereunder 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, however, 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 any such jurisdiction where it is
not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
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
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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) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof 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) hereof, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the sole 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; provided, however, that the Company shall not be required to
amend or supplement a Registration Statement, any related Prospectus or any
document incorporated therein by reference, in the event that, and for a period
not to exceed an aggregate of 45 days in any calendar year if, (i) any event
occurs and is continuing as a result of which a Shelf Registration Statement
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (ii)(a) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a material
adverse effect on the business, operations or prospects of the Company or (b)
the disclosure otherwise relates to a pending material business transaction that
has not been publicly disclosed.
(k) 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.
(l) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes in
form and substance reasonably satisfactory to the Company and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to facilitate the registration or the disposition of such
Registrable Notes and,
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in such connection, (i) make such representations and warranties to, and
covenants with, the 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 in
writing if and when requested; (ii) obtain the written opinion of counsel to the
Company and written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings of debt similar to the Notes; (iii) use its best efforts
to obtain "cold comfort" letters and updates thereof in form, scope 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 the Company or of any business acquired by the Company or any of its
subsidiaries for which financial statements and financial data are, or are
required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and substantially in the form delivered to the Initial Purchasers
under the Purchase Agreement; 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
underwriter 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.
(m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, subject to prior receipt of appropriate confidentiality
agreements, make available for inspection by one representative of the selling
Holders of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holders or each such Participating Broker-
Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business hours, all financial
and other records, pertinent corporate documents and instruments 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 reasonably requested by any such
Inspector in connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential
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and any Records which it notifies 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,
(iii) disclosure of such information is, in the opinion of counsel for any
Inspector, necessary or advisable in connection with any action, claim, suit or
proceeding, directly or indirectly, involving or reasonably likely to involve
such Inspector and arising out of, based upon, relating to, or involving this
Agreement, or any transactions contemplated hereby or arising hereunder, or (iv)
the information in such Records has been made generally available to the public;
provided, further, however, that prior notice shall be provided as soon as
practicable to the Company of the potential disclosure of any information by
such Inspector pursuant to clauses (i), (ii), (iii) or (iv) of this sentence to
permit the Company to obtain a protective order (or waive the provisions of this
paragraph (m)) and that such Inspector shall take such actions as are reasonably
necessary to protect the confidentiality of such information (if practicable).
Each selling Holder of such Registrable Notes and each such Participating
Broker-Dealer 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 as the basis for any market transactions in the securities of the Company or
any of its subsidiaries unless and until such information is 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 prior notice to the Company and allow the Company to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Company's, sole expense.
(n) 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) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
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.
(o) Comply with all applicable rules and regulations of the SEC to the
extent and so long as they are applicable to the Exchange Registration Statement
or the Shelf Registration Statement 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
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promulgated under the Securities Act) no later than 60 days after the end of any
12-month period (or 120 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 a Registration Statement, which statements shall cover said
12-month periods.
(p) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable 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 that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(q) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, 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").
(r) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, 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, that the Exchange Notes or Private Exchange Notes,
as the case may be, the related guarantees, if any, and the related indenture
constitute legal, valid and binding obligations of the Company (and the
Guarantors, if any), enforceable against the Company (and the Guarantors, if
any), in accordance with their respective terms, subject to customary exceptions
and qualifications.
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
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes or Exchange Notes of any
seller or Participating Broker-Dealer who fails to furnish such information
within a reasonable time after receiving such request. Each seller or
Participating Broker-Dealer 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 or Participating Broker-
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Dealer not materially misleading and to promptly notify the Company following
any sale or other transfer of Registrable Notes covered by the Shelf
Registration Statement, which notice shall specify the amount of securities
involved and the market, if any, on which such sale or transfer occurred.
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 actual 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(j) hereof, 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
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof or (y) the Advice; provided, however, that nothing in this paragraph
shall be construed to require the Company to keep a Registration Statement
effective at a time when all of the Registrable Notes covered thereby may be
sold under Rule 144.
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 (x) where the holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h) hereof, 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
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Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
or by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or sold by any Participating
Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery
expenses incurred by the Company, (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) hereof), (v) fees
and disbursements of all independent certified public accountants referred to in
Section 5(l)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, if any, and any fees associated with
making the Registrable Notes or Exchange Notes eligible for trading through The
Depository Trust Company, (vii) Securities Act liability insurance, if the
Company desires such insurance, (viii) fees and expenses of all other Persons
retained by the Company, (ix) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (x) the expense of any annual
audit of the Company, (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, if
applicable, and (xii) the expenses relating to printing, word processing and
distributing all Registration Statements and any other documents necessary in
order to comply with this Agreement.
(b) In the event the Company is required to file a Shelf Registration
Statement pursuant to a Shelf Notice delivered pursuant to Section 2(c)(ii)
hereof, the Company, shall reimburse the Holders of the Registrable Notes being
registered in a Shelf 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 Shelf Registration Statement.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes offered pursuant to a Shelf Registration Statement 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 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 pursuant to which the offering of such Registrable Notes or Exchange
Notes, as the case may be, is registered (or any
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amendment thereto) or related Prospectus (or any amendments or supplements
thereto) or any related preliminary prospectus, or caused by, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company will
not be required to indemnify a Participant if (i) 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 or on behalf
of such Participant expressly for use therein or (ii) if such Participant sold
to the person asserting the claim the Registrable Notes or Exchange Notes which
are the subject of such claim and such untrue statement or omission or alleged
untrue statement or omission was contained or made in any preliminary prospectus
and corrected in the Prospectus or any amendment or supplement thereto and the
Prospectus does not contain any other untrue statement or omission or alleged
untrue statement or omission of a material fact that was the subject matter of
the related proceeding and it is established by the Company in the related
proceeding that such Participant failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes sold to
such Person if required by applicable law, unless such failure to deliver or
provide a copy of the Prospectus (as amended or supplemented) or as a result of
noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors and officers, employees,
representatives, affiliates and agents 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 (i) with reference to information relating to such
Participant furnished to the Company in writing by or on behalf of such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus or (ii) with
respect to any untrue statement or representation made by such Participant in
writing to the Company. The liability of any Participant under this paragraph
shall in no event exceed the proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes giving rise to such obligations.
(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 of the
two preceding paragraphs, 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 counsel reasonably satisfactory to the
Indemnified Person to
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<PAGE>
represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred by such counsel related to such proceeding; provided,
however, that the failure to so notify the Indemnifying Person shall not relieve
it of any obligation or liability which it may have hereunder or otherwise
(unless and only to the extent that such failure directly results in the loss or
compromise of any material rights or defenses by the Indemnifying Person and the
Indemnifying Person was not otherwise aware of such action or claim). 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 shall have failed within a reasonable period of 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 representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that, unless there
exists a conflict among Indemnified Persons, the Indemnifying Person shall not,
in connection with any one such proceeding or separate but substantially similar
related proceedings in the same jurisdiction arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed promptly after demand 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, its directors,
officers, employees, representatives, agents and affiliates 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 non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
the Indemnifying Person agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written consent of the
Indemnified Person (which consent shall not be unreasonably withheld), effect
any settlement or compromise 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 (A) includes an unconditional written release of such Indemnified
Person, in form and substance reasonably satisfactory to such Indemnified
Person, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Indemnified Person.
22
<PAGE>
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, 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 and
in order to provide for just and equitable contribution, 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
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or such Participant or such other Indemnified Person, as the case may
be, on the other, the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(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, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid 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.
23
<PAGE>
(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. Rule 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 in accordance with
the requirements of the Securities Act and the Exchange Act 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, provide other information so long as necessary
to permit sales pursuant to Rule 144 and Rule 144A. The Company further
covenants for so long as any Registrable Notes remain outstanding, to make
available to any Holder or beneficial owner of Registrable Notes in connection
with any sale thereof and any prospective purchaser of such Registrable Notes
from such Holder or beneficial owner the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
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 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 required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) 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 nor will
24
<PAGE>
it enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to a
Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Company and the Holders of not less than a majority in aggregate
principal amount of the then outstanding 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, however, that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(d) 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 facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BancAmerica Robertson Stephens
231 S. LaSalle Street
17th Floor
Chicago, Illinois 60697
Facsimile No: (312) 828-5539
Attention: Thomas J. McGrath
25
<PAGE>
Merrill Lynch & Co.
World Financial Center
North Tower, 32nd Floor
New York, New York 10281
Facsimile No.: (212) 449-8635
Attention: Bertram Michel
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Facsimile No: (312) 558-5700
Attention: Steven J. Gavin
2. if to the Initial Purchasers, at the addresses specified in
Section 10(d)(1);
3. if to the Company, as follows:
Globe Manufacturing Corp.
456 Bedford Street
Fall River, Massachusetts 02720
Facsimile No.: (508) 679-9458
Attention: President
26
<PAGE>
with copies to:
Code Hennessy & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Facsimile No: (312) 876-3854
Attention: Peter M. Gotsch
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Facsimile No: (312) 861-2000
Attention: Laurie T. Gunther
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign holds Registrable Notes.
(f) 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.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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<PAGE>
(h) 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 WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT T0 THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) 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 reasonable 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. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) 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.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
[Signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GLOBE MANUFACTURING CORP., an Alabama
Corporation
By: /s/ Thomas A. Rodgers, III
------------------------------
Name: Thomas A. Rodgers, III
Title: President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Daniel J. Kelly
--------------------------------
Name: Daniel J. Kelly
Title: Director
MERRILL LYNCH & CO.
By: /s/ illegible
--------------------------------
Name: Illegible
Title: Authorized Signatory
<PAGE>
EXHIBIT 4.4
GLOBE HOLDINGS, INC.
SECURITYHOLDERS AGREEMENT
-------------------------
THIS SECURITYHOLDERS AGREEMENT (this "Agreement") is made as of July
31, 1998, by and among (i) Globe Holdings, Inc., a Massachusetts company
formerly known as Globe Manufacturing Co. (the "Company"), (ii) Code, Hennessy &
Simmons III, L.P. ("CHS"), (iii) each of the Persons listed on Schedule B
attached hereto (the "Institutional Investors" and individually, a
"Institutional Investor"), (iv) each of the Persons listed on Schedule C
attached hereto (the "Other Investors"), and (v) each other Person who, at any
time, acquires securities of the Company and, with the written consent of CHS,
executes a counterpart of this Agreement or otherwise agrees to be bound by this
Agreement (any such Person shall be deemed an "Other Investor", unless CHS deems
such Person to be an "Institutional Investor" at the time such Person executes
such counterpart to this Agreement). CHS, the Institutional Investors and the
Other Investors are collectively referred to as the "Securityholders" and
individually as a "Securityholder." Capitalized terms used herein and not
otherwise defined are defined in Section 10 hereof.
The Company and the Securityholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's Board of Directors (the "Board"), (ii) limiting the manner and
terms by which Stockholder Securities may be transferred, and (iii) assuring
continuity in the ownership of the company.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
(a) From and after the date hereof, each holder of Stockholder
Securities (a "Holder") shall vote all of such Holder's Stockholder Securities
and shall take all other necessary or desirable actions within such Holder's
control (whether as a stockholder, director, member of a Board committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings), and the Company shall
take all necessary or desirable actions within its control (including, without
limitation, calling special Board and stockholder meetings), in order to cause:
(i) the authorized number of directors on the Board to be established
at five (5) directors; provided that the holders of a majority of the CHS
Common Shares may elect to expand the Board to such number of directors as
such holders shall determine by delivering written notice of such election
to the Company and the other Securityholders;
<PAGE>
(ii) the election to the Board of those representatives who are
designated by the holders of a majority of the CHS Common Shares from time
to time (the "Directors"), with Thomas Rodgers, Jr., Thomas Rodgers III,
Andrew W. Code, Peter M. Gotsch and Edward M. Lhee serving as the initial
Directors;
(iii) the removal from the Board (with or without cause) of any
Director at the written request of the holders of a majority of the CHS
Common Shares, but only upon such written request and under no other
circumstances; and
(iv) in the event that any Director resigns, or for any other reason
ceases to serve as a member of the Board during his term of office, the
filling of the resulting vacancy on the Board by a representative
designated by the holders of a majority of the CHS Common Shares.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
and any committee thereof.
(c) The provisions of this Section 1 will terminate automatically
and be of no further force and effect upon the first to occur of (i)
consummation of a Public Offering and (ii) consummation of a Sale of the
Company.
2. Irrevocable Proxy; Conflicting Agreements.
(a) In order to secure each Minority Securityholder's obligation to
vote his Stockholder Securities in accordance with the provisions of Section 1
and Section 5, each Minority Securityholder hereby appoints Peter M. Gotsch, as
his true and lawful proxy and attorney-in-fact, with full power of substitution,
to vote all of his Stockholder Securities for the election and/or removal of
directors and all such other matters as expressly provided for in Section 1 and
Section 5. Peter M. Gotsch may exercise the irrevocable proxy granted to him
hereunder at any time such Minority Securityholder fails to comply with the
provisions of this Agreement. The proxies and powers granted by each Minority
Securityholder pursuant to this Section 2 are coupled with an interest and are
given to secure the performance of such Minority Securityholder's obligations to
CHS. Such proxies and powers will be irrevocable for the term of this Agreement
and will survive the death, incompetency and disability of such Minority
Securityholder and the respective holders of their Stockholder Securities.
(b) Each Securityholder represents and warrants that (i) such
Securityholder is the record owner of the number of Stockholder Securities set
forth opposite his or its name on Schedule A (which lists the number of
Stockholder Securities that CHS is the record owner of), Schedule B, or Schedule
C attached hereto, (ii) this Agreement has been duly authorized, executed and
delivered by such Securityholder and constitutes the valid and binding
obligation of such Securityholder, enforceable in accordance with its terms, and
(iii) such Securityholder has not granted and is not a party to any proxy,
voting trust or other agreement which is inconsistent with, conflicts with or
violates any provision of this Agreement. No holder of Stockholder Securities
shall
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<PAGE>
grant any proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
(c) The provisions of this Section 2 will terminate automatically and
be of no further force and effect upon the first to occur of (i) consummation of
a Public Offering and (ii) consummation of a Sale of the Company.
3. Restrictions on Transfer.
(a) First Refusal Rights.
(i) Prior to making any Transfer of Minority Securities the
transferring holder of Minority Securities (the "Transferring Holder")
shall deliver written notice (an "Offer Notice") to the Company, CHS and
the Institutional Investors. The Offer Notice shall disclose in reasonable
detail the identity of the prospective transferee(s), the proposed number
and type of Minority Securities to be transferred and the terms and
conditions of the proposed Transfer. The Transferring Holder shall not
consummate any Transfer until 75 days after the Offer Notice has been given
to the Company, CHS and the Institutional Investors, unless the parties to
the Transfer have been finally determined pursuant to this Section 3(a)
prior to the expiration of such 75-day period.
(ii) The Company may elect to purchase all (but not less than
all) of such Minority Securities specified in the Offer Notice at the price
and on the terms specified therein by delivering written notice of such
election to the Transferring Holder and to CHS as soon as practicable but
in any event within 40 days after the delivery of the Offer Notice. If the
Company has not elected to purchase all of such Minority Securities within
such 40-day period, CHS and/or the Institutional Investors may elect to
purchase all (but not less than all) of the Minority Securities specified
in the Offer Notice at the price and on the terms specified therein by
delivering written notice of such election to the Transferring Holder as
soon as practicable but in any event within 75 days after delivery of the
Offer Notice (the "Election Period"). If CHS and/or one or more of the
Institutional Investors elect to purchase an aggregate amount of Minority
Securities in excess of the amount of Minority Securities specified in the
Offer Notice, the Minority Securities shall be allocated among CHS and/or
the relevant Institutional Investors based on the amount of such type or
types of Minority Securities owned by each party on the date of the Offer
Notice. CHS or any Institutional Investor may condition his, her or its
election to purchase such Minority Securities on the election of one or
more Institutional Investor and/or CHS to purchase Minority Securities. If
the Company, or CHS and/or any Institutional Investor, has elected to
purchase all of the Minority Securities specified in the Offer Notice from
the Transferring Holder, the transfer will be consummated as soon as
practicable after the delivery of the election notices, but in any event
within 30 days after the expiration of the Election Period. If none of the
Company, CHS or any Institutional Investor elects to purchase all of the
Minority Securities being offered, the Transferring Holder may, within 60
days after the expiration of the Election Period, transfer all of such
Minority Securities to the third party(ies) identified in the Offer Notice
at a price no less than the prices specified in the Offer Notice and on
other terms no
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<PAGE>
more favorable to the transferee(s) than offered to the Company and CHS in
the Offer Notice. Any Minority Securities not transferred within such 60-
day period shall be reoffered to the Company, CHS and the Institutional
Investors pursuant to this Section 3(a) prior to Transfer. The purchase
price specified in any Offer Notice shall be payable solely in cash at the
closing of the transaction or in installments over time, provided, however,
that the Company shall satisfy any such purchase price first by offsetting
indebtedness or obligations owed by such Transferring Holder to the
Company.
(b) Permitted Transfers. The restrictions set forth in this Section
3 shall not apply with respect to any Transfer of Minority Securities made (i)
in the case of any Person who is an individual, pursuant to applicable laws of
descent and distribution or to such Person's legal guardian in the case of any
mental incapacity or among such Person's Family Group, (ii) in the case of any
Person which is an entity, among its Affiliates, or (iii) by and between
BankAmerica Investment Corporation and MIG Partners VII; provided, that the
restrictions contained in this Section 3 will continue to be applicable to such
Minority Securities after any Transfer of the type referred to in clause (i),
(ii) or (iii) and the transferees of such Minority Securities will agree in
writing to be bound by the provisions of this Agreement. Any transferee of
Minority Securities pursuant to a transfer in accordance with the provisions of
this Section 3(b) is herein referred to as a "Permitted Transferee." Upon the
Transfer of Minority Securities pursuant to this Section 3(b), the transferee(s)
shall deliver a written notice to the Company, which notice shall disclose in
reasonable detail the identity of such transferee.
(c) Pledges; Transfer to Competitor. Notwithstanding anything to the
contrary in this Agreement, no holder of Minority Securities may (i) pledge any
or all of the Minority Securities owned by such holder (other than the Minority
Securities held by MIG Partners VII which may be pledged to BankAmerica
Investment Corporation), except to the Company in order to secure any debt owed
by such holder to the Company, or (ii) Transfer Minority Securities owned by
such holder to a Competitor.
(d) Termination. The provisions of this Section 3 will terminate
automatically and be of no further force and effect upon the consummation of a
Public Offering or the Sale of the Company.
4. Participation Rights. Prior to any sale by CHS of any Common
Stock or Preferred Shares (a "Sale"), CHS will give written notice of the price
and other material terms of the Sale (a "Sale Notice") to the Company and each
holder of Minority Securities (collectively, the "Minority Securityholders").
Such Minority Securityholders may elect (which election shall be irrevocable)
to participate in the proposed Sale by delivering written notice to CHS within
15 days after delivery of the Sale Notice. The Minority Securityholders
electing to participate in the proposed Sale shall be entitled to sell in the
proposed Sale, at the same price and on the same terms as CHS:
(a) in the case of Common Stock, a number of shares of Common Stock
equal to the product of (i) a fraction, the numerator of which is the
number of shares of Common Stock owned by such Minority Securityholder (and
that can be acquired by such Minority
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<PAGE>
Securityholder upon exercise or conversion of then currently exercisable or
convertible rights to acquire shares of Common Stock, including rights that
become exercisable or convertible as a result of the Sale) and the
denominator of which is the number of shares of Common Stock held by CHS
and all of the Minority Securityholders (assuming the exercise and
conversion of all then currently exercisable or convertible rights to
acquire shares of Common Stock) multiplied by (ii) the total number of
shares of Common Stock to be sold in the proposed Sale;
(b) in the case of Preferred Shares, Preferred Shares with a
liquidation preference equal to the product of (i) a fraction, the
numerator of which is equal to the liquidation preference of, and accrued
and unpaid dividends on, Preferred Shares held by such Minority
Securityholder and the denominator of which is equal to the aggregate
liquidation preference of, and accrued and unpaid dividends on, all
outstanding Preferred Shares held by CHS and all of the Minority
Securityholders multiplied by (ii) the aggregate liquidation preference of
Preferred Shares to be sold in the proposed Sale.
CHS shall use reasonable efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Minority Securityholders who have
elected to participate in any contemplated Sale, and CHS shall not sell any of
its Common Stock or Preferred Shares if the prospective transferee(s) decline(s)
to allow the participation of the Minority Securityholders who have elected to
participate. The Minority Securityholders who have elected to participate in
any contemplated Sale shall bear their pro-rata share (based upon the aggregate
consideration received in such Sale) of the reasonable costs of such Sale.
Notwithstanding the foregoing, the provisions of this Section 4 shall not apply
to (i) any Sale (other than a Sale constituting a Sale of the Company) to any
officer, director or employee of the Company or any of its Subsidiaries or to
any Affiliate of CHS or its general partner or to any fund organized and
controlled by any officer of Code Hennessy & Simmons LLC, or (ii) any Sale to an
Institutional Investor. The provisions of this Section 4 will terminate
automatically and be of no further force and effect upon the consummation of a
Public Offering.
5. Sale of the Company.
(a) If the holders of a majority of the voting Stockholder Securities
then outstanding (the "Approving Holders") approve a Sale of the Company (the
"Approved Sale"), each Holder shall consent to and raise no objections against
the Approved Sale, and if the Approved Sale is structured as a sale of stock,
each Holder shall vote for, consent to, raise no objection against and agree to
sell such Holder's shares of Common Stock and surrender any stock options owned
by such Holder on the terms and conditions approved by the Approving Holders,
subject to the provisions of Section 5(b). Each Holder shall take all necessary
and desirable actions in connection with the consummation of the Approved Sale.
(b) The obligations of the Holders with respect to the Approved Sale
are subject to the satisfaction of the following conditions: (i) upon the
consummation of the Approved Sale, all of the Holders shall receive the same
form and amount of consideration per share of Common Stock, or if Holders are
given an option as to the form and amount of consideration to be received, all
-5-
<PAGE>
Holders shall be given the same option; (ii) all holders of then currently
exercisable or convertible rights to acquire shares of Common Stock (or holders
of rights to acquire shares of Common Stock that become exercisable or
convertible in accordance with their terms as a result of the Approved Sale)
shall be given an opportunity to either (A) exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
Common Stock or (B) upon the consummation of the Approved Sale, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of Common Stock
received by the holders of Common Stock in connection with the Approved Sale
less the exercise or conversion price per share of Common Stock of such rights
to acquire Common Stock by (2) the number of shares of Common Stock represented
by such rights; (iii) the aggregate amount of all payments of liquidation
preference and accrued dividends, if any, made on the Preferred Shares in
connection with the consummation of an Approved Sale, shall be made equally and
ratably among all of the Preferred Shares; and (iv) no Holder shall be obligated
in connection with the Approved Sale to indemnify the prospective transferee or
its affiliates with respect to an amount in excess of the net proceeds received
by such Holder in connection with the Approved Sale (other than as a result of
any breach of such Holder's representations and warranties with respect to due
power and authority, non-contravention and ownership of stock, free and clear of
all liens, in which case such limit shall not apply).
(c) If the Board or the Approving Holders enter into any negotiation
or transaction for which Rule 506 (or any similar rule then in effect)
promulgated by the Securities and Exchange Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the Holders shall, at the request of the Company, appoint
a "purchaser representative" (as such term is defined in Rule 501) reasonably
acceptable to the Company. If any Holder appoints a purchaser representative
designated by the Company, the Company shall pay the fees of such purchaser
representative. However, if any Holder declines to appoint the purchaser
representative designated by the Company, such Holder shall appoint another
purchaser representative (reasonably acceptable to the Company), and such Holder
shall be responsible for the fees of the purchaser representative so appointed.
(d) All holders of Stockholder Securities shall bear their pro-rata
share (based upon the aggregate consideration received in such sale) of the
costs of any sale of Stockholder Securities pursuant to an Approved Sale to the
extent such costs are reasonable and incurred for the benefit of all holders of
Stockholder Securities and are not otherwise paid by the Company or the
acquiring party. Costs incurred by the holders of Stockholder Securities on
their own behalf shall not be considered costs of the transaction hereunder.
(e) Termination. The provisions of this Section 5 will terminate
automatically and be of no further force and effect upon the consummation of a
Public Offering.
6. Initial Public Offering.
In the event that the Board and CHS approve a Public Offering
pursuant to an effective registration statement under the Securities Act, as
amended, the holders of Preferred Shares and Common Stock shall take all
necessary or desirable actions in connection with the
-6-
<PAGE>
consummation of the Public Offering. In the event that such Public Offering is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the Common Stock and/or Preferred Share structure
would adversely affect the marketability of the offering, each holder of Common
Stock and Preferred Shares shall consent to and vote for a recapitalization,
reorganization and/or exchange of the Common Stock and/or Preferred Shares, as
the case may be, into securities that the managing underwriters, the Board and
CHS find acceptable and shall take all necessary or desirable actions in
connection with the consummation of the recapitalization, reorganization and/or
exchange; provided that the resulting securities reflect and are consistent with
the rights and preferences set forth in the Company's articles of incorporation
as in effect immediately prior to such Public Offering.
7. Preemptive Rights.
(a) If the Company authorizes the issuance or sale of any shares of
Common Stock, preferred shares, Options or any securities containing Options, in
each case to CHS or any of its Affiliates (other than as a dividend on the
outstanding Common Stock) (any such issuance or sale, a "Preemptive Sale"), the
Company shall first offer each Minority Securityholder the right (the "Right")
to purchase a portion of such stock or securities equal to the product
determined by multiplying (x) the total number of securities to be issued or
sold in a Preemptive Sale multiplied by (y) the quotient determined by dividing
(1) the number of outstanding shares of Common Stock held by such holder by (2)
the total number of shares of outstanding Common Stock. Notwithstanding the
foregoing, if CHS or its Affiliates are required to also purchase other
securities of the Company in connection with such Preemptive Sale, the holders
of Minority Securityholder Securities exercising their right pursuant to this
Section 7 shall also be required to purchase the same strip of securities (on
the same terms and conditions) that CHS or its Affiliates are required to
purchase. In the event that the consideration received by the Company in
connection with a Preemptive Sale is property other than cash, each holder of
Minority Securityholder Securities may, at its election, pay the purchase price
for such additional shares or other securities in such property or solely in
cash. In the event that any such holder elects to pay cash, the amount thereof
shall be determined based on the fair value of the consideration received or
receivable by the Company in connection with the Preemptive Sale and shall be
payable by cashier's check or wire transfer of immediately available funds.
Each Minority Securityholder may purchase all or any part of the securities that
such Minority Securityholder is entitled to purchase in a Preemptive Sale.
(b) The Company shall deliver to the Minority Securityholder a
written notice of its intent to sell stock or other securities of the Company
for which the Minority Securityholder has preemptive rights under this Section
7, describing in reasonable detail the stock or securities being offered, the
purchase price thereof, the payment terms and such holder's percentage
allotment. In order to exercise the Right, the Minority Securityholder must
within 15 days after receipt of such written notice from the Company deliver a
written notice to the Company describing such Person's election hereunder. The
closing of the purchase and sale pursuant to the exercise of the Right shall
occur at least 10 days after the Company receives such notice of the exercise of
the Right and concurrently with the closing of the Preemptive Sale.
-7-
<PAGE>
(c) The rights of each Minority Securityholder under this Section 7
shall terminate upon the effectiveness of a registration statement filed by the
Company with the Securities and Exchange Commission under the 1933 Act with
respect to an offering of Common Stock; provided that if the registration
statement is withdrawn or abandoned before any shares of Common Stock are sold
thereunder, the provisions of this Section 7 shall remain in effect.
8. Additional Restrictions on Transfer.
(a) Legend. Each certificate representing the Stockholder Securities
shall bear a legend in substantially the following form:
"The securities represented by this certificate were originally issued
as of July 31, 1998 have not been registered under the Securities Act
of 1933, as amended (the "Act"), and may not be sold or transferred in
the absence of an effective registration statement under the Act or an
exemption from registration thereunder.
The securities represented by this certificate are also subject to
additional restrictions on transfer, certain repurchase options and
certain other agreements set forth in a Securityholders Agreement
dated as of July 31, 1998 among the issuer of such securities (the
"Company") and certain of the Company's securityholders, as amended
and modified from time to time. A copy of such Securityholders
Agreement may be obtained by the holder hereof at the Company's
principal place of business without charge."
(b) Opinion of Counsel. No holder of Minority Securities may sell,
transfer or dispose of any Minority Securities except pursuant to an effective
registration statement under the 1933 Act, repurchase upon termination of
employment, a Sale of the Company or pursuant to Section 4 without first
delivering to the Company an opinion of counsel (reasonably acceptable in form
and substance to the Company) that neither registration nor qualification under
the 1933 Act and applicable state securities laws is required in connection with
such transfer. In addition, if such holder delivers to the Company an opinion
of such counsel that no subsequent transfer of such Minority Securities shall
require registration under the 1933 Act, the Company shall promptly upon such
contemplated transfer deliver new certificates for such Minority Securities
which do not bear the 1933 Act legend set forth in the first paragraph of
Section 8(a).
9. Financial Information. The Company shall deliver to each
Institutional Investor any reports delivered to the holders of the Globe
Manufacturing Corp. 10% Senior Subordinated Notes due 2008 or the holders of the
Globe Holdings, Inc. ___% Senior Discount Notes due 2009 promptly after such
reports are delivered to such note holders.
-8-
<PAGE>
10. Definitions.
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by or under common control with
such Person.
"Agreement" shall have the meaning set forth in the preface.
"Approved Sale" shall have the meaning set forth in Section 5(a).
"Board" shall have the meaning set forth in the preface.
"CHS" shall have the meaning set forth in the preface.
"CHS Common Shares" means any Common Stockholder Shares issued to or
held by CHS.
"Common Stock" means the Company's Class A Common Stock, par value
$0.01 per share; its Class B Common Stock, par value $0.01 per share; and its
Class C Common Stock, par value $0.01 per share.
"Common Stockholder Shares" means Stockholder Securities which are (i)
Common Stock, (ii) warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, Common Stock, whether or not then exercisable
or convertible (including, without limitation, the Warrants), and (iii) stock or
other securities which are convertible into or exchangeable for, directly or
indirectly, Common Stock, whether or not then convertible or exchangeable. As
to any particular Common Stockholder Shares, such shares shall cease to be
Common Stockholder Shares when they have been disposed of in a Public Sale or
repurchased by the Company or any Subsidiary. References in this Agreement to a
majority of, or a certain percentage of, the Stockholder Securities or the
Common Stockholder Shares, shall be deemed to be references to a majority of the
Common Stockholder Shares or a certain percentage of Common Stockholder Shares
(calculated on a fully-diluted basis), as applicable.
"Company" shall have the meaning set forth in the preface.
"Competitor" means any Person who engages (whether as an owner,
stockholder, operator, manager, employee, officer, director, consultant,
advisor, representative or otherwise) directly or indirectly in any business
(other than the Company and its Subsidiaries) that manufactures, distributes or
sells polyether or polyester spandex, latex thread or other elastomeric fiber
(provided that passive ownership of less than 2% of the outstanding stock of any
publicly-traded corporation shall not, in and of itself, constitute being
engaged in such activity).
"Directors" shall have the meaning set forth in Section 1(a).
"Election Period" shall have the meaning set forth in Section 3(a).
-9-
<PAGE>
"Executive Security Agreement" shall have the meaning set forth in
the preface.
"Family Group" means (i) a Person's spouse and descendants (whether
natural or adopted), (ii) any trust solely for the benefit of the Person and/or
any of the Person's spouse and/or descendants and (iii) any entity wholly-owned
by the Person.
"Holder" shall have the meaning set forth in Section 1(a).
"Independent Third Party" means any Person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully diluted basis, who is not an Affiliate of such 5% owner
of the Company's Common Stock and who is not the spouse or descendant (by birth
or adoption) of any such 5% owner of the Company's Common Stock.
"Institutional Investor" shall have the meaning set forth in the
preface.
"Minority Securities" means, collectively, all Stockholder Securities
acquired by an Institutional Investor or an Other Investor, whether before, on
or after the date of this Agreement. Minority Securities will continue to be
Minority Securities in the hands of any holder other than an Institutional
Investor or an Other Investor (other than the Company or CHS and except for
transferees in an Approved Sale, a Public Sale or pursuant to Section 4), and,
except as otherwise provided in this Agreement, each such holder of Minority
Securities will succeed to all rights and obligations attributable to the
transferor as a holder of Minority Securities hereunder.
"Minority Securityholders" shall have the meaning set forth in Section
4.
"1933 Act" means the Securities Act of 1933, as amended from time to
time.
"Offer Notice" shall have the meaning set forth in Section 3(b).
"Options" means warrants, options or other rights to subscribe for or
to acquire, directly or indirectly, Common Stock, whether or not then
exercisable or convertible.
"Other Investor" and "Other Investors" shall have the meaning set
forth in the preface.
"Permitted Transferees" shall have the meaning set forth in Section
3(b).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preemptive Sale"shall have the meaning set forth in Section 7(a).
"Preferred Shares" means shares of the Class A Preferred Stock, $0.01
par value, of the Company.
-10-
<PAGE>
"Public Offering" means an initial public offering and sale of equity
securities of the Company.
"Public Sale" means any sale of Common Stock to the public pursuant to
which such Common Stock has been effectively registered under the 1933 Act and
disposed of in accordance with the registration statement covering such Common
Stock or to the public through a broker, dealer or market maker pursuant to the
provisions of Rule 144 (or any similar provision then in force) under the 1933
Act.
"Right" shall have the meaning set forth in Section 7(a).
"Sale" shall have the meaning set forth in Section 4.
"Sale Notice" shall have the meaning set forth in Section 4.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
"Securityholder" and "Securityholders" shall have the meaning set
forth in the preface.
"Stockholder Securities" means any of the following held by any
Securityholder: (i) any capital stock of the Company (including, without
limitation, Preferred Shares), (ii) any warrants, options or other rights to
subscribe for or to acquire, directly or indirectly, capital stock of the
Company, whether or not then exercisable or convertible, (iii) any stock, notes
or other securities which are convertible into or exchangeable for, directly or
indirectly, capital stock of the Company, whether or not then convertible or
exchangeable, (iv) any capital stock of the Company issued or issuable upon the
exercise, conversion or exchange of any of the securities referred to in clauses
(ii) and (iii) above, (v) any securities issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i), (ii),
(iii) and (iv) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (vi) the Preferred Shares. As to any particular shares
constituting Stockholder Securities, such shares will cease to be Stockholder
Securities when they have been transferred in a Public Sale or have been
repurchased by the Company or any Subsidiary of the Company.
"Subsidiary" means, with respect to any Person, any corporation of
which a majority of the total voting power of shares of stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
-11-
<PAGE>
"Transfer" is the sale, transfer, assignment, pledge or other
disposition of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law) any interest in a Holder's Minority
Securities.
"Transferring Holder" shall have the meaning set forth in Section
3(a).
11. Transfers.
(a) Transferees. The provisions of this Agreement shall continue to
be applicable to the Stockholder Securities after any Transfer of such
Stockholder Securities (other than pursuant to the Repurchase Option, a Sale of
the Company or pursuant to Section 4), and each transferee of such Stockholder
Securities (including transferees pursuant to Section 3(c)) shall, as a
condition to any such Transfer, agree in writing to be bound by the provisions
of this Agreement affecting the Stockholder Securities so transferred.
(b) Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Securities in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Securities as the
owner of such securities for any purpose.
12. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Securityholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of a
majority of the voting Stockholder Securities (unless the matter relates only to
the Preferred Shares, in which case such matter may be approved in writing by
the holders of a majority of the principal amount, or liquidation preference, of
such Preferred Shares, respectively, as applicable). Notwithstanding the
foregoing, a modification, amendment or waiver of any provision of this
Agreement shall be effective against a Securityholder (and such Securityholder's
past and future transferees) if such modification, amendment or waiver is
approved in writing by such Securityholder. The failure of any party to enforce
any of the provisions of this Agreement shall in no way be construed as a waiver
of such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The parties hereto agree that the addition of new parties to this Agreement
(including other executives of the Company who purchase securities of the
Company and persons complying with Section 10 hereof) shall not constitute a
modification, amendment or waiver of this Agreement.
13. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
-12-
<PAGE>
14. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
15. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Securityholders and any
subsequent holders of Stockholder Securities and the respective successors and
assigns of each of them, so long as they hold Stockholder Securities; provided
that the rights and obligations of the Securityholders under this Agreement may
not be assigned except in connection with a permitted transfer of Stockholder
Securities hereunder.
16. Counterparts; Facsimile Signature. This Agreement may be
executed in multiple counterparts, each of which shall be an original and all of
which taken together shall constitute one and the same agreement. This
Agreement may be executed by facsimile signature.
17. Remedies. Each of the parties to this Agreement shall be
entitled to enforce his, her or its rights under this Agreement specifically, to
recover damages and costs caused by any breach of any provision of this
Agreement and to exercise all other rights existing in his, her or its favor.
In the event of a dispute hereunder, the prevailing party's reasonable
attorney's fees and costs shall be promptly reimbursed by the other party or
parties to such dispute. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in his, her or its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
18. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, sent via facsimile, mailed
first class mail (postage prepaid) or sent by reputable overnight courier
service (charges prepaid) to the Company at the address set forth below and to
any other recipient at the address indicated on the respective schedule attached
hereto and to any subsequent holder of Stockholder Securities subject to this
Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other Person as the recipient party has
specified by prior written notice to the sending party. Notices shall be deemed
to have been given hereunder when delivered personally, three days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service. The Company's address is:
-13-
<PAGE>
Globe Holdings, Inc.
456 Bedford Street
Fall River, MA 02720
Attention: President
with a copy (which will not constitute notice to the Company) to:
Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Attention: Peter M. Gotsch
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
19. Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Massachusetts, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Massachusetts or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Massachusetts.
20. Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
21. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Securityholders Agreement on the day and year first above written.
GLOBE HOLDINGS, INC.
By: /s/ Lawrence R. Walsh
--------------------------------------------
Name: Lawrence R. Walsh
------------------------------------------
Its: Vice President, Finance and Administration
-------------------------------------------
CODE, HENNESSY & SIMMONS III, L.P.
By: CHS Management III, L.P.
Its: General Partner
By: Code Hennessy & Simmons LLC
Its: General Partner
By: /s/ Peter M. Gotsch
--------------------------------------------
Peter M. Gotsch
Partner
<PAGE>
[CONTINUATION OF SECURITYHOLDERS AGREEMENT SIGNATURE PAGE]
OTHER INVESTORS: /s/ Thomas A. Rodgers, III
----------------------------------
Thomas A. Rodgers, III
/s/ Americo Reis
----------------------------------
Americo Reis
/s/ Lawrence R. Walsh
----------------------------------
Lawrence Walsh
/s/ Robert L. Bailey
----------------------------------
Robert L. Bailey
/s/ Tracy A. Hogan
----------------------------------
Tracy A. Hogan
/s/ Marcus J. George
----------------------------------
Marcus J. George
/s/ Edward M. Lhee
----------------------------------
Edward M. Lhee
/s/ Paige T. Walsh
----------------------------------
Paige T. Walsh
Thomas A. Rodgers, Jr. Grantor
Retained Annuity Trust
By:/s/ Thomas A. Rodgers, Jr.
-----------------------------------
Thomas A. Rodgers, Jr., Trustee
/s/ Thomas A. Rodgers, III, Trustee
-----------------------------------
Thomas A. Rodgers, III, Trustee
/s/ Myron Wilner, Trustee
-----------------------------------
Myron Wilner, Trustee
<PAGE>
[CONTINUATION OF SECURITYHOLDERS AGREEMENT SIGNATURE PAGE]
INSTITUTIONAL INVESTORS:
BRINSON TRUST COMPANY AS TRUSTEE FOR BRINSON MAP
VENTURE CAPITAL FUND III TRUST
By: /s/ David S. Timson
---------------------------------------------
Name: David S. Timson
-------------------------------------------
Its: Trust Officer
--------------------------------------------
BRINSON VENTURE CAPITAL FUND III, L.P.
By: Brinson Partners, Inc.
Its: General Partner
By: /s/ David S. Timson
---------------------------------------------
Name: David S. Timson
-------------------------------------------
Its: Executive Director, Brinson Partners, Inc.
--------------------------------------------
VIRGINIA RETIREMENT SYSTEM
By: Brinson Partners, Inc., As Agent For Virginia
Retirement System
By: /s/ David S. Timson
---------------------------------------------
Name: David S. Timson
-------------------------------------------
Its: Executive Director, Brinson Partners, Inc.
--------------------------------------------
BANKAMERICA INVESTMENT CORPORATION
By: /s/ Jeffrey M. Mann
---------------------------------------------
Name: Jeffrey M. Mann
-------------------------------------------
Its: Managing Director
--------------------------------------------
MIG PARTNERS VII
By: /s/ Jason A. Mehring
---------------------------------------------
Name: Jason A. Mehring
-------------------------------------------
Its: General Partner
--------------------------------------------
<PAGE>
SCHEDULE A
CHS
---
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS A PREFERRED
CLASS A COMMON STOCK STOCK
(NO. SHARES) (NO. SHARES)
--------------------- ------------------
- -------------------------------------------------------------------------------
<S> <C> <C>
Code, Hennessy & Simmons III, L.P. 1,647,437 21,999.60
c/o Code Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
INSTITUTIONAL INVESTORS
-----------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CLASS A COMMON STOCK CLASS A PREFERRED
(NO. SHARES) STOCK (NO. SHARES)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Brinson Venture Capital Fund III, L.P. 38,631 515.87
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
Brison Trust Company as Trustee for 6,300 84.13
Brinson MAP Venture Capital
Fund III Trust
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
Virginia Retirement System 179,724 2,400
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
BankAmerica Investment Corporation 35,944.80 480
231 South LaSalle Street, 12/th/ Floor
Chicago, IL 60697
MIG Partners VII 8,986.20 120
c/o BankAmerica Investment Corporation
231 South LaSalle Street, 12/th/ Floor
Chicago, IL 60697
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE C
OTHER INVESTORS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
OPTIONS TO ACQUIRE A "STRIP" OF:
---------------------------------
CLASS A CLASS A CLASS A
CLASS A COMMON PREFERRED STOCK COMMON STOCK PREFERRED STOCK
STOCK (NO. SHARES) (NO. SHARES) (NO. SHARES) (NO. SHARES)
------------------ ---------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas A. Rodgers, Jr. 166,244 2,220
Grantor Retained Annuity Trust
19 Defenders Row
Goat Island
Newport, RI 02840
- -----------------------------------------------------------------------------------------------------
Thomas A. Rodgers, III
1027 Seapowet Avenue 89,862 1,200
Tiverton, RI 02878
- -----------------------------------------------------------------------------------------------------
Americo Reis 22,465 300
1225 New Boston Road
Fall River, MA 02720
- -----------------------------------------------------------------------------------------------------
Lawrence R. Walsh 22,465 300
322 North Lane
Bristol, RI 02809
- -----------------------------------------------------------------------------------------------------
Robert L. Bailey 22,465 300
44 Anthony Street
South Dartmouth, MA 02748
- -----------------------------------------------------------------------------------------------------
Tracy A. Hogan 1,348 18
c/o Code, Hennessy &
Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------
Marcus J. George 1,348 18
c/o Code, Hennessy &
Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
OPTIONS TO ACQUIRE A "STRIP" OF:
----------------------------------
CLASS A CLASS A CLASS A
CLASS A COMMON PREFERRED STOCK COMMON STOCK PREFERRED STOCK
STOCK (NO. SHARES) (NO. SHARES) (NO. SHARES) (NO. SHARES)
------------------ ---------------- -------------- -----------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Edward M. Lhee 1,977 26.4
c/o Code, Hennessy &
Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------
Paige T. Walsh 1,348 18
c/o Code, Hennessy &
Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 4.5
GLOBE HOLDINGS, INC.
REGISTRATION AGREEMENT
----------------------
THIS REGISTRATION AGREEMENT (this "Agreement") dated as of July 31,
1998 is made by and among (i) Globe Holdings, Inc., a Massachusetts company
formerly known as Globe Manufacturing Co. (the "Company"), (ii) the Persons
listed on Schedule A attached hereto (the "CHS Group"), (iii) the Persons listed
on Schedule B attached hereto (the "Other Stockholders"), and (iv) each other
Person who, at any time, acquires securities of the Company and, with the
consent of CHS, executes a counterpart of this Agreement or otherwise agrees to
be bound by this Agreement (any such Person shall be deemed to be an Other
Stockholder, unless such Person and CHS agree that such Person shall be deemed
to be a member of the CHS Group). The CHS Group and the Other Stockholders are
collectively referred to herein as the "Stockholders". Unless otherwise
provided in this Agreement, capitalized terms used herein shall have the
meanings set forth in Section 9 hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Demand Registrations.
(a) Requests for Registration. At any time the holders of a majority
of the CHS Registrable Securities may request registration under the Securities
Act of all or part of their Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations") or, if available, on Form S-2
or S-3 or any similar short-form registration ("Short-Form Registrations"). All
registrations requested pursuant to this Section 1(a) are referred to herein as
"Demand Registrations." Each request for a Demand Registration shall specify
the approximate number of CHS Registrable Securities requested to be registered
and the anticipated per share price range for such offering. Within ten days
after receipt of any such request, the Company shall give written notice of such
requested registration to all other holders of Registrable Securities and,
subject to Section 1(d) below, will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of a majority of the CHS
Registrable Securities shall be entitled to request unlimited Long-Form
Registrations in which the Company will pay all Registration Expenses (as
defined below in Section 5). All Long-Form Registrations shall be underwritten
registrations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Section 1(b), the holders of a majority of
the CHS Registrable Securities shall be entitled to request an unlimited number
of Short-Form Registrations in which the Company will pay all Registration
Expenses. Demand Registrations will be Short-Form Registrations whenever
<PAGE>
the Company is permitted to use any applicable short form. After the Company has
become subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, the Company shall use its best efforts to make Short-Form
Registrations on Form S-3 available for the sale of Registrable Securities. All
Short-Form Registrations shall be underwritten registrations, unless otherwise
agreed to by the Company.
(d) Priority on Demand Registrations. The Company will not include in
any Demand Registration any securities which are not Registrable Securities or
Warrant Shares without the prior written consent of the holders of a majority of
the Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities, Warrant Shares and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registrable
Securities, Warrant Shares and other securities, if any, which can be sold in an
orderly manner in such offering within the price range acceptable to the holders
of a majority of the CHS Registrable Securities initially requesting
registration, the Company will include in such registration (i) first, the
number of Registrable Securities and Warrant Shares requested to be included in
such registration which in the opinion of such underwriters can be sold without
adverse effect, pro rata among the respective holders thereof on the basis of
the number of Registrable Securities and/or Warrant Shares, as the case may be,
owned by each such holder and (ii) second, other securities requested to be
included in such Demand Registration, pro rata among the holders of such
securities on the basis of the number of such securities owned by each such
holder.
(e) Restrictions on Demand Registrations. The Company will not
be to effect any Long Form Registration within six months after the effective
date of a previous Long Form Registration. The Company may postpone for up to
six months the filing or the effectiveness of a registration statement for a
Demand Registration if the Company and the holders of at least a majority of the
CHS Registrable Securities agree that such Demand Registration would reasonably
be expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer, reorganization or similar transaction; provided that in such event, the
Company shall pay all Registration Expenses in connection with such
registration. The Company may delay a Demand Registration hereunder only once in
any twelve-month period.
(f) Selection of Underwriters. The holders of a majority of the
Registrable Securities included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the Company's approval which will not be unreasonably withheld.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its equity securities under the Securities Act (other than (i) pursuant to a
Demand Registration, (ii) pursuant to a registration on Form S-4 or S-8 or any
successor or similar forms, or (iii) pursuant to an initial public offering of
Common Stock) and the registration form to be used may be used for
2
<PAGE>
the registration of Registrable Securities (a "Piggyback Registration"), whether
or not for sale for its own account, the Company will give prompt written notice
to all holders of Registrable Securities of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such offering exceeds the number which
can be sold in an orderly manner in such offering within the price range
acceptable to the Company, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Registrable
Securities and Warrant Shares requested to be included in such registration, pro
rata among the holders thereof on the basis of the number of Registrable
Securities and/or Warrant Shares, as the case may be, owned by each such holder,
and (iii) third, other securities requested to be included in such registration
pro rata among the holders of such securities on the basis of the number of such
securities owned by each such holder.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities (it being understood that secondary registrations on behalf of
holders of Registrable Securities are addressed in Section 1 above rather than
this Section 2(d)), and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will include
in such registration (i) first, the securities and Warrant Shares requested to
be included therein by the holders requesting such registration and by the
holders of Warrant Shares, respectively, pro rata among the holders of such
securities and Warrant Shares on the basis of the number of securities and/or
Warrant Shares, as the case may be, owned by each such holder, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
Registrable Securities owned by each such requesting holder, and (iii) third,
other securities requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the selection of the investment banker(s) and manager(s)
for the offering must be approved by the holders of a majority of the
Registrable Securities included in such Piggyback Registration, which approval
shall not be unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 1 or pursuant to this Section 2, and if such previous registration has
not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible
3
<PAGE>
or exchangeable into or exercisable for its equity securities under the
Securities Act (except on Form S-4 or S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least six months has elapsed from the effective date of such
previous registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities, options or rights convertible into
or exchangeable or exercisable for such securities, during the seven days prior
to and the 180-day period (the "Lock-Up Period") beginning on the effective date
of any underwritten public offering of the Company's equity securities
(including Demand and Piggyback Registrations) (except as part of such
underwritten registration), unless the underwriters managing the registered
public offering otherwise agree; provided, however, that, after the expiration
of the Lock-Up Period related to the Company's initial public offering of Common
Stock, the foregoing restriction shall not apply to any holder of Registrable
Securities holding less than one (1) percent of the outstanding Common Stock of
the Company as of the effective date of any such underwritten public offering.
(b) The Company (i) agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten public offering of the Company's equity securities (including
Demand and Piggyback Registrations) (except as part of such underwritten
registration or pursuant to registrations on Form S-4 or S-8 or any successor
form), unless the underwriters managing the registered public offering otherwise
agree and (ii) shall cause each holder of its Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock, purchased from
the Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Securities and Exchange Commission a registration statement with respect to such
Registrable Securities and thereafter use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed);
4
<PAGE>
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of either (i) not less than six months (subject
to extension pursuant to Section 7(b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of the holders of
a majority of the securities included in such registration, the Company will
prepare and furnish, to any seller who requests, a reasonable number of copies
of a supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on a securities exchange or the NASD
automated quotation system and, if listed on the NASD
5
<PAGE>
automated quotation system, use its reasonable efforts to secure designation of
all such Registrable Securities covered by such registration statement as a
NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of
the Securities and Exchange Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(j) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(k) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Registrable
Securities;
(l) obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters, which letter shall be addressed to the
underwriters; and
(m) obtain an opinion from the Company's outside counsel in customary
form and covering such matters of the type customarily covered by such opinions,
which opinion shall be addressed to the underwriters.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
6
<PAGE>
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne as provided in this
Agreement, except that the Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
a securities exchange or the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.
(c) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
will be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the full
extent permitted by law, each holder of Registrable Securities, its officers,
directors, agents, and employees and each Person who controls such holder
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities, joint or several, together with reasonable costs and expenses
(including reasonable attorney's fees), to which such indemnified party may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (i) any untrue or
alleged untrue statement of material fact contained (A) in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or (B) in any application or other document or communication
(in this Section 6 collectively called an "application") executed by or on
behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify any
securities covered by such registration statement under the "blue sky" or
securities laws thereof, or (ii) any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Company will reimburse such holder and each such
director, officer and controlling Person for any legal or any other expenses
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding;
7
<PAGE>
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement, or omission or alleged omission, made in such
registration statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, or in any application, in reliance upon, and in
conformity with, written information prepared and furnished to the Company by
such holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the full extent permitted by law, will indemnify and hold
harmless the other holders of Registrable Securities and the Company, and their
respective directors, officers, agents and employees and each other Person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities, joint or several, together with reasonable
costs and expenses (including reasonable attorney's fees), to which such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or in any application or (ii) any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is made in such registration statement,
any such prospectus or preliminary prospectus or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information prepared and furnished to the Company by such holder expressly for
use therein; provided, however, that the obligation to indemnify will be
individual to each holder and will be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a
8
<PAGE>
claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnifying party shall not, except with the approval of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to each indemnified party of a release from all liability
in respect to such claim or litigation without any payment or consideration
provided by such indemnified party.
(e) If the indemnification provided for in this Section 6 is
unavailable to or is insufficient to hold harmless an indemnified party under
the provisions above in respect to any losses, claims, damages or liabilities
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the sellers of
Registrable Securities and any other sellers participating in the registration
statement on the other from the sale of Registrable Securities pursuant to the
registered offering of securities as to which indemnity is sought or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other in connection with the
registration statement on the other in connection with the statement or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the sellers of Registrable Securities and any
other sellers participating in the registration statement on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) to the Company bear to the total net proceeds from
the offering (before deducting expenses) to the sellers of Registrable
Securities and any other sellers participating in the registration statement.
The relative fault of the Company on the one hand and of the sellers of
Registrable Securities and any other sellers participating in the registration
statement on the other shall be determined by reference to, among other things,
whether the untrue or alleged omission to state a material fact relates to
information supplied by the Company or by the sellers of Registrable Securities
or other sellers participating in the registration statement and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the sellers of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 6 were
determined by pro rata allocation (even if the sellers of Registrable Securities
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any
9
<PAGE>
such action or claim. Notwithstanding the provisions of this Section 6, no
seller of Registrable Securities shall be required to contribute any amount in
excess of the net proceeds received by such Seller from the sale of Registrable
Securities covered by the registration statement filed pursuant hereto. 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 indemnification and contribution by any such party provided
for under this Agreement shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant to
law or contract and will remain in full force and effect regardless of any
investigation made or omitted by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and will
survive the transfer of securities.
7. Participation in Underwritten Registrations.
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of Registrable
Securities will be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such Section 4(e). In the
event the Company shall give any such notice, the applicable time period
mentioned in Section 4(b) during which a Registration Statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this Section 7 to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 4(e).
8. Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will take such
further action as any holder or holders of Registrable Securities may reasonably
request, all to the extent required to enable such holders to sell Registrable
Securities pursuant to Rule 144 adopted
10
<PAGE>
by the Securities and Exchange Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission.
9. Definitions
"CHS Registrable Securities" means (i) all Common Stock received by
members of the CHS Group pursuant to Section 2.01(b) of the Merger Agreement,
(ii) all other Common Stock otherwise acquired by a member of the CHS Group, and
(iii) all Common Stock issued or issuable directly or indirectly with respect to
the securities referred to in clauses (i) or (ii) above upon exercise,
conversion or exchange or by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular CHS Registrable Securities, such
securities shall cease to be CHS Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the Securities
Act or sold to the public through a broker, dealer or market maker in compliance
with Rule 144 under the Securities Act (or any similar rule then in force) or
repurchased by the Company or any Subsidiary. For purposes of this Agreement, a
Person shall be deemed to be a holder of CHS Registrable Securities, and the CHS
Registrable Securities shall be deemed to be in existence, whenever such Person
has the right to acquire directly or indirectly such CHS Registrable Securities
(upon conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected, and
such Person shall be entitled to exercise the rights of a holder of CHS
Registrable Securities hereunder.
"CHS" means Code, Hennessy & Simmons III, L.P., a Delaware limited
partnership.
"Class A Common Stock" means the Company's Class A Common Stock, par
value $0.01 per share.
"Class C Common Stock" means the Company's Class C Common Stock, par
value $0.01 per share.
"Common Stock" means the Class A Common Stock and the Class C Common
Stock.
"Merger Agreement" means that certain Agreement and Plan of Merger, as
amended, dated as of June 23, 1998 by and between Globe Acquisition Company and
the Company.
"Offering Memorandum" means the Company's offering memorandum dated
July 30, 1998 related to the issuance of 49,086 units consisting of 14% senior
discount notes due 2009 and warrants to purchase 69,481 shares of Class A Common
Stock.
"Other Registrable Securities" means (i) all Class A Common Stock
received by Other Stockholders pursuant to the transactions contemplated by the
Merger Agreement, (ii) all other Class A Common Stock otherwise acquired by an
Other Stockholder, (iii) all Class A Common Stock issued or issuable upon
conversion of the Class C Common Stock, and (iv) all Class A
11
<PAGE>
Common Stock issued or issuable directly or indirectly with respect to the
securities referred to in clauses (i) or (ii) above upon exercise, conversion or
exchange or by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other reorgan
ization; provided that Common Stock received in connection with options granted
after the date hereof pursuant to the Company's 1998 Stock Option Plan shall not
constitute Other Registrable Securities. As to any particular Other Registrable
Securities, such securities shall cease to be Other Registrable Securities when
they have been distributed to the public pursuant to a offering registered under
the Securities Act or sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar rule
then in force) or repurchased by the Company or any Subsidiary. For purposes of
this Agreement, a Person shall be deemed to be a holder of Other Registrable
Securities, and the Other Registrable Securities shall be deemed to be in
existence, whenever such Person has the right to acquire directly or indirectly
such Other Registrable Securities (upon conversion or exercise in connection
with a transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Person shall be entitled to exercise the
rights of a holder of Other Registrable Securities hereunder.
"Person" means an individual, a partnership, a joint venture, an
association, a joint stock company, a corporation, a limited liability company,
a trust, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Registrable Securities" means the CHS Registrable Securities and the
Other Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Warrant" means a warrant to be issued pursuant to a warrant agreement
to be dated as of August 6, 1998, between the Company and Norwest Bank
Minnesota, National Association as warrant agent, to purchase 1.4155 shares of
Class A Common Stock at an exercise price of $0.01 per share, substantially as
described in the Offering Memorandum.
"Warrant Shares" means the shares of Class A Common Stock issued or
issuable upon exercise of the Warrants, which shares are to be governed by a
warrant registration rights agreement between the Company and BancAmerica
Robertson Stephens to be entered into on August 6, 1998, substantially as
described in the Offering Memorandum.
12
<PAGE>
10. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and the holders of a majority of the Registrable
Securities; provided, however, that in the event that such amendment or waiver
would treat a holder or group of holders of Registrable Securities materially
and adversely differently from any other holders of Registrable Securities, then
such amendment or waiver will require the consent of such holder or the holders
of a majority of the Registrable Securities of such group materially adversely
treated; provided further that an amendment or modification of this Agreement to
add a party hereto and to grant such party registration rights will be effective
against the Company and all holders of Registrable Securities if such
modification, amendment or waiver is approved in writing by the Company and the
holders of a majority of the Registrable Securities. The failure of any party to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision in accordance with its terms.
(e) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the holders of Registrable Securities (or any portion thereof) as
such shall be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities (or of such portion thereof).
(f) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of
13
<PAGE>
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or the
effectiveness or validity of any provision in any other jurisdiction, and this
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
(g) Entire Agreement. Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(h) Counterparts; Facsimile Signature. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement. This Agreement may be executed by
facsimile signature.
(i) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(j) Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights and obligations
of the Company and the Stockholders. All other issues and questions concerning
the construction, validity, enforcement and interpretation of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
(k) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or sent by guaranteed
overnight courier service. Such notices, demands and other communications will
be sent to the Company at the address indicated below, to any party hereto at
the address indicated on Schedule A and Schedule B attached hereto and to any
subsequent holder of Registrable Securities at such address as indicated by the
Company's records, or at such address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party, and to the Company at the address indicated below:
If to the Company:
Globe Holdings, Inc.
456 Bedford Street
Fall River, MA 02720
Attention: President
14
<PAGE>
with copies to:
Code, Hennessy & Simmons III, L.P.
c/o Code, Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Agreement on the day and year first above written.
COMPANY: GLOBE HOLDINGS, INC.
By: /s/ Lawrence R. Walsh
--------------------------
Lawrence R. Walsh
Its: Vice President, Finance and Administration
CHS GROUP: CODE, HENNESSY & SIMMONS III, L.P.
By: CHS Management III, L.P.
Its: General Partner
By: Code Hennessy & Simmons LLC
Its: General Partner
By: /s/ Peter M. Gotsch
---------------------------------
Peter M. Gotsch
Partner
/s/ Tracy A. Hogan
-------------------------------------
Tracy A. Hogan
/s/ Marcus J. George
-------------------------------------
Marcus J. George
/s/ Edward M. Lhee
-------------------------------------
Edward M. Lhee
/s/ Paige T. Walsh
-------------------------------------
Paige T. Walsh
16
<PAGE>
[Continuation of Registration Agreement Signature Page]
BRINSON VENTURE CAPITAL FUND III, L.P.
By: Brinson Partners, Inc.
Its: General Partner
By: /s/ David S. Timson
----------------------------------------------
Name: David S. Timson
--------------------------------------------
Title: Executive Director, Brinson Partners, Inc.
-------------------------------------------
BRINSON TRUST COMPANY AS TRUSTEE FOR THE
BRINSON MAP VENTURE CAPITAL FUND III TRUST
By: /s/ David S. Timson
----------------------------------------------
Name: Davis S. Timson
--------------------------------------------
Title: Trust Officer
-------------------------------------------
VIRGINIA RETIREMENT SYSTEM
By: Brinson Partners, Inc., As Agent
For Virginia Retirement System
By: /s/ David S. Timson
----------------------------------------------
Name: David S. Timson
--------------------------------------------
Title: Executive Director, Brinson Partners, Inc.
-------------------------------------------
BANKAMERICA INVESTMENT CORPORATION
By: /s/ Jeffrey M. Mann
----------------------------------------------
Name: Jeffrey M. Mann
--------------------------------------------
Title: Managing Director
-------------------------------------------
MIG PARTNERS VII
By: /s/ Jason A. Mehring
----------------------------------------------
Name: Jason A. Mehring
--------------------------------------------
Title: General Partner
-------------------------------------------
17
<PAGE>
[Continuation of Registration Agreement Signature Page]
OTHER STOCKHOLDERS:
/s/ Thomas A. Rodgers, III
-------------------------------
Thomas A. Rodgers, III
/s/ Americo Reis
-------------------------------
Americo Reis
/s/ Lawrence R. Walsh
-------------------------------
Lawrence Walsh
/s/ Robert L. Bailey
-------------------------------
Robert L. Bailey
Thomas A. Rodgers, Jr. Grantor
Retained Annuity Trust
By:/s/ Thomas A. Rodgers, Jr.
-----------------------------------
Thomas A. Rodgers, Jr., Trustee
/s/ Thomas A. Rodgers, III, Trustee
-----------------------------------
Thomas A. Rodgers, III, Trustee
/s/ Myron Wilner, Trustee
-----------------------------------
Myron Wilner, Trustee
18
<PAGE>
SCHEDULE A
(CHS GROUP)
Code, Hennessy & Simmons III, L.P.
c/o Code, Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie
Tracy A. Hogan
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Marcus J. George
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Edward M. Lhee,
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Paige T. Walsh
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
19
<PAGE>
Brinson Venture Capital Fund III, L.P.
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
Brinson Trust Company as Trustee for
Brinson Map Venture Capital Fund III Trust
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
Virginia Retirement System
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
BankAmerica Investment Corporation
231 South LaSalle Street, 12/th/ Floor
Chicago, IL 60697
MIG Partners VII
231 South LaSalle Street, 12/th/ Floor
Chicago, IL 60697
20
<PAGE>
SCHEDULE B
----------
(OTHER STOCKHOLDERS)
Thomas A. Rodgers, Jr.
Grantor Retained Annuity Trust
19 Defenders Row
Goat Island
Newport, RI 02840
Thomas A. Rodgers, III
1027 Seapowet Avenue
Tiverton, Ri 02878
Americo Reis
1225 New Boston Road
Fall River, MA 02720
Lawrence Walsh
322 North Lane
Bristol, RI 02809
Robert L. Bailey
44 Anthony Street
South Dartmouth, MA 02748
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 31st day of
December, 1997, is entered into by Globe Manufacturing Co., a Massachusetts
corporation, with its principal place of business at 456 Bedford Street, Fall
River, MA 02720 (the "Company"), and Thomas A. Rodgers III of Tiverton, Rhode
Island (the "Executive").
The Company desires to employ the Executive, and the Executive desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment with the Company, upon
the terms set forth in this Agreement, for the period commencing on January 1,
1998 (the "Commencement Date") and ending on December 31, 2000 (the "Employment
Period"); provided, however, that commencing on January 1, 2001 and each January
1 thereafter, the Employment Period shall be automatically extended for one
additional year unless, not later than 90 days prior to the scheduled expiration
of the Employment Period (or any extension thereof), the Company shall have
given the Executive written notice that the Employment Period will not be
extended.
2. Title; Capacity. The Executive shall serve as President or in such
other position as the Company or its Board of Directors (the "Board") may
determine from time to time. The Executive shall be based at the Company's
headquarters in Fall River, Massachusetts, or such place or places in the
continental United States as the Board shall determine. The Executive shall be
subject to the supervision of, and shall have such authority as is delegated to
him by, the Board or such officer of the Company as may be designated by the
Board.
<PAGE>
The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Executive agrees to devote his entire business time,
attention and energies to the business and interests of the Company during the
Employment Period. The Executive agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company. The Executive
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. Compensation and Benefits.
a. Base Salary. The Company shall pay the Executive, in
installments payable at intervals in accordance with Company policy for senior
executives, an annual base salary of $549,000 commencing on the Commencement
Date. Such salary shall be subject to increase, but not decrease, from time to
time thereafter as determined by the Board.
b. Fringe Benefits. The Executive shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its Executives, if any, to the extent that Executive's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Executive shall be entitled to no less than four weeks
vacation during each year of his employment, such vacation to be taken at such
times and intervals as shall be reasonably determined by the Executive. The
Executive shall be entitled to holiday time and sick leave in accordance with
the policy of the Company for senior executives.
c. Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
his duties, responsibilities or services under
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<PAGE>
this Agreement, upon presentation by the Executive of documentation, expense
statements, vouchers and/or such other supporting information as the Company may
request, provided, however, that the amount available for such travel,
entertainment and other expenses may be fixed in advance by the Board.
4. Termination of Employment.
4.1 Notice of Termination.
(a) Any termination of the Executive's employment by the Company
or by Executive (other than due to the death of the Executive or expiration of
Employment Period) shall be communicated by a written notice to the other party
hereto (the "Notice of Termination"), given in accordance with Section 9. Any
Notice of Termination shall: (i) indicate the specific termination provision (if
any) of this Agreement relied upon by the party giving such notice, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) specify the Date of Termination (as defined
below). The effective date of an employment termination (the "Date of
Termination") shall be the close of business on the date specified in the Notice
of Termination (which date may not be less than 5 days or more than 120 days
after the date of delivery of such Notice of Termination), in the case of a
termination other than due to the Executive's death, or the date of the
Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or
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<PAGE>
preclude the Executive or the Company, respectively, from asserting any such
fact or circumstance in enforcing the Executive's or the Company's right
hereunder.
(c) Any Notice of Termination for Cause given by the Company must
be given within 90 days of the occurrence of the event(s) or circumstance(s)
which constitute(s) Cause and must include a copy of a resolution of the Board
providing for such termination adopted by the affirmative vote of two-thirds of
all of the members of the Board.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the events or
circumstances which constitutes Good Reason.
4.2 Events of Termination. The employment of the Executive by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
(a) The expiration of the Employment Period (as it may be
extended from time to time) in accordance with Section 1;
(b) At the election of the Company, for Cause. For the purposes
of this Agreement, Cause shall mean: (i) the Executive's intentional, willful
and continuous failure to substantially perform his or her reasonable assigned
duties (other than any such failure resulting from incapacity due to physical or
mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
which specifically identifies the manner in which the Board believes the
Executive has not substantially performed the Executive's duties; or (ii) the
Executive's intentional and willful engagement in illegal or dishonest conduct
or gross misconduct.
-4-
<PAGE>
(c) The death or Disability of the Executive. For purposes of
this Agreement, the term "Disability" shall mean the inability of the Executive,
due to a physical or mental disability, for a period of 180 consecutive calendar
days, to perform the services contemplated under this Agreement. A
determination of disability shall be made by a physician satisfactory to both
the Executive and the Company, provided that if the Executive and the Company do
not agree on a physician, the Executive and the Company shall each select a
physician and these two together shall select a third physician, whose
determination as to disability shall be binding on all parties;
(d) At the election of the Executive for Good Reason. For
purposes of this Agreement, Good Reason shall mean the occurrence, without the
Executive's written consent, of any of the events or circumstances set forth in
clauses (i) through (v) below. Notwithstanding the occurrence of any such event
or circumstance, such occurrence shall not be deemed to constitute Good Reason
if, prior to the Date of Termination specified in the Notice of Termination
(each as defined in Section 4.1(a)) given by the Executive in respect thereof,
such event or circumstance has been fully corrected and the Executive has been
reasonably compensated for any losses or damages resulting therefrom (provided
that such right of correction by the Company shall only apply to the first
Notice of Termination for Good Reason given by the Executive).
(i) any significant diminution in the Executive's duties,
responsibilities or authority in effect immediately prior to the execution of
this Agreement (the "Measurement Date");
(ii) a reduction in the Executive's annual base salary as
in the failure by the Company to (1) continue in effect any material
compensation or benefit plan or
-5-
<PAGE>
program (a "Benefit Plan") in which the Executive participates or which is
applicable to the Executive immediately prior to the Measurement Date, unless an
equitable arrangement (embodied in an ongoing substitute or alternative plan or
reasonable cash compensation in lieu thereof) has been made with respect to such
plan or program, (2) continue the Executive's participation in a Benefit Plan
(or in such substitute or alternative plan or make reasonable cash compensation
in lieu thereof) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of the Executive's participation
relative to other participants, than the basis existing immediately prior to the
Measurement Date or (3) award cash bonuses to the Executive in amounts and in a
manner substantially consistent with past practice in light of the Company's
financial performance;
(iii) a change by the Company in the location at which the
Executive performs the Executive's principal duties for the Company to a new
location that is either (1) outside a radius of 35 miles from the Executive's
principal residence immediately prior to the Measurement Date or (2) more than
25 miles from the location at which the Executive performs his or her principal
duties for the Company immediately prior to the Measurement Date, and which
results in an increase in the Executive's daily commuting distance; or a
requirement by the Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the Measurement
Date;
(iv) the failure of the Company to obtain the agreement, in
a form reasonably satisfactory to the Executive, from any successor to the
Company to assume and agree to perform this Agreement; or
(v) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan
-6-
<PAGE>
within seven days of the date such compensation or benefits are due, or any
material breach by the Company of this Agreement.
The Executive's right to terminate his or her employment for Good Reason
shall not be affected by his or her incapacity due to physical or mental
illness.
(e) By the Executive or Company at any time without cause.
5. Effect of Termination.
5.1 Termination by Company Without Cause or by the Executive for Good
Reason. If the Executive's employment with the Company is terminated by the
Company pursuant to Section 4.2(a) or (e) or by the Executive for Good Reason,
pursuant to Section 4.2(d) then the Executive shall be entitled to the following
benefits:
(a) the Company shall pay to the Executive in a lump sum within
15 days after the Date of Termination the sum of (A) the Executive's base salary
through the Date of Termination, and (B) the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
previously paid, (hereinafter referred to as the "Accrued Obligations");
(b) the Company shall pay each month to the Executive, beginning
on the date of the first normal executive payroll of the Company which occurs
more than 30 days after the Date of Termination the amount equal to one-twelfth
of the Executive's annual base salary as of the Measurement Date or as of the
date immediately before the Date of Termination provided, however, such payments
shall cease upon the Executive's death or upon the date the Employment Period
would have expired, had the Executive not been terminated.
(c) the Company shall pay the Executive, on or before 90 days
after the end of the Company's fiscal year in which the Date of Termination
occurs, the maximum
-7-
<PAGE>
amount the Executive would have been entitled to under the incentive plan for
such fiscal year per any plan, policy, program or agreement, had the Executive's
employment not been terminated.
(d) for 36 full calendar months after the Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue to provide life,
medical, dental, and health disability insurance benefits ("Insurance Benefit
Plans") to the Executive and the Executive's family at least equal to those
which would have been provided to them if the Executive's employment had not
been terminated, in accordance with the applicable Insurance Benefit Plans in
effect on the Measurement Date or, if more favorable to the Executive and his or
her family, in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies; provided, however,
that if the Executive becomes reemployed with another employer and is eligible
to receive comparable benefits under another employer-provided plan, on terms at
least as favorable to the Executive and his or her family, then the benefits
described in this clause (d) shall be reduced to the extent such other benefits
are available to the Executive and his or her family; and
(e) to the extent not previously paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
-8-
<PAGE>
5.2 Resignation without Good Reason; Termination for Cause;
Termination for Death or Disability. If the Executive terminates his or her
employment with the Company pursuant to Section 4.2(e), or if the Executive's
employment with the Company is terminated by the Company pursuant to Section
4.2(b), or by reason of the Executive's death or Disability, then the Company
shall (a) pay the Executive (or his or her estate, if applicable), in a lump sum
in cash within 15 days after the Date of Termination, the Accrued Obligations
and (b) timely pay or provide to the Executive the Other Benefits.
6. Indemnification. The Company shall indemnify and hold harmless the
Executive from and against any and all damage, loss, liability or expense
(including reasonable legal fees) arising out of or with respect to the
performance of his duties hereunder in his capacity as an officer, director (if
applicable) and employee of the Company to the maximum extent permitted under
the laws of the Commonwealth of Massachusetts. The Executive shall notify the
Company of any claim by any third party coming to his attention which may result
in any liability on the Company's part. The Company shall have the right to
conduct the defense against any such claim with counsel of its selection.
7. Notice. All notices, instructions and other communications given
hereunder or in correction herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to Globe
Manufacturing Co., 456 Bedford Street, Fall River, MA 02720, Attention:
President, and to the Executive at the address listed on page 1 (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
-9-
<PAGE>
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or
other communication hereunder using any other means, but no such notice,
instruction or other communication shall be deemed to have been duly delivered
unless and until it actually is received by the party for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Survival. The provisions of Section 8.9 shall survive the
termination of this Agreement.
8.5 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
-10-
<PAGE>
8.6 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
8.8 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.9 Non-Competition Agreement. Nothing herein shall be deemed to
supercede or amend the provisions of that certain Agreement between the
Executive and the Company dated December 16, 1992, as amended, relating to non-
competition, non-solicitation and intellectual property obligations of the
Executive, which Agreement and which obligations shall remain in full force and
effect.
8.10 Entire Agreement. Except as provided Section 8.9 above, this
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto, including without limitation the employment agreement dated
April 7, 1988 and amended December 22, 1992; and any prior agreement of the
parties hereto in respect of the subject matter contained herein is hereby
terminated and cancelled.
8.11 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
GLOBE MANUFACTURING CO.
By: /s/ Thomas A. Rodgers, Jr.
---------------------------------
Title: Chairman
EXECUTIVE:
/s/ Thomas A. Rodgers, III
-------------------------------------
Name: Thomas A. Rodgers, III
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<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 31st day of
December, 1997, is entered into by Globe Manufacturing Co., a Massachusetts
corporation, with its principal place of business at 456 Bedford Street, Fall
River, MA 02720 (the "Company"), and Americo Reis of Fall River, Massachusetts
(the "Executive").
The Company desires to employ the Executive, and the Executive desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment with the Company, upon
the terms set forth in this Agreement, for the period commencing on January 1,
1998 (the "Commencement Date") and ending on December 31, 2000 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Executive shall serve as Vice President -
Operations or in such other position as the Company or its Board of Directors
(the "Board") may determine from time to time. The Executive shall be based at
the Company's headquarters in Fall River, Massachusetts, or such place or places
in the continental United States as the Board shall determine. The Executive
shall be subject to the supervision of, and shall have such authority as is
delegated to him by, the Board or such officer of the Company as may be
designated by the Board.
The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board
<PAGE>
or its designee shall from time to time reasonably assign to him. The Executive
agrees to devote his entire business time, attention and energies to the
business and interests of the Company during the Employment Period. The
Executive agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the Company. The Executive acknowledges receipt of
copies of all such rules and policies committed to writing as of the date of
this Agreement.
3. Compensation and Benefits.
a. Base Salary. The Company shall pay the Executive, in
installments payable at intervals in accordance with Company policy for senior
executives, an annual base salary of $212,000 commencing on the Commencement
Date. Such salary shall be subject to increase, but not decrease, from time to
time thereafter as determined by the Board.
b. Fringe Benefits. The Executive shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its Executives, if any, to the extent that Executive's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Executive shall be entitled to no less than four weeks
vacation during each year of his employment, such vacation to be taken at such
times and intervals as shall be reasonably determined by the Executive. The
Executive shall be entitled to holiday time and sick leave in accordance with
the policy of the Company for senior executives.
c. Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, upon presentation
by the Executive of documentation, expense statements, vouchers and/or such
other supporting information as the Company may request, provided,
2
<PAGE>
however, that the amount available for such travel, entertainment and other
expenses may be fixed in advance by the Board.
4. Termination of Employment.
4.1 Notice of Termination.
(a) Any termination of the Executive's employment by the Company or
by Executive (other than due to the death of the Executive or expiration of
Employment Period) shall be communicated by a written notice to the other party
hereto (the "Notice of Termination"), given in accordance with Section 9. Any
Notice of Termination shall: (i) indicate the specific termination provision (if
any) of this Agreement relied upon by the party giving such notice, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) specify the Date of Termination (as defined
below). The effective date of an employment termination (the "Date of
Termination") shall be the close of business on the date specified in the Notice
of Termination (which date may not be less than 5 days or more than 120 days
after the date of delivery of such Notice of Termination), in the case of a
termination other than due to the Executive's death, or the date of the
Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting any such fact or circumstance in enforcing the Executive's or the
Company's right hereunder.
3
<PAGE>
(c) Any Notice of Termination for Cause given by the Company must be
given within 90 days of the occurrence of the event(s) or circumstance(s) which
constitute(s) Cause and must include a copy of a resolution of the Board
providing for such termination adopted by the affirmative vote of two-thirds of
all of the members of the Board.
(d) Any Notice of Termination for Good Reason given by the Executive
must be given within 90 days of the occurrence of the events or circumstances
which constitutes Good Reason.
4.2 Events of Termination. The employment of the Executive by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
(a) The expiration of the Employment Period (as it may be
extended from time to time) in accordance with Section 1;
(b) At the election of the Company, for Cause. For the purposes
of this Agreement, Cause shall mean: (i) the Executive's intentional, willful
and continuous failure to substantially perform his or her reasonable assigned
duties (other than any such failure resulting from incapacity due to physical or
mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
which specifically identifies the manner in which the Board believes the
Executive has not substantially performed the Executive's duties; or (ii) the
Executive's intentional and willful engagement in illegal or dishonest conduct
or gross misconduct.
(c) The death or Disability of the Executive. For purposes of
this Agreement, the term "Disability" shall mean the inability of the Executive,
due to a physical or
4
<PAGE>
mental disability, for a period of 180 consecutive calendar days, to perform the
services contemplated under this Agreement. A determination of disability shall
be made by a physician satisfactory to both the Executive and the Company,
provided that if the Executive and the Company do not agree on a physician, the
Executive and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
(d) At the election of the Executive for Good Reason. For purposes of
this Agreement, Good Reason shall mean the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (i)
through (v) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 4.1(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(i) any significant diminution in the Executive's duties,
responsibilities or authority in effect immediately prior to the execution of
this Agreement (the "Measurement Date");
(ii) a reduction in the Executive's annual base salary as in
the failure by the Company to (1) continue in effect any material compensation
or benefit plan or program (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement
5
<PAGE>
(embodied in an ongoing substitute or alternative plan or reasonable cash
compensation in lieu thereof) has been made with respect to such plan or
program, (2) continue the Executive's participation in a Benefit Plan (or in
such substitute or alternative plan or make reasonable cash compensation in lieu
thereof) on a basis not materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's participation relative to
other participants, than the basis existing immediately prior to the Measurement
Date or (3) award cash bonuses to the Executive in amounts and in a manner
substantially consistent with past practice in light of the Company's financial
performance;
(iii) a change by the Company in the location at which the
Executive performs the Executive's principal duties for the Company to a new
location that is either (1) outside a radius of 35 miles from the Executive's
principal residence immediately prior to the Measurement Date or (2) more than
25 miles from the location at which the Executive performs his or her principal
duties for the Company immediately prior to the Measurement Date, and which
results in an increase in the Executive's daily commuting distance; or a
requirement by the Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the Measurement
Date;
(iv) the failure of the Company to obtain the agreement, in
a form reasonably satisfactory to the Executive, from any successor to the
Company to assume and agree to perform this Agreement; or
(v) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of this Agreement.
6
<PAGE>
The Executive's right to terminate his or her employment for Good Reason
shall not be affected by his or her incapacity due to physical or mental
illness.
(e) By the Executive or Company at any time without cause.
5. Effect of Termination.
5.1 Termination by Company Without Cause or by the Executive for Good
Reason. If the Executive's employment with the Company is terminated by the
Company pursuant to Section 4.2(a) or (e) or by the Executive for Good Reason,
pursuant to Section 4.2(d) then the Executive shall be entitled to the following
benefits:
(a) the Company shall pay to the Executive in a lump sum within
15 days after the Date of Termination the sum of (A) the Executive's base salary
through the Date of Termination, and (B) the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
previously paid, (hereinafter referred to as the "Accrued Obligations");
(b) the Company shall pay each month to the Executive, beginning
on the date of the first normal executive payroll of the Company which occurs
more than 30 days after the Date of Termination the amount equal to one-twelfth
of the Executive's annual base salary as of the Measurement Date or as of the
date immediately before the Date of Termination provided, however, such payments
shall cease upon the Executive's death or upon the date the Employment Period
would have expired, had the Executive not been terminated.
(c) the Company shall pay the Executive, on or before 90 days
after the end of the Company's fiscal year in which the Date of Termination
occurs, the maximum amount the Executive would have been entitled to under the
incentive plan for such fiscal year
7
<PAGE>
per any plan, policy, program or agreement, had the Executive's employment not
been terminated.
(d) for 36 full calendar months after the Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue to provide life,
medical, dental, and health disability insurance benefits ("Insurance Benefit
Plans") to the Executive and the Executive's family at least equal to those
which would have been provided to them if the Executive's employment had not
been terminated, in accordance with the applicable Insurance Benefit Plans in
effect on the Measurement Date or, if more favorable to the Executive and his or
her family, in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies; provided, however,
that if the Executive becomes reemployed with another employer and is eligible
to receive comparable benefits under another employer-provided plan, on terms at
least as favorable to the Executive and his or her family, then the benefits
described in this clause (d) shall be reduced to the extent such other benefits
are available to the Executive and his or her family; and
(e) to the extent not previously paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
5.2 Resignation without Good Reason; Termination for Cause;
Termination for Death or Disability. If the Executive terminates his or her
employment with the Company pursuant to Section 4.2(e), or if the Executive's
employment with the Company is terminated by the Company
8
<PAGE>
pursuant to Section 4.2(b), or by reason of the Executive's death or Disability,
then the Company shall (a) pay the Executive (or his or her estate, if
applicable), in a lump sum in cash within 15 days after the Date of Termination,
the Accrued Obligations and (b) timely pay or provide to the Executive the Other
Benefits.
6. Indemnification. The Company shall indemnify and hold harmless the
Executive from and against any and all damage, loss, liability or expense
(including reasonable legal fees) arising out of or with respect to the
performance of his duties hereunder in his capacity as an officer, director (if
applicable) and employee of the Company to the maximum extent permitted under
the laws of the Commonwealth of Massachusetts. The Executive shall notify the
Company of any claim by any third party coming to his attention which may result
in any liability on the Company's part. The Company shall have the right to
conduct the defense against any such claim with counsel of its selection.
7. Notice. All notices, instructions and other communications given
hereunder or in correction herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to Globe
Manufacturing Co., 456 Bedford Street, Fall River, MA 02720, Attention:
President, and to the Executive at the address listed on page 1 (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give
9
<PAGE>
any notice, instruction or other communication hereunder using any other means,
but no such notice, instruction or other communication shall be deemed to have
been duly delivered unless and until it actually is received by the party for
whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Survival. The provisions of Section 8.9 shall survive the
termination of this Agreement.
8.5 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.6 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
10
<PAGE>
8.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
8.8 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.9 Non-Competition Agreement. Nothing herein shall be deemed to
supercede or amend the provisions of that certain Agreement between the
Executive and the Company dated December 16, 1992, as amended, relating to non-
competition, non-solicitation and intellectual property obligations of the
Executive, which Agreement and which obligations shall remain in full force and
effect.
8.10 Entire Agreement. Except as provided Section 8.9 above, this
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto, including without limitation the employment agreement dated
April 7, 1988 and amended December 22, 1992; and any prior agreement of the
parties hereto in respect of the subject matter contained herein is hereby
terminated and cancelled.
8.11 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
GLOBE MANUFACTURING CO.
By: /s/ Thomas A. Rodgers, III
-------------------------------
Title: President
EXECUTIVE:
/s/ Americo Reis
-----------------------------------
Name: Americo Reis
12
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 31st day of
December, 1997, is entered into by Globe Manufacturing Co., a Massachusetts
corporation, with its principal place of business at 456 Bedford Street, Fall
River, MA 02720 (the "Company"), and Lawrence R. Walsh, of Bristol, Rhode Island
(the "Executive").
The Company desires to employ the Executive, and the Executive desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment with the Company, upon
the terms set forth in this Agreement, for the period commencing on January 1,
1998 (the "Commencement Date") and ending on December 31, 2000 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Executive shall serve as its Vice President -
Finance and Administration or in such other position as the Company or its Board
of Directors (the "Board") may determine from time to time. The Executive shall
be based at the Company's headquarters in Fall River, Massachusetts, or such
place or places in the continental United States as the Board shall determine.
The Executive shall be subject to the supervision of, and shall have such
authority as is delegated to him by, the Board or such officer of the Company as
may be designated by the Board.
The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board
<PAGE>
or its designee shall from time to time reasonably assign to him. The Executive
agrees to devote his entire business time, attention and energies to the
business and interests of the Company during the Employment Period. The
Executive agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the Company. The Executive acknowledges receipt of
copies of all such rules and policies committed to writing as of the date of
this Agreement.
3. Compensation and Benefits.
a. Base Salary. The Company shall pay the Executive, in
installments payable at intervals in accordance with Company policy for senior
executives, an annual base salary of $219,000 commencing on the Commencement
Date. Such salary shall be subject to increase, but not decrease, from time to
time thereafter as determined by the Board.
b. Fringe Benefits. The Executive shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its Executives, if any, to the extent that Executive's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Executive shall be entitled to no less than four weeks
vacation during each year of his employment, such vacation to be taken at such
times and intervals as shall be reasonably determined by the Executive. The
Executive shall be entitled to holiday time and sick leave in accordance with
the policy of the Company for senior executives.
c. Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, upon presentation
by the Executive of documentation, expense statements, vouchers and/or such
other supporting information as the Company may request, provided,
--------
-2-
<PAGE>
however, that the amount available for such travel, entertainment and other
expenses may be fixed in advance by the Board.
4. Termination of Employment.
4.1 Notice of Termination.
(a) Any termination of the Executive's employment by the Company
or by Executive (other than due to the death of the Executive or expiration of
Employment Period) shall be communicated by a written notice to the other party
hereto (the "Notice of Termination"), given in accordance with Section 9. Any
Notice of Termination shall: (i) indicate the specific termination provision (if
any) of this Agreement relied upon by the party giving such notice, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) specify the Date of Termination (as defined
below). The effective date of an employment termination (the "Date of
Termination") shall be the close of business on the date specified in the Notice
of Termination (which date may not be less than 5 days or more than 120 days
after the date of delivery of such Notice of Termination), in the case of a
termination other than due to the Executive's death, or the date of the
Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
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<PAGE>
(c) Any Notice of Termination for Cause given by the Company must
be given within 90 days of the occurrence of the event(s) or circumstance(s)
which constitute(s) Cause and must include a copy of a resolution of the Board
providing for such termination adopted by the affirmative vote of two-thirds of
all of the members of the Board.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the events or
circumstances which constitutes Good Reason.
4.2 Events of Termination. The employment of the Executive by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
(a) The expiration of the Employment Period (as it may be
extended from time to time) in accordance with Section 1;
(b) At the election of the Company, for Cause. For the purposes
of this Agreement, Cause shall mean: (i) the Executive's intentional, willful
and continuous failure to substantially perform his or her reasonable assigned
duties (other than any such failure resulting from incapacity due to physical or
mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
which specifically identifies the manner in which the Board believes the
Executive has not substantially performed the Executive's duties; or (ii) the
Executive's intentional and willful engagement in illegal or dishonest conduct
or gross misconduct.
(c) The death or Disability of the Executive. For purposes of
this Agreement, the term "Disability" shall mean the inability of the Executive,
due to a physical or
-4-
<PAGE>
mental disability, for a period of 180 consecutive calendar days, to perform the
services contemplated under this Agreement. A determination of disability shall
be made by a physician satisfactory to both the Executive and the Company,
provided that if the Executive and the Company do not agree on a physician, the
Executive and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
(d) At the election of the Executive for Good Reason. For
purposes of this Agreement, Good Reason shall mean the occurrence, without the
Executive's written consent, of any of the events or circumstances set forth in
clauses (i) through (v) below. Notwithstanding the occurrence of any such event
or circumstance, such occurrence shall not be deemed to constitute Good Reason
if, prior to the Date of Termination specified in the Notice of Termination
(each as defined in Section 4.1(a)) given by the Executive in respect thereof,
such event or circumstance has been fully corrected and the Executive has been
reasonably compensated for any losses or damages resulting therefrom (provided
that such right of correction by the Company shall only apply to the first
Notice of Termination for Good Reason given by the Executive).
(i) any significant diminution in the Executive's duties,
responsibilities or authority in effect immediately prior to the execution of
this Agreement (the "Measurement Date");
(ii) a reduction in the Executive's annual base salary as
in the failure by the Company to (1) continue in effect any material
compensation or benefit plan or program (a "Benefit Plan") in which the
Executive participates or which is applicable to the Executive immediately prior
to the Measurement Date, unless an equitable arrangement
-5-
<PAGE>
(embodied in an ongoing substitute or alternative plan or reasonable cash
compensation in lieu thereof) has been made with respect to such plan or
program, (2) continue the Executive's participation in a Benefit Plan (or in
such substitute or alternative plan or make reasonable cash compensation in lieu
thereof) on a basis not materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's participation relative to
other participants, than the basis existing immediately prior to the Measurement
Date or (3) award cash bonuses to the Executive in amounts and in a manner
substantially consistent with past practice in light of the Company's financial
performance;
(iii) a change by the Company in the location at which the
Executive performs the Executive's principal duties for the Company to a new
location that is either (1) outside a radius of 35 miles from the Executive's
principal residence immediately prior to the Measurement Date or (2) more than
25 miles from the location at which the Executive performs his or her principal
duties for the Company immediately prior to the Measurement Date, and which
results in an increase in the Executive's daily commuting distance; or a
requirement by the Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the Measurement
Date;
(iv) the failure of the Company to obtain the agreement,
in a form reasonably satisfactory to the Executive, from any successor to the
Company to assume and agree to perform this Agreement; or
(v) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of this Agreement.
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<PAGE>
The Executive's right to terminate his or her employment for Good Reason
shall not be affected by his or her incapacity due to physical or mental
illness.
(e) By the Executive or Company at any time without
cause.
5. Effect of Termination.
5.1 Termination by Company Without Cause or by the Executive for Good
Reason. If the Executive's employment with the Company is terminated by the
Company pursuant to Section 4.2(a) or (e) or by the Executive for Good Reason,
pursuant to Section 4.2(d) then the Executive shall be entitled to the following
benefits:
(a) the Company shall pay to the Executive in a lump sum within
15 days after the Date of Termination the sum of (A) the Executive's base salary
through the Date of Termination, and (B) the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
previously paid, (hereinafter referred to as the "Accrued Obligations");
(b) the Company shall pay each month to the Executive, beginning
on the date of the first normal executive payroll of the Company which occurs
more than 30 days after the Date of Termination the amount equal to one-twelfth
of the Executive's annual base salary as of the Measurement Date or as of the
date immediately before the Date of Termination provided, however, such payments
shall cease upon the Executive's death or upon the date the Employment Period
would have expired, had the Executive not been terminated.
(c) the Company shall pay the Executive, on or before 90 days
after the end of the Company's fiscal year in which the Date of Termination
occurs, the maximum amount the Executive would have been entitled to under the
incentive plan for such fiscal year
-7-
<PAGE>
per any plan, policy, program or agreement, had the Executive's employment not
been terminated.
(d) for 36 full calendar months after the Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue to provide life,
medical, dental, and health disability insurance benefits ("Insurance Benefit
Plans") to the Executive and the Executive's family at least equal to those
which would have been provided to them if the Executive's employment had not
been terminated, in accordance with the applicable Insurance Benefit Plans in
effect on the Measurement Date or, if more favorable to the Executive and his or
her family, in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies; provided, however,
--------
that if the Executive becomes reemployed with another employer and is eligible
to receive comparable benefits under another employer-provided plan, on terms at
least as favorable to the Executive and his or her family, then the benefits
described in this clause (d) shall be reduced to the extent such other benefits
are available to the Executive and his or her family; and
(e) to the extent not previously paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
5.2 Resignation without Good Reason; Termination for Cause;
Termination for Death or Disability. If the Executive terminates his or her
employment with the Company
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<PAGE>
pursuant to Section 4.2(e), or if the Executive's employment with the Company is
terminated by the Company pursuant to Section 4.2(b), or by reason of the
Executive's death or Disability, then the Company shall (a) pay the Executive
(or his or her estate, if applicable), in a lump sum in cash within 15 days
after the Date of Termination, the Accrued Obligations and (b) timely pay or
provide to the Executive the Other Benefits.
6. Indemnification. The Company shall indemnify and hold harmless the
Executive from and against any and all damage, loss, liability or expense
(including reasonable legal fees) arising out of or with respect to the
performance of his duties hereunder in his capacity as an officer, director (if
applicable) and employee of the Company to the maximum extent permitted under
the laws of the Commonwealth of Massachusetts. The Executive shall notify the
Company of any claim by any third party coming to his attention which may result
in any liability on the Company's part. The Company shall have the right to
conduct the defense against any such claim with counsel of its selection.
7. Notice. All notices, instructions and other communications given
hereunder or in correction herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to Globe
Manufacturing Co., 456 Bedford Street, Fall River, MA 02720, Attention:
President, and to the Executive at the address listed on page 1 (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give
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<PAGE>
any notice, instruction or other communication hereunder using any other means,
but no such notice, instruction or other communication shall be deemed to have
been duly delivered unless and until it actually is received by the party for
whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Survival. The provisions of Section 8.9 shall survive the
termination of this Agreement.
8.5 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.6 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
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<PAGE>
8.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
8.8 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.9 Non-Competition Agreement. Nothing herein shall be deemed to
supercede or amend the provisions of that certain Agreement between the
Executive and the Company dated December 16, 1992, as amended, relating to non-
competition, non-solicitation and intellectual property obligations of the
Executive, which Agreement and which obligations shall remain in full force and
effect.
8.10 Entire Agreement. Except as provided Section 8.9 above, this
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto, including without limitation the employment agreement dated
April 7, 1988 and amended December 22, 1992; and any prior agreement of the
parties hereto in respect of the subject matter contained herein is hereby
terminated and cancelled.
8.11 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
GLOBE MANUFACTURING CO.
By: /s/ Thomas A. Rodgers, III
----------------------------------
Title: President
EXECUTIVE:
Lawrence R. Walsh
--------------------------------------
Name: Lawrence R. Walsh
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<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 31st day of
December, 1997, is entered into by Globe Manufacturing Co., a Massachusetts
corporation, with its principal place of business at 456 Bedford Street, Fall
River, MA 02720 (the "Company"), and Robert L. Bailey, of South Dartmouth,
Massachusetts (the "Executive").
The Company desires to employ the Executive, and the Executive desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment with the Company, upon
the terms set forth in this Agreement, for the period commencing on January 1,
1998 (the "Commencement Date") and ending on December 31, 2000 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Executive shall serve as its Vice President -
Sales and Marketing or in such other position as the Company or its Board of
Directors (the "Board") may determine from time to time. The Executive shall be
based at the Company's headquarters in Fall River, Massachusetts, or such place
or places in the continental United States as the Board shall determine. The
Executive shall be subject to the supervision of, and shall have such authority
as is delegated to him by, the Board or such officer of the Company as may be
designated by the Board.
The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board
<PAGE>
or its designee shall from time to time reasonably assign to him. The Executive
agrees to devote his entire business time, attention and energies to the
business and interests of the Company during the Employment Period. The
Executive agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the Company. The Executive acknowledges receipt of
copies of all such rules and policies committed to writing as of the date of
this Agreement.
3. Compensation and Benefits.
a. Base Salary. The Company shall pay the Executive, in
installments payable at intervals in accordance with Company policy for senior
executives, an annual base salary of $200,000 commencing on the Commencement
Date. Such salary shall be subject to increase, but not decrease, from time to
time thereafter as determined by the Board.
b. Fringe Benefits. The Executive shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its Executives, if any, to the extent that Executive's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Executive shall be entitled to no less than four weeks
vacation during each year of his employment, such vacation to be taken at such
times and intervals as shall be reasonably determined by the Executive. The
Executive shall be entitled to holiday time and sick leave in accordance with
the policy of the Company for senior executives.
c. Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, upon presentation
by the Executive of documentation, expense statements, vouchers and/or such
other supporting information as the Company may request, provided,
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<PAGE>
however, that the amount available for such travel, entertainment and other
expenses may be fixed in advance by the Board.
4. Termination of Employment.
4.1 Notice of Termination.
(a) Any termination of the Executive's employment by the Company
or by Executive (other than due to the death of the Executive or expiration of
Employment Period) shall be communicated by a written notice to the other party
hereto (the "Notice of Termination"), given in accordance with Section 9. Any
Notice of Termination shall: (i) indicate the specific termination provision (if
any) of this Agreement relied upon by the party giving such notice, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) specify the Date of Termination (as defined
below). The effective date of an employment termination (the "Date of
Termination") shall be the close of business on the date specified in the Notice
of Termination (which date may not be less than 5 days or more than 120 days
after the date of delivery of such Notice of Termination), in the case of a
termination other than due to the Executive's death, or the date of the
Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
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<PAGE>
(c) Any Notice of Termination for Cause given by the Company must
be given within 90 days of the occurrence of the event(s) or circumstance(s)
which constitute(s) Cause and must include a copy of a resolution of the Board
providing for such termination adopted by the affirmative vote of two-thirds of
all of the members of the Board.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the events or
circumstances which constitutes Good Reason.
4.2 Events of Termination. The employment of the Executive by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
(a) The expiration of the Employment Period (as it may be
extended from time to time) in accordance with Section 1;
(b) At the election of the Company, for Cause. For the purposes
of this Agreement, Cause shall mean: (i) the Executive's intentional, willful
and continuous failure to substantially perform his or her reasonable assigned
duties (other than any such failure resulting from incapacity due to physical or
mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
which specifically identifies the manner in which the Board believes the
Executive has not substantially performed the Executive's duties; or (ii) the
Executive's intentional and willful engagement in illegal or dishonest conduct
or gross misconduct.
(c) The death or Disability of the Executive. For purposes of
this Agreement, the term "Disability" shall mean the inability of the Executive,
due to a physical or
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<PAGE>
mental disability, for a period of 180 consecutive calendar days, to perform the
services contemplated under this Agreement. A determination of disability shall
be made by a physician satisfactory to both the Executive and the Company,
provided that if the Executive and the Company do not agree on a physician, the
Executive and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
(d) At the election of the Executive for Good Reason. For
purposes of this Agreement, Good Reason shall mean the occurrence, without the
Executive's written consent, of any of the events or circumstances set forth in
clauses (i) through (v) below. Notwithstanding the occurrence of any such event
or circumstance, such occurrence shall not be deemed to constitute Good Reason
if, prior to the Date of Termination specified in the Notice of Termination
(each as defined in Section 4.1(a)) given by the Executive in respect thereof,
such event or circumstance has been fully corrected and the Executive has been
reasonably compensated for any losses or damages resulting therefrom (provided
that such right of correction by the Company shall only apply to the first
Notice of Termination for Good Reason given by the Executive).
(i) any significant diminution in the Executive's duties,
responsibilities or authority in effect immediately prior to the execution of
this Agreement (the "Measurement Date");
(ii) a reduction in the Executive's annual base salary as in
the failure by the Company to (1) continue in effect any material compensation
or benefit plan or program (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement
-5-
<PAGE>
(embodied in an ongoing substitute or alternative plan or reasonable cash
compensation in lieu thereof) has been made with respect to such plan or
program, (2) continue the Executive's participation in a Benefit Plan (or in
such substitute or alternative plan or make reasonable cash compensation in lieu
thereof) on a basis not materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's participation relative to
other participants, than the basis existing immediately prior to the Measurement
Date or (3) award cash bonuses to the Executive in amounts and in a manner
substantially consistent with past practice in light of the Company's financial
performance;
(iii) a change by the Company in the location at which the
Executive performs the Executive's principal duties for the Company to a new
location that is either (1) outside a radius of 35 miles from the Executive's
principal residence immediately prior to the Measurement Date or (2) more than
25 miles from the location at which the Executive performs his or her principal
duties for the Company immediately prior to the Measurement Date, and which
results in an increase in the Executive's daily commuting distance; or a
requirement by the Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the Measurement
Date;
(iv) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement; or
(v) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of this Agreement.
-6-
<PAGE>
The Executive's right to terminate his or her employment for Good Reason
shall not be affected by his or her incapacity due to physical or mental
illness.
(e) By the Executive or Company at any time without cause.
5. Effect of Termination.
5.1 Termination by Company Without Cause or by the Executive for Good
Reason. If the Executive's employment with the Company is terminated by the
Company pursuant to Section 4.2(a) or (e) or by the Executive for Good Reason,
pursuant to Section 4.2(d) then the Executive shall be entitled to the following
benefits:
(a) the Company shall pay to the Executive in a lump sum within
15 days after the Date of Termination the sum of (A) the Executive's base salary
through the Date of Termination, and (B) the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
previously paid, (hereinafter referred to as the "Accrued Obligations");
(b) the Company shall pay each month to the Executive, beginning
on the date of the first normal executive payroll of the Company which occurs
more than 30 days after the Date of Termination the amount equal to one-twelfth
of the Executive's annual base salary as of the Measurement Date or as of the
date immediately before the Date of Termination provided, however, such payments
shall cease upon the Executive's death or upon the date the Employment Period
would have expired, had the Executive not been terminated.
(c) the Company shall pay the Executive, on or before 90 days
after the end of the Company's fiscal year in which the Date of Termination
occurs, the maximum amount the Executive would have been entitled to under the
incentive plan for such fiscal year
-7-
<PAGE>
per any plan, policy, program or agreement, had the Executive's employment not
been terminated.
(d) for 36 full calendar months after the Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue to provide life,
medical, dental, and health disability insurance benefits ("Insurance Benefit
Plans") to the Executive and the Executive's family at least equal to those
which would have been provided to them if the Executive's employment had not
been terminated, in accordance with the applicable Insurance Benefit Plans in
effect on the Measurement Date or, if more favorable to the Executive and his or
her family, in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies; provided, however,
that if the Executive becomes reemployed with another employer and is eligible
to receive comparable benefits under another employer-provided plan, on terms at
least as favorable to the Executive and his or her family, then the benefits
described in this clause (d) shall be reduced to the extent such other benefits
are available to the Executive and his or her family; and
(e) to the extent not previously paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
5.2 Resignation without Good Reason; Termination for Cause;
Termination for Death or Disability. If the Executive terminates his or her
employment with the Company
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<PAGE>
pursuant to Section 4.2(e), or if the Executive's employment with the Company is
terminated by the Company pursuant to Section 4.2(b), or by reason of the
Executive's death or Disability, then the Company shall (a) pay the Executive
(or his or her estate, if applicable), in a lump sum in cash within 15 days
after the Date of Termination, the Accrued Obligations and (b) timely pay or
provide to the Executive the Other Benefits.
6. Indemnification. The Company shall indemnify and hold harmless the
Executive from and against any and all damage, loss, liability or expense
(including reasonable legal fees) arising out of or with respect to the
performance of his duties hereunder in his capacity as an officer, director (if
applicable) and employee of the Company to the maximum extent permitted under
the laws of the Commonwealth of Massachusetts. The Executive shall notify the
Company of any claim by any third party coming to his attention which may result
in any liability on the Company's part. The Company shall have the right to
conduct the defense against any such claim with counsel of its selection.
7. Notice. All notices, instructions and other communications given
hereunder or in correction herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to Globe
Manufacturing Co., 456 Bedford Street, Fall River, MA 02720, Attention:
President, and to the Executive at the address listed on page 1 (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give
-9-
<PAGE>
any notice, instruction or other communication hereunder using any other means,
but no such notice, instruction or other communication shall be deemed to have
been duly delivered unless and until it actually is received by the party for
whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Survival. The provisions of Section 8.9 shall survive the
termination of this Agreement.
8.5 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.6 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
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<PAGE>
8.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
8.8 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.9 Non-Competition Agreement. Nothing herein shall be deemed to
supercede or amend the provisions of that certain Agreement between the
Executive and the Company dated December 16, 1992, as amended, relating to non-
competition, non-solicitation and intellectual property obligations of the
Executive, which Agreement and which obligations shall remain in full force and
effect.
8.10 Entire Agreement. Except as provided Section 8.9 above, this
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto, including without limitation the employment agreement dated
December 22, 1992; and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and cancelled.
8.11 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
GLOBE MANUFACTURING CO.
By: /s/ Thomas A. Rodgers, III
---------------------------------
Title: President
EXECUTIVE:
Robert L. Bailey
-------------------------------------
Name: Robert L. Bailey
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<PAGE>
EXHIBIT 10.5
GLOBE HOLDINGS, INC.
EXECUTIVE SECURITIES AGREEMENT
------------------------------
THIS EXECUTIVE SECURITIES AGREEMENT (this "Agreement") is made as of
July 31, 1998, by and among Globe Holdings, Inc., a Massachusetts corporation
formerly known as Globe Manufacturing Co. (the "Company"), and
___________________ (the "Executive Securityholder", and together with the other
executives of the Company who execute an agreement having terms substantially
identical to those contained herein, the "Executive Securityholders"). Certain
capitalized terms used herein are defined in Section 5 hereof. Capitalized
terms used but not defined herein shall have the meanings set forth in the
Securityholders Agreement dated as of the date hereof (the "Securityholders
Agreement") by and among the Company and certain stockholders of the Company.
The parties hereto desire to enter into this Agreement for the
purposes, among others, of (i) assuring continuity in the management and
ownership of the Company, and (ii) limiting the manner and terms by which
Executive Securities may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
SECTION 1. Representations and Warranties of Executive
Securityholder. The Executive Securityholder represents and warrants that (i)
this Agreement has been duly authorized, executed and delivered by such
Executive Securityholder and constitutes the valid and binding obligation of
such Executive Securityholder, enforceable in accordance with its terms, and (ii
such Executive Securityholder has not granted and is not a party to any proxy,
voting trust or other agreement which is inconsistent with, conflicts with or
violates any provision of this Agreement. No holder of Executive Securities
shall grant any proxy or become party to any voting trust or other agreement
which is inconsistent with, conflicts with or violates any provision of this
Agreement.
SECTION 2. Restrictions on Transfer of Executive Securities.
(a) Transfer of Executive Securities. The holders of Executive
Securities shall not sell, transfer, assign, pledge or otherwise dispose of (a
"Transfer") any interest in any Executive Securities, except pursuant to (i) the
provisions of Section 4 of the Securityholders Agreement, (ii) a Public Sale of
the type described in clause (i) of the definition thereof, (iii) an Approved
Sale or (iv) the provisions of Section 2(b) hereof.
(b) Certain Permitted Transfers. The restrictions set forth in this
Section 2 shall not apply with respect to any Transfer of Executive Securities
made (i) pursuant to applicable laws of descent and distribution or to such
Person's legal guardian in case of any mental incapacity or among such Person's
Family Group, or (ii) at such time as the CHS Group sell shares of Common Stock
in a Public Sale, but in the case of this clause (ii) only to extent of the
number of shares of
<PAGE>
Common Stock held by such Executive Securityholder multiplied by a fraction, the
numerator of which is the number of shares of Common Stock sold by the CHS Group
in such Public Sale and the denominator of which is the total number of shares
of Common Stock held by the CHS Group prior to the Public Sale; provided, that
the restrictions contained in this Section 2 will continue to be applicable to
the Executive Securities after any Transfer of the type referred to in clause
(i) and the transferees of such Executive Securities will agree in writing to be
bound by the provisions of this Agreement. Any transferee of Executive
Securities pursuant to a transfer in accordance with the provisions of this
Section 2(b) is herein referred to as a "Permitted Transferee." Upon the
transfer of Executive Securities pursuant to this Section 2(b), the transferring
Executive Securityholder will deliver a written notice (a "Transfer Notice") to
the Company. In the case of a Transfer pursuant to clause (i) hereof, the
Transfer Notice will disclose in reasonable detail the identity of the Permitted
Transferee(s).
(c) Termination of Restrictions. The restrictions set forth in this
Section 2 will continue with respect to each unit of Executive Securities until
the earlier of (i) the date on which such unit of Executive Securities has been
transferred in a Public Sale, or (ii) the consummation of an Approved Sale.
SECTION 3. Repurchase of Executive Securities
(a) Repurchase of Executive Securities without Cause, etc. If any
Executive Securityholder's employment with the Company terminates (the
"Termination") due to (i) termination by the Company without Cause (as defined
below) or (ii) death or disability, then:
(i) the Company and the CHS Group shall have the right to
repurchase all (but not less than all) of the Executive Securities of such
Executive Securityholder at a price equal to (A) in the case of capital
stock, the greater of Original Cost and Fair Market Value and (B) in the
case of Preferred Shares, the sum of such Preferred Shares' liquidation
preference and accrued dividends on the date of repurchase; and
(ii) such Executive Securityholder, or his heirs or permitted
assigns, shall have 90 days from the date of Termination in which to
exercise all unexercised Options of such Executive Securityholder.
(b) Repurchase of Executive Securities for Cause, etc. If any
Executive Securityholder's employment with the Company terminates due to (i)
termination by the Company for Cause or (ii) resignation by the Executive
Securityholder without Good Reason, then:
(A) the Company and the CHS Group have the right to repurchase
all (but not less than all) of the Executive Securities of such Executive
Securityholder at a price equal to (x) in the case of Common Stock, the
lesser of (1) Original Cost and (2) Fair Market Value, and (y) in the case
of Preferred Shares, the sum Preferred Shares' liquidation preference and
accrued dividends on the date of repurchase; and
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(B) all unexercised Options of such Executive Securityholder
shall terminate.
(c) Repurchase Procedure for the Company. The Company may elect to
repurchase all (but not less than all) of the Executive Securities (the
"Available Securities") of an Executive Securityholder whose employment with the
Company has terminated as described in Sections 3(a) or 3(b) (the "Repurchase
Option") by delivery of written notice (a "Repurchase Notice") to the holders of
such Executive Securities within 120 days after the date of the Termination (the
"Repurchase Notice Period"). The Repurchase Notice shall set forth the aggregate
consideration to be paid for such Available Securities and the time (not to be
later than 20 days after such notice) and place for the closing of the
transaction.
(d) Repurchase Procedure for the CHS Group. If for any reason the
Company does not elect to purchase all of the Available Securities, the members
of the CHS Group shall be entitled to exercise the Repurchase Option for all
(but not less than all) of the Available Securities. As soon as practicable
after the Company has determined that it will not purchase all of the Available
Securities, but in any event within 60 days after the Termination, the Company
shall give written notice (the "Option Notice") to each member of the CHS Group
setting forth the number of Available Securities and the purchase price for the
Available Securities. The members of the CHS Group may elect to purchase all
(but not less than all) of the Available Securities by giving written notice to
the Company within 30 days after the Option Notice has been delivered to such
member of the CHS Group by the Company. If the members of the CHS Group elect
to purchase an aggregate amount of Available Securities in excess of the amount
of Available Securities specified in the Option Notice, the Available Securities
shall be allocated among the members of the CHS Group based on the amount of
such type or types of Stockholder Securities owned by each member of the CHS
Group on the date of the Option Notice. Any member of the CHS Group may
condition his, her or its election to purchase such Available Securities on the
election of one or more other members of the CHS Group to purchase Available
Securities. As soon as practicable, and in any event within ten days after the
expiration of the 30 day period set forth in the immediately preceding sentence,
the Company shall deliver a Repurchase Notice to the holders of such Available
Securities setting forth the aggregate consideration to be paid by the
respective members of the CHS Group for such Available Securities and the time
(not to be later than 20 days after such notice) and place for the closing of
the transaction. At the time the Company delivers such Repurchase Notice to the
holders of such Available Securities, the Company shall also deliver written
notice to each member of the CHS Group setting forth the amount of securities
such member is entitled to purchase, the aggregate purchase price and the time
and place of the closing of the transaction.
(e) Manner of Payment. If the Company purchases all or any part of
such Executive Securities, including Executive Securities held by one or more
transferees, the Company shall pay for such Executive Securities first by
offsetting indebtedness or obligations owed by such Executive Securityholder to
the Company and second by certified check or wire transfer of funds; provided
that if such cash payment would (i) cause the Company to violate the Business
Corporation Law of the Commonwealth of Massachusetts, or (ii) cause the Company
to breach any agreement to which it is a party relating to the indebtedness for
borrowed money or any other material agreement ((i) and (ii) are collectively
referred to as the "Reasons for Deferral") then the Company shall have the right
to pay such amount as soon as no Reason for Deferral exists so long as the
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Company also pays interest at the prime rate (as published in The Wall Street
Journal on the date of Termination) for the deferral period at the time when
such payment is made. If a member of the CHS Group elects to purchase all or
any portion of the Available Securities, such member shall pay for such
Executive Securities by certified check or wire transfer of funds.
(f) Revocation. Notwithstanding anything to the contrary contained in
this Agreement, if the holder of Executive Securities delivers the notice of
disagreement described in the definition of Fair Market Value, or if the Fair
Market Value of the Executive Securities is determined to be an amount more than
10% greater than the repurchase price for Executive Securities originally
determined by the Board, each of the Company and each member of the CHS Group
who has exercised their Repurchase Option shall have the right to revoke its or
their exercise of the Repurchase Option for all or any portion of the Executive
Securities elected to be repurchased by it by delivering notice of such
revocation in writing to the holder of the Executive Securities during (i) the
thirty-day period beginning on the date the Company and the relevant members of
the CHS Group receive the Executive Securityholder's written notice of
disagreement and (ii) the thirty-day period beginning on the date the Company
and the relevant members of the CHS Group are given written notice that the Fair
Market Value of the Executive Securities was finally determined to be an amount
more than 10% greater than the repurchase price for such Executive Securities
originally determined by the Board. The closing of the transaction shall be
postponed until the expiration of the thirty-day period described in the
preceding sentence and shall in any event be postponed until the Fair Market
Value of the Executive Securities is finally determined pursuant to the
procedure described in the definition of Fair Market Value.
(g) Retirement. Upon Retirement or resignation with Good Reason by
an Executive Securityholder, such Executive Securityholder will have the right
to retain his Executive Securities; provided that if such Executive
Securityholder thereafter engages (whether as an owner, stockholder, operator,
manager, employee, officer, director, consultant, advisor, representative or
otherwise) directly or indirectly anywhere in the United States in any business
that manufactures, distributes or sells polyether or polyester spandex, latex
thread or other elastomeric fiber (provided that passive ownership of less than
2% of the outstanding stock of any publicly-traded corporation shall not, in and
of itself, constitute being engaged in such activity), then such Executive
Securityholder shall be deemed to have resigned from the Company for purposes of
Section 3(b) and the provisions of Section 3(b) shall apply to such Executive
Securityholder's Executive Securities.
(h) Termination of Certain Repurchase Options. The Repurchase Option
set forth in Section 3(a) shall terminate upon a Public Offering or an Approved
Sale.
SECTION 4. Transfer. Prior to transferring any Executive
Securities (other than in a Public Sale or an Approved Sale) to any Person, the
transferring Executive Securityholder will cause the prospective transferee to
be bound by this Agreement and to execute and deliver to the Company and the
other Stockholders a counterpart to this Agreement. Any Transfer or attempted
Transfer of any Executive Securities in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Securities as the
owner of such shares for any purpose.
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SECTION 5. Definitions.
"Approved Sale" has the meaning set forth in the Securities Holders
Agreement.
"Affiliate" means with respect to any Person, any other Person
controlling, controlled by, or under common control with such first Person and
in the case of a Person which is a partnership, any partner of that Person.
"Cause" shall be defined to mean (i) the commission of a felony or a
crime involving moral turpitude or the commission of any other substantial act
or omission involving dishonesty, disloyalty or fraud with respect to the
Company or any of its Subsidiaries or any of their customers or suppliers that
have a material adverse effect on the Company, any Subsidiary, customer or
supplier of the Company, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties as reasonably directed by the Board, (iv)
gross negligence or willful misconduct with respect to the Company or any of its
Subsidiaries, (v) any other material breach of this Agreement not cured within
10 days of the Executive Securityholder's receiving notice of such breach or
(vi) any material breach of the Executive Securityholder's employment agreement,
if any, with the Company that is not cured within 10 days of the Executive
Securityholder's receiving notice of such breach.
"CHS" means Code, Hennessy & Simmons III, L.P., a Delaware limited
partnership
"CHS Group"means those persons set forth on Schedule A to the
Registration Agreement.
"CHS Common Shares" means any Common Stock issued to or held by any
member of the CHS Group.
"Common Stock" means the Company's Class A Common Stock, par value
$.01 per share; its Class B Common Stock, par value $.01 per share; and its
Class C Common Stock, par value $.01 per share.
"Executive Securities" for any particular Executive Securityholder
means all Stockholder Securities currently owned or hereafter acquired by such
Executive Securityholder. Executive Securities will continue to be Executive
Securities in the hands of any other Person (except for the Company and the CHS
Group and except for transferees in a Public Sale), and, except as otherwise
provided herein, each such other holder of such Executive Securities will
succeed to all rights and obligations attributable to the Executive
Securityholder as a holder of Executive Securities hereunder.
"Fair Market Value" of any Executive Securities means the composite
closing price of the sales of such Executive Securities on the securities
exchanges on which such Executive Securities may at the time be listed (as
reported in The Wall Street Journal), or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if such Executive Securities
are not so listed, the
5
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closing price (or last price, if applicable) of sales of such Executive
Securities on The Nasdaq Stock Market (as reported in The Wall Street Journal),
or if such Executive Securities are not quoted in The Nasdaq Stock Market but
are traded over-the-counter, the average of the highest bid and lowest asked
prices on such day in the over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the Fair Market Value is being determined and the 20 consecutive business days
prior to such day. If at any time such Executive Securities are not listed on
any securities exchange, quoted in The Nasdaq Stock Market, or quoted in the
over-the-counter market, the "Fair Market Value" of such Executive Securities
shall mean the fair market value of such Executive Securities, as between a
willing buyer and a willing seller, taking into account all relevant factors
determinative of value (including the lack of liquidity of such Executive
Securities due to the Company's status as a privately held corporation, but
without regard to any discounts for minority interests), using valuation
techniques then prevailing in the securities industry (e.g., discounted cash
flows and/or comparable companies) and assuming full disclosure of all relevant
information and a reasonable period of time for effectuating such sale, as
determined by the Board in good faith; provided that if the Executive
Securityholder disagrees with the Board's determination of Fair Market Value,
then the Executive Securityholder shall provide notice of his disagreement to
the Company and the CHS Group within ten days after the Board provides notice to
the Executive Securityholder of its determination, in which case "Fair Market
Value" shall be determined by an investment banking firm agreed upon by the
Company and the Executive Securityholder, which firm shall submit to the Company
and the Executive Securityholder a report within 30 days of its engagement
setting forth such determination. If the parties are unable to agree on an
investment banking firm within 20 days after the Executive Securityholder
provides notice to the Board of his disagreement, the Company and the Executive
Securityholder shall each select an investment bank of recognized national
standing and such two investment banking firms shall select a third investment
banking firm. Such third investment banking firm shall render a determination
within 30 days of its engagement. The expenses of such firms will be split
equally between the Company and the Executive Securityholder, and the
determination of such firm will be final and binding upon all parties. The
Company may require that the investment banking firm keep confidential any non-
public information received as a result of this paragraph pursuant to reasonable
confidentiality arrangements. Regardless of when a transaction based on a Fair
Market Value valuation is executed, Fair Market Value shall be determined as of
the date of the Termination of the Executive Securityholder's employment with
the Company.
"Family Group" means (i) a Person's spouse and descendants (whether
natural or adopted), (ii) any trust solely for the benefit of the Person and/or
any of the Person's spouse and/or descendants and (iii) any entity wholly-owned
by the Person.
"Good Reason" shall be deemed to exist (i) upon the mutual agreement
of the Executive Securityholder and the Chairman of the Board of the Directors
of the Company that good reason exists; (ii) the Executive Securityholder being
required to relocate from the Fall River, Massachusetts area without the consent
of the Executive Securityholder; (iii) reduction of the Executive
Securityholder's annual base salary or health insurance and similar benefits; or
(iv) any material breach by the Company or any successor to the Company of this
Agreement or the Executive Securityholder's employment agreement, if any, with
the Company.
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"Merger Agreement" means that certain agreement and plan of merger
dated as of June 23, 1998, as amended, by and among the Company and Globe
Acquisition Company, a Delaware corporation ("MergerCo").
"Options" warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, Common Stock, whether or not then exercisable
or convertible.
"Original Cost" with respect to the Common Stock shall be equal to
$8.90256 per share (as adjusted for stock splits, stock dividends or other
recapitalizations occurring after the date hereof). Regardless of when a
transaction based on an Original Cost valuation is executed, Original Cost shall
be determined as of the date of the Termination of the Executive
Securityholder's employment with the Company.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or any other entity (including,
without limitation, any governmental entity or any department, agency or
political subdivision thereof).
"Preferred Shares" means shares of the Class A Preferred Stock, $0.01
par value, of the Company.
"Public Offering" means an initial public offering and sale of equity
securities of the Company.
"Public Sale" means any sale of Stockholder Securities (i) to the
public pursuant to an offering registered under the Securities Act or (ii) to
the public through a broker, dealer or market maker pursuant to the provisions
of Rule 144 (or any similar provision then in effect) adopted under the
Securities Act.
"Registration Agreement" means the Registration Agreement dated as of
the date hereof by and among the Company and certain stockholders of the
Company.
"Retirement" means a decision by any Executive Securityholder to
retire at age 65 or older.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Stockholder" means any Person, other than the Company, who is a
party to the Securityholders Agreement.
"Stockholder Securities" means any of the following held by any
Stockholder: (i) any capital stock of the Company, (ii) any Options, (iii) any
stock, notes or other securities which are convertible into or exchangeable for,
directly or indirectly, capital stock of the Company, whether or not then
convertible or exchangeable, (iv) any capital stock of the Company issued or
issuable upon the exercise, conversion or exchange of any of the securities
referred to in clauses (ii) and (iii) above, (v) any securities issued or
issuable directly or indirectly with respect to the securities referred
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to in clauses (i), (ii), (iii) and (iv) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (vi) the Preferred Shares. As to any
particular Stockholder Securities, such securities will cease to be Stockholder
Securities when they have been transferred in a Public Sale or have been
repurchased by the Company or any Subsidiary of the Company.
"Subsidiaries" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of such Person or entity or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
SECTION 6. Miscellaneous.
(a) Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders, unless such modification,
amendment or waiver is approved in writing by the Company, the holders of a
majority of the CHS Common Shares then outstanding, and the Executive
Securityholder. The failure of any party to enforce any of the provisions of
this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(b) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Agreement. Except as otherwise expressly set forth herein, in the
Securities Holders Agreement, or in the Registration Agreement, this Agreement,
those documents expressly referred to herein (including the Securities Holders
Agreement) and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and
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preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(d) Successors and Assigns. Except as otherwise provided herein, this
Agreement will bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Securities and their respective successors and assigns,
so long as they hold Stockholder Securities.
(e) Third Party Beneficiaries. The members of the CHS Group are
intended to be third-party beneficiaries of this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by the holders of a
majority of the CHS Common Shares then outstanding in accordance with this
Agreement's terms as though such holders of CHS Common Shares were a party to
every provision hereof. Except as expressly provided herein, no other third
party beneficiaries are intended by the parties hereto to be beneficiaries
hereof.
(f) Counterparts; Facsimile signature. This Agreement may be executed
in separate counterparts each of which will be an original and all of which
taken together shall constitute one and the same agreement. This Agreement may
be executed by facsimile signature.
(g) Remedies. The Stockholders shall be entitled to enforce their
rights under this Agreement specifically to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any Stockholder may in its sole discretion apply to any court
of competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
(h) Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, sent by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the Company and the Executive
Securityholder at the addresses set forth below and to any member of the CHS
Group at the address set forth on Schedule A attached hereto, or subsequent
holder of Executive Securities subject to this Agreement, at such address as is
indicated in the Company's records, or at such address or to the attention of
such other Person as the recipient party has specified by prior written notice
to the sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service.
If to the Company:
Globe Holdings Inc.
456 Bedford Street
Fall River, MA 02720
Attention: President
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with copies to:
Code Hennessy & Simmons III, L.P.
c/o Code, Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie
If to the Executive Securityholder:
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Attention: John A. Burgess
Telecopy: (617) 526-5000
(i) Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights and obligations
of the Company and its stockholders. All other issues and questions concerning
the construction, validity, enforcement and interpretation of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
(j) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Executive
Securities Agreement on the day and year first above written.
COMPANY: GLOBE HOLDINGS, INC.
By:________________________________
Its:_______________________________
EXECUTIVE SECURITYHOLDER: ___________________________________
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SCHEDULE A
----------
Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Tracy A. Hogan
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Marcus J. George
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Edward M. Lhee
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Paige T. Walsh
c/o Code, Hennessy & Simmons III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Brinson Venture Capital Fund III, L.P.
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
Brinson Trust Company as Trustee for Brinson MAP Venture Capital Fund III Trust
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
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Virginia Retirement System
c/o Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
BankAmerica Investment Corporation
231 South LaSalle Street, 12th Floor
Chicago, IL 60697
MIG Partners VII
c/o BankAmerica Investment Corporation
231 South LaSalle Street, 12th Floor
Chicago, IL 60697
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Exhibit 10.6
NON-COMPETITION AGREEMENT
-------------------------
THIS AGREEMENT (the "Agreement") is entered into as of July 31, 1998 by and
between _________________(the "Stockholder") and Globe Holdings, Inc., a
Massachusetts corporation formerly known as Globe Manufacturing Co. (the
"Company") (Stockholder and the Company are referred to sometimes herein as the
"Parties"). This Agreement is entered into pursuant to Section 7.01(j) of the
Agreement and Plan of Merger (the "Merger Agreement") dated as of June 23, 1998,
as amended, by and between the Company and Globe Acquisition Company, a Delaware
corporation ("MergerCo"). The Company is the surviving corporation of the
merger of MergerCo with and into the Company. Capitalized terms used but not
otherwise defined herein have the meanings given such terms in the Merger
Agreement.
Stockholder has been a stockholder and an employee, officer [and director]
of the Company, and as such, possesses special knowledge, abilities and
experience regarding the business of the Company and its Subsidiaries.
Stockholder acknowledges that he will receive a significant amount of cash and
securities in connection with the transactions contemplated by the Merger
Agreement, and enters into this Agreement to induce MergerCo to consummate the
transactions contemplated by the Merger Agreement. The execution and delivery
by Stockholder of this Agreement is a condition to the obligations of MergerCo
under the Merger Agreement. As a result, Stockholder acknowledges that MergerCo
would not consummate the transactions contemplated by the Merger Agreement if
Stockholder had not agreed to the restrictions contained herein.
In consideration of the premises and the mutual covenants and agreements
set forth herein, the Parties agree as follows:
1. Noncompetition. During the period beginning on the Closing Date
and ending on the third anniversary of the Closing Date (the "Noncompete
Period"), such Stockholder shall not engage (whether as an owner, stockholder,
operator, manager, employee, officer, director, consultant, advisor,
representative or otherwise) directly or indirectly anywhere in the United
States in any business (other than that of the Company and its Subsidiaries)
that manufactures, distributes or sells polyether or polyester spandex, latex
thread or other elastomeric fiber; provided that passive ownership of less than
2% of the outstanding stock of any publicly-traded corporation shall not, in and
of itself, be deemed to violate this Section 1.
2. Nonsolicitation. Stockholder shall not directly or indirectly
through another Person during the Noncompete Period, (i) induce or attempt to
induce any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or any of its Subsidiaries, or in any way interfere with
the relationship between the Company or any of its Subsidiaries and any employee
thereof, (ii) hire any Person who was an employee of the Company or any of its
Subsidiaries within twelve months after such Person's employment with the
Company or any of its Subsidiaries was terminated for any reason or (iii) induce
or attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its
<PAGE>
Subsidiaries to cease doing business with the Company or any of its
Subsidiaries, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any of its
Subsidiaries.
3. Confidentiality. Stockholder shall treat and hold as confidential
any information concerning the business and affairs of the Company and its
Subsidiaries, other than information that is already generally available to the
public or becomes generally available without a breach of this Agreement (the
"Confidential Information"), refrain from using any of the Confidential
Information except in compliance with this Agreement, and deliver promptly to
the Company or destroy, at the request and option of the Company, all tangible
embodiments (and all copies) of the Confidential Information which are in his
possession or under his control. In the event that Stockholder is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, Stockholder shall notify the
Company promptly of the request or requirement so that the Company may seek an
appropriate protective order or waive compliance with the provisions of this
Section 3. If, in the absence of a protective order or the receipt of a waiver
hereunder, Stockholder is, on the advice of counsel, compelled to disclose any
Confidential Information to any Governmental Entity or else stand liable for
contempt, Stockholder may disclose the Confidential Information to the
Governmental Entity; provided that Stockholder shall use his or its reasonable
best efforts to obtain, at the request of the Company, an order or other
assurance that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as the Company shall
designate.
4. Remedy for Breach. Stockholder acknowledges and agrees that
in the event of a breach of any of the provisions of this Agreement, monetary
damages shall not constitute a sufficient remedy. Consequently, in the event of
any such breach, the Company and/or its successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the provisions
hereof, in each case without the requirement of posting a bond or proving actual
damages.
5. Survival; Duration; Modification. The Parties hereto agree that
the covenant set forth in this Agreement is reasonable with respect to its
duration, geographical area and scope. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Agreement is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
<PAGE>
6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and its affiliates, successors and assigns
and shall be binding upon and inure to the benefit of Stockholder and his
assigns. The Company may assign or transfer its rights hereunder to any of its
affiliates or to a successor in the event of merger, consolidation or transfer
or sale of all or substantially all of the assets of the Company.
7. Modification of Waiver. No amendment, modification or waiver of
this Agreement shall be binding or effective for any purpose unless it is made
in a writing signed by the party against who enforcement of such amendment,
modification or waiver is sought. No course of dealing between the parties to
this Agreement shall be deemed to affect or to modify, amend or discharge any
provision or term of this Agreement. No delay on the part of the Company or
Stockholder in the exercise of any of their respective rights or remedies shall
operate as a waiver thereof, and no single or partial exercise by the Company or
Stockholder of any such right or remedy shall preclude other or further
exercises thereof. A waiver of right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on any other
occasion.
8. Governing Law. THE LAW OF THE STATE OF MASSACHUSETTS SHALL GOVERN
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND
ENFORCEABILITY OF THIS AGREEMENT AND ANY EXHIBITS AND SCHEDULES ATTACHED HERETO,
AND THE PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF MASSACHUSETTS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
MASSACHUSETTS.
9. Not an Employment Agreement Stockholder and the Company
acknowledge and agree that this Agreement is not intended, and will not be
construed, to grant to Stockholder any right to employment with the Company.
10. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Party.
11. Stockholder's Representations. Stockholder represents and
warrants to the Company that (i) his execution, delivery and performance of this
Agreement does not and shall not conflict with, or result in the breach of or
violation of, any other agreement, instrument, order, judgment or decree to
which he is a party or by which he is bound, and (ii) upon the execution and
delivery of this Agreement by the Company, this Agreement shall be the valid and
binding obligation of his, enforceable in accordance with its terms.
12. Notice. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to
<PAGE>
have been given (i) when personally delivered, sent by telex, cable or telecopy
(with hard copy to follow) or sent by reputable overnight express courier
(charges prepaid), or (ii) three days following mailing by certified or
registered mail, postage prepaid and return receipt requested. Unless another
address is specified in writing, notices, demands and communications to
Stockholder and the Company shall be sent to the addresses as follows:
To Stockholder:
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Attention: John A. Burgess
Telecopy: (617) 526-5000
To Company: Globe Manufacturing Co.
456 Bedford Street
Fall River MA 02720
Attention: Vice President, Finance and
Administration
Telecopy: (508) 679-9458
With a copy to: Code Hennessy & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Attention: Peter M. Gotsch
Telecopy: (312) 876-3854
And with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
Telecopy: (312) 861-2200
Either party may change its address by written notice to the other party in
accordance with this Section 12.
13. Interpretation. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement. The use of the word
"including" herein shall mean "including without limitation."
<PAGE>
14. Counterparts; Facsimile Signature. This Agreement may be
executed in counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same instrument. This Agreement may be executed by facsimile
signature.
* * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
(Corporate Seal) GLOBE MANUFACTURING CO.
ATTEST ____________________________
Name:
____________________ Title:
Secretary
[Stockholder]
____________________________
<PAGE>
EXHIBIT 10.7
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), dated as of July 31,
1998 is made by and between CHS Management III, L.P., a Delaware limited
partnership ("CHS") and Globe Manufacturing Corp., an Alabama corporation
formerly known as Globe Elastic Co., Inc. (the "Company").
BACKGROUND
----------
The Company desires to receive financial and management consulting
services from CHS, and thereby obtain the benefit of the experience of CHS in
business and financial management generally and its knowledge of the Company and
the Company's financial affairs in particular. CHS is willing to provide
financial and management consulting services to the Company. Accordingly, the
compensation arrangements set forth in this Agreement are designed to compensate
CHS for such services.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, CHS and the Company hereby agree as follows:
TERMS
-----
1. Engagement. The Company hereby engages CHS as a financial and
management consultant, and CHS hereby agrees to provide financial and management
consulting services to the Company, all on the terms and subject to the
conditions set forth below.
2. Services of CHS. CHS hereby agrees during the term of this
engagement to consult with the board of directors (the "Board") and the
management of the Company in such manner and on such business and financial
matters as may be reasonably requested from time to time by the Board, including
but not limited to:
(a) corporate strategy;
(b) budgeting of future corporate investments;
(c) acquisition and divestiture strategies; and
(d) debt and equity financings.
<PAGE>
3. Compensation.
(a) Monthly Fee. The Company agrees to pay to CHS as compensation
for services to be rendered by CHS hereunder, a monthly fee equal to $83,333,
payable monthly in arrears on the last day of each month commencing on August
31, 1998.
(b) Recapitalization. The Company agrees to pay $3,000,000 to CHS on
the date hereof as compensation for services rendered by CHS to the Company in
connection with the transactions contemplated by the Agreement and Plan of
Merger, dated as of June 23, 1998, by and between Globe Holdings, Inc., a
Massachusetts corporation formerly known as Globe Manufacturing Co. and the
parent of the Company ("Holdings"), and Globe Acquisition Company, a Delaware
corporation, as amended, and in connection with the financing of such
transactions (the "Recapitalization").
(c) Future Acquisitions. When and as the Company consummates the
acquisition of any other business, company, product line or enterprise (each, an
"Acquisition"), the Company will pay to CHS a fee equal to the greater of (i)
one percent (1%) of the Acquisition Price (as defined below) of such Acquisition
and (ii) $250,000, as compensation for services to be rendered by CHS to the
Company in connection with the consummation of such Acquisition. "Acquisition
Price" means, with respect to a given Acquisition, the fair value of the total
sale proceeds and other consideration received by the target company and its
stockholders upon consummation of such Acquisition, including cash, securities,
notes, consulting agreements, noncompete agreements, contingent payments, plus
the fair value of all liabilities assumed.
(d) Notwithstanding the foregoing, payment under Section 3(a) and
Section 3(c) shall be subject to the terms of the Credit Agreement dated July
31, 1998, as amended from time to time (the "Credit Agreement"), by and among
the Company, Holdings, Bank of America National Trust and Savings Association as
Administrative Agent, BancAmerica Robertson Stephens as Arranger, and Merrill
Lynch, Pierce, Fenner & Smith, Inc., as Syndication Agent.
4. Expense Reimbursement. The Company shall promptly reimburse CHS
for such reasonable travel expenses and other out-of-pocket fees and expenses as
may be incurred by CHS, its partners and employees, Code, Hennessy & Simmons
III, L.P., or Code Hennessy & Simmons LLC, in connection with the
Recapitalization and future Acquisitions, and in connection with the rendering
of services hereunder.
5. Term. This Agreement shall be in effect for an initial term of
five years commencing on the date hereof, and shall be automatically renewed
thereafter on a year-to-year basis unless, at least 30 days prior to the end of
the then-effective term, one party gives written notice to the other of its
desire to terminate this Agreement. No termination of this Agreement, whether
pursuant to this paragraph or otherwise, shall affect the Company's obligations
with respect to the fees, costs and expenses incurred by CHS in rendering
services hereunder and not reimbursed by the Company as of the effective date of
such termination.
2
<PAGE>
6. Indemnification. The Company agrees to indemnify and hold
harmless CHS, its officers and employees against and from any and all loss,
liability, suits, claims, costs, damages and expenses (including attorneys'
fees) arising from their performance hereunder, except, as a result of their
gross negligence or intentional wrongdoing.
7. CHS an Independent Contractor. CHS and the Company agree that
CHS shall perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel. Neither
CHS nor its partners or employees shall be considered employees or agents of the
Company as a result of this Agreement nor shall any of them have authority to
contract in the name of or bind the Company, except as expressly agreed to in
writing by the Company.
8. Notices. Any notice, report or payment required or permitted to
be given or made under this Agreement by one party to the other shall be deemed
to have been duly given or made if personally delivered or, if mailed, when
mailed by registered or certified mail, postage prepaid to the other party at
the following addresses (or at such other address as shall be given in writing
by one party to the other):
If to CHS:
CHS Management III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
Edward M. Lhee
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie
If to the Company:
Globe Manufacturing Corp.
456 Bedford Street
Fall River, MA 02720
Attn: President
9. Entire Agreement Modification. This Agreement (a) contains the
complete and entire understanding and agreement of CHS and the Company with
respect to the subject matter
3
<PAGE>
hereof; (b) supersedes all prior and contemporaneous understandings, conditions
and agreements, oral or written, express or implied, respecting the engagement
of CHS in connection with the subject matter hereof; and (c) may not be modified
except by an instrument in writing executed by CHS and the Company.
10. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
11. Assignment. Neither CHS nor the Company may assign its rights or
obligations under this Agreement without the express written consent of the
other.
12. Choice of Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
* * * * *
4
<PAGE>
IN WITNESS WHEREOF, CHS and the Company have caused this Management
Agreement to be duly executed and delivered on the date and year first above
written.
CHS MANAGEMENT III, L.P.
By: Code Hennessy & Simmons LLC
its: General Partner
By: /s/ Peter M. Gotsch
--------------------------------
Peter M. Gotsch
Partner
GLOBE MANUFACTURING CORP.
By: /s/ Lawrence R. Walsh
--------------------------------
Name:________________________________
Title:_______________________________
5
<PAGE>
EXHIBIT 10.8
TAX SHARING AGREEMENT
This agreement is effective as of July 31, 1998, between Globe Holdings,
Inc., a Massachusetts corporation ("Holdings"), and Globe Manufacturing Corp.,
an Alabama corporation ("Globe").
Recitals
--------
A. Holdings is the common parent of an affiliated group of corporations (the
"Globe Group") as defined by Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). Holdings and Globe are members of the
Globe Group.
B. Holdings and Globe wish to file a consolidated federal income tax return
and certain state combined and/or consolidated income tax returns.
C. Holdings and Globe wish to define the method by which the income tax
liability of the Globe Group will be paid.
Therefore, Holdings and Globe hereby agree as follows:
1. Holdings and Globe will join in the filing of a federal consolidated
income tax return and will execute any necessary consents related thereto.
2. Holdings will prepare a consolidated federal income tax return for the
Globe Group for each taxable year in accordance with the requirements of
the Code and any regulations thereunder which will show the Globe Group's
consolidated federal income tax liability (the "Globe Group Federal Income
Tax Liability"). Holdings will also prepare a combined or consolidated
state or local income tax return for each state or locality where the Globe
Group reports on a combined or consolidated basis showing the Globe Group's
combined or consolidated state or local income tax liability (each, a
"Globe Group State or Local Income Tax Liability").
3. Globe will compute, for each taxable year during which it is a member of
the Globe Group, the federal income tax liability that it would incur if it
filed a federal income tax return on a separate-company basis for such year
("Separate Company Federal Income Tax Liability").
4. For purposes of computing Separate Company Federal Income Tax Liability:
a. Dividends received from another member of the Globe Group will be
eliminated.
b. Deferred intercompany gain (as provided by Treasury Regulation
(S)1.1502-13 and any successor thereto) and gain attributable to any
excess loss account (as provided
<PAGE>
by Treasury Regulation (S)1.1502-19 and any successor thereto) will be
taken into account at the time and to the extent that such item is
taken into the taxable income of the Globe Group under the
consolidated return regulations and any successors thereto.
c. Any benefit to the Globe Group of lower bracket amounts under Code
(S)11(b)(1) (and any other items specified in Code (S)1561(a)) shall
be shared equally among all members of the Globe Group.
5. With respect to any income of Globe reported on a combined or consolidated
state or local income tax return with other members of the Globe Group,
Globe shall compute, for each taxable year during which it is a member of
the Globe Group, the state or local income tax liability that it would
incur if it filed a state or local income tax return on a separate-company
basis for such year (taking into account solely results from that taxable
year) ("State or Local Income Tax Liability"). Globe's State and Local
Income Tax Liability shall be determined based on principles similar to
those outlined in paragraph 4.
6. Globe shall pay the amount of its Separate Company Federal Income Tax
Liability and any State or Local Income Tax Liability to Holdings. In no
event, however, will the amount required to be paid by Globe to Holdings
exceed the Globe Group Federal Income Tax Liability or, for each state or
locality in which combined or consolidated returns are filed, the relevant
Globe Group State or Local Income Tax Liability. Payments shall be made
hereunder on an estimated basis not more frequently than quarterly, but at
least biannually; provided that each quarterly payment to Holdings shall
not be made before 10 days prior to the date Holding's quarterly estimated
tax payments are due to the respective federal or state government. If
payments received hereunder for any taxable year are different than the
amount finally determined under paragraphs 3, 4 and 5 as limited by the
second and third sentences of this paragraph 6 after calculations of the
final group liabilities under paragraph 2, Holdings shall refund to Globe
or Globe shall pay to Holdings (pursuant to the procedures set out in this
paragraph 6), as the case may be, the amount of such difference no later
than the date upon which Holdings files the applicable consolidated federal
income tax return or combined or consolidated state or local income tax
return for the Globe Group.
7. Globe's Separate Company Federal Income Tax Liability and any State or
Local Income Tax Liability shall be recomputed if the income tax items of
Globe are recomputed on audit or otherwise. Any (i) additional tax
liability resulting from such recomputation and (ii) interest and penalties
related to such recomputed items shall be paid by Globe as if it were a
Separate Company Federal Income Tax Liability or a State or Local Income
Tax Liability, as the case may be.
8. This agreement shall remain in effect for those taxable periods for which
the income from Globe is includable in the consolidated federal income tax
return or a combined or
<PAGE>
consolidated state or local income tax return filed by the Globe Group,
notwithstanding the fact that (i) Globe ceases to be a member of the Globe
Group or (ii) a new entity becomes a member of the Globe Group.
<PAGE>
Entered into on July 31, 1998.
Globe Holdings, Inc.
By /s/ Lawrence R. Walsh
Its_________________________________
Globe Manufacturing Corp.
By /s/ Lawrence R. Walsh
Its_________________________________
<PAGE>
EXHIBIT 10.9
CREDIT AGREEMENT
among
GLOBE HOLDINGS, INC.,
GLOBE MANUFACTURING CORP.,
VARIOUS LENDERS,
MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.,
as Syndication Agent,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
and
BANCAMERICA ROBERTSON STEPHENS,
as Arranger
__________________________________
Dated as of July 31, 1998
__________________________________
<PAGE>
TABLE OF CONTENTS
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ARTICLE I.
DEFINITIONS.......................................................... 1
1.01 Defined Terms.................................................. 1
1.02 Other Definitional Provisions.................................. 29
(a) Defined Terms............................................. 29
(b) The Agreement............................................. 29
(c) Certain Common Terms...................................... 29
(d) Performance; Time......................................... 29
(e) Contracts................................................. 29
(f) Laws 30
1.03 Accounting Principles.......................................... 30
ARTICLE II.
THE CREDIT FACILITIES................................................ 30
2.01 Amounts and Terms of Commitments............................... 30
(a) The Tranche A Term Loans.................................. 30
(b) The Tranche B Term Loans.................................. 30
(c) The Revolving Loans....................................... 30
(d) The Swingline Loans....................................... 31
2.02 Loan Accounts and Register; Notes.............................. 32
2.03 Procedure for Borrowing........................................ 33
2.04 Conversion and Continuation Elections for Loans................ 34
2.05 Reduction and Termination of Commitments....................... 36
2.06 Voluntary Prepayments.......................................... 37
2.07 Mandatory Prepayments.......................................... 38
2.08 Repayment of Principal......................................... 41
(a) The Tranche A Term Loans.................................. 41
(b) The Tranche B Term Loans.................................. 41
(c) The Revolving Loans....................................... 42
(d) The Swingline Loans....................................... 42
2.09 Interest....................................................... 42
2.10 Fees........................................................... 44
(a) Commitment Fees........................................... 44
(b) Other Fees................................................ 45
2.11 Computation of Fees and Interest............................... 45
2.12 Payments by the Borrower....................................... 46
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2.13 Payments by the Lenders to the Administrative Agent................ 46
2.14 Sharing of Payments, etc........................................... 47
2.15 Security and Guaranties............................................ 48
ARTICLE III.
THE LETTERS OF CREDIT.................................................... 48
3.01 The Letter of Credit Subfacility................................... 48
3.02 Issuance, Amendment and Renewal of Letters of Credit............... 49
3.03 Participations, Drawings and Reimbursements........................ 51
3.04 Repayment of Participations........................................ 52
3.05 Role of the Issuing Lenders........................................ 53
3.06 Obligations Absolute............................................... 53
3.07 Cash Collateral Pledge............................................. 54
3.08 Letter of Credit Fees.............................................. 55
3.09 Uniform Customs and Practice....................................... 56
ARTICLE IV.
TAXES, YIELD PROTECTION AND ILLEGALITY................................... 56
4.01 Taxes.............................................................. 56
4.02 Illegality......................................................... 59
4.03 Increased Costs and Reduction of Return............................ 60
4.04 Funding Losses..................................................... 61
4.05 Inability to Determine Rates....................................... 61
4.06 Increased Costs on Eurodollar Loans................................ 62
4.07 Certificates of Lenders............................................ 62
4.08 Change of Lending Office, Replacement Lender, etc.................. 62
4.09 Survival........................................................... 63
ARTICLE V.
CONDITIONS PRECEDENT..................................................... 63
5.01 Conditions to Loans and Letters of Credit on the Closing Date...... 63
(a) Credit Agreement.............................................. 64
(b) Resolutions; Incumbency....................................... 64
(c) Articles of Incorporation; By-laws and Good Standing.......... 64
(d) Subsidiary Guaranty........................................... 65
(e) Pledge Agreement.............................................. 65
(f) Security Agreement............................................ 65
(g) Mortgages; Title Insurance; Survey, etc....................... 66
(h) Legal Opinions................................................ 66
(i) Payment of Fees and Expenses.................................. 67
(j) Certificates.................................................. 67
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(k) Solvency Opinion...................................................................... 67
(l) Transaction........................................................................... 67
(m) Adverse Change........................................................................ 68
(n) Governmental and Third Party Approvals................................................ 68
(o) Litigation............................................................................ 68
(p) Shareholders Agreements; Management Agreements and Tax Sharing Agreements............. 69
(q) Financial Statements.................................................................. 69
(r) Insurance............................................................................. 69
5.02 Conditions to all Borrowings and the Issuance of any Letters of Credit..................... 69
(a) Notice................................................................................ 69
(b) Continuation of Representations and Warranties........................................ 69
(c) No Existing Default................................................................... 69
(d) No Material Adverse Effect............................................................ 69
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES................................................................... 70
6.01 Existence and Power........................................................................ 70
6.02 Authorization; No Contravention............................................................ 70
6.03 Governmental Authorization................................................................. 71
6.04 Binding Effect............................................................................. 71
6.05 Litigation................................................................................. 71
6.06 No Default................................................................................. 72
6.07 ERISA Compliance........................................................................... 72
6.08 Use of Proceeds; Margin Regulations....................................................... 73
6.09 Title to Properties, etc................................................................... 73
6.10 Taxes...................................................................................... 73
6.11 Financial Statements....................................................................... 73
6.12 Securities Law, etc.; Compliance........................................................... 74
6.13 Governmental Regulation.................................................................... 74
6.14 Labor Controversies........................................................................ 74
6.15 Subsidiaries............................................................................... 74
6.16 Patents, Trademarks, etc................................................................... 74
6.17 Accuracy of Information.................................................................... 74
6.18 Hazardous Materials........................................................................ 75
6.19 Collateral Documents....................................................................... 75
6.20 Solvency................................................................................... 76
6.21 Representations and Warranties in the other Documents...................................... 76
6.22 Capitalization............................................................................. 76
6.23 Special Purpose Corporation................................................................ 77
6.24 Insurance.................................................................................. 77
6.25 Subordination Provisions................................................................... 77
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ARTICLE VII.
AFFIRMATIVE COVENANTS......................................................................................... 78
7.01 Financial Statements.................................................................................... 78
7.02 Certificates; Other Information......................................................................... 79
7.03 Notices................................................................................................. 80
7.04 Books, Records and Inspections.......................................................................... 82
7.05 Maintenance of Property; Insurance...................................................................... 82
7.06 Franchises.............................................................................................. 83
7.07 Compliance with Law..................................................................................... 83
7.08 Payment of Taxes........................................................................................ 83
7.09 Contributions........................................................................................... 83
7.10 End of Fiscal Years; Fiscal Quarters.................................................................... 84
7.11 Cash Management System.................................................................................. 84
7.12 Additional Security; Further Assurances................................................................. 84
7.13 Foreign Subsidiaries Security........................................................................... 85
7.14 Use of Proceeds; Margin Regulations..................................................................... 85
7.15 Holdings Preferred Stock................................................................................ 86
ARTICLE VIII.
NEGATIVE COVENANTS............................................................................................ 86
8.01 Liens................................................................................................... 86
8.02 Consolidation, Merger, Purchase or Sale of Assets, etc.................................................. 89
8.03 Dividends............................................................................................... 91
8.04 Indebtedness............................................................................................ 93
8.05 Advances, Investments and Loans......................................................................... 95
8.06 Transactions with Affiliates............................................................................ 97
8.07 Capital Expenditures.................................................................................... 98
8.08 Consolidated Interest Coverage Ratio.................................................................... 99
8.09 Consolidated Fixed Charge Coverage Ratio................................................................ 100
8.10 Maximum Leverage Ratio.................................................................................. 100
8.11 Limitation on Voluntary Payments and Modification of Indebtedness; Modifications
of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc.............................. 101
8.12 Limitation on Certain Restrictions on Subsidiaries...................................................... 103
8.13 Limitation on Issuance of Capital Stock................................................................. 103
8.14 Business................................................................................................ 104
8.15 Limitation on Creation of Subsidiaries.................................................................. 105
ARTICLE IX.
EVENTS OF DEFAULT............................................................................................. 105
9.01 Event of Default........................................................................................ 105
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(a) NonPayment................................................................... 105
(b) Representation or Warranty................................................... 105
(c) Specific Defaults............................................................ 105
(d) Other Defaults............................................................... 105
(e) CrossDefault................................................................. 106
(f) Insolvency; Voluntary Proceedings............................................ 106
(g) Involuntary Proceedings...................................................... 106
(h) ERISA........................................................................ 106
(i) Judgments.................................................................... 107
(j) Change of Control............................................................ 107
(k) Collateral; Guaranties....................................................... 107
9.02 Remedies.......................................................................... 107
9.03 Rights Not Exclusive.............................................................. 108
ARTICLE X.
THE GUARANTY............................................................................ 108
10.01 Guaranty from Holdings............................................................ 108
ARTICLE XI.
THE ADMINISTRATIVE AGENT, THE COLLATERAL
AGENT, THE ISSUING LENDERS, THE ARRANGER AND THE
SYNDICATION AGENT....................................................................... 112
11.01 Appointment and Authorization..................................................... 112
11.02 Delegation of Duties.............................................................. 112
11.03 Liability of Agent................................................................ 113
11.04 Reliance by Agent................................................................. 113
11.05 Notice of Default................................................................. 114
11.06 Credit Decision................................................................... 114
11.07 Indemnification................................................................... 114
11.08 Agent in Individual Capacity...................................................... 115
11.09 Successor Agent................................................................... 115
11.10 The Arranger and Syndication Agent................................................ 116
ARTICLE XII.
MISCELLANEOUS........................................................................... 116
12.01 Amendments and Waivers............................................................ 116
12.02 Notices........................................................................... 118
12.03 No Waiver; Cumulative Remedies.................................................... 118
12.04 Costs and Expenses................................................................ 118
12.05 Indemnity......................................................................... 119
12.06 Successors and Assigns............................................................ 120
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12.07 Assignments, Participations, etc.......................................... 120
12.08 Confidentiality........................................................... 122
12.09 Setoff.................................................................... 122
12.10 Notification of Addresses, Lending Offices, etc........................... 123
12.11 Counterparts.............................................................. 123
12.12 Severability.............................................................. 123
12.13 No Third Parties Benefited................................................ 123
12.14 Governing Law and Jurisdiction............................................ 123
12.15 Waiver of Jury Trial...................................................... 124
12.16 Domicile of Loans......................................................... 124
</TABLE>
SCHEDULE 1.01 (a) Lending Offices
SCHEDULE 1.01 (b) Commitments
SCHEDULE 1.01 (c) Subsidiary Guarantors
SCHEDULE 1.01 (d) Indebtedness to be Refinanced
SCHEDULE 6.09 Real Property
SCHEDULE 6.15 Subsidiaries
SCHEDULE 6.24 Insurance
SCHEDULE 8.01 Existing Liens
SCHEDULE 8.04 Existing Indebtedness
SCHEDULE 8.05 Existing Investments
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B Form of Notice of Conversion/Continuation
EXHIBIT C Form of Pledge Agreement
EXHIBIT D Form of Subsidiary Guaranty
EXHIBIT E Form of Guarantor Supplement
EXHIBIT F Form of Security Agreement
EXHIBIT G Form of Leverage Ratio Certificate
EXHIBIT H Form of Kirkland & Ellis Opinion
EXHIBIT I Form of White & Case LLP Opinion
EXHIBIT J Form of Holdings Shareholder Subordinated Note
EXHIBIT K Form of Compliance Certificate
EXHIBIT L Form of Assignment and Acceptance
EXHIBIT M Form of Intercompany Note
EXHIBIT N Form of Section 4.01(f) Certificate
(vi)
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of July 31, 1998, among GLOBE HOLDINGS,
INC., a Massachusetts corporation ("Holdings"), GLOBE MANUFACTURING CORP., an
Alabama corporation (the "Borrower"), the several lenders from time to time
party to this Agreement (the "Lenders"), MERRILL LYNCH, PIERCE, FENNER & SMITH,
INC., as Syndication Agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent, and BANCAMERICA ROBERTSON STEPHENS, as
Arranger.
W I T N E S S E T H:
-------------------
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Lenders are willing to make available to the Borrower the respective
credit facilities provided for herein;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.01 Defined Terms. As used in this Agreement, the capitalized terms
in the preamble hereto shall have the meanings therein given them, and the
following words and terms shall have the meanings specified below:
"Acquired Entity or Business" has the meaning specified in the
definition of "Consolidated Net Income".
"Additional Security Documents" has the meaning specified in Section
7.12.
"Adjusted Consolidated Working Capital" means, at any time,
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities at such time.
"Adjustment Date" means (A) the first date after 180 days following
the Closing Date upon which Holdings has delivered a Leverage Ratio Certificate
to the Administrative Agent in accordance with Section 12.02 as of the end of
the then most recently ended fiscal quarter of Holdings (the "First Adjustment
Date") and (B) after the First Adjustment Date, the earlier of (x) each date
which is 45 days after the end of a fiscal quarter of Holdings (or, in the case
of the fourth fiscal quarter of Holdings, 90 days) and (y) the date which is two
Business Days after Holdings has delivered a Leverage Ratio Certificate to the
Administrative Agent in accordance with Section 12.02 as of the end of a fiscal
quarter of Holdings.
<PAGE>
"Administrative Agent" means Bank of America in its capacity as
administrative agent for the Lenders hereunder, and any successor administrative
agent.
"Administrative Agent's Payment Office" means the address for payments
set forth on the signature page hereto in relation to the Administrative Agent
or such other address as the Administrative Agent may from time to time specify
in accordance with Section 12.02.
"Affiliate" means, with respect to any Person, any other Person (i)
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person or (ii) that directly or indirectly owns more
than 5% of any class of the capital stock of, or equity interests in, such
Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise, provided that no Lender nor any
Affiliate thereof shall be an Affiliate of Holdings or any of its Subsidiaries.
"Agent" means Bank of America, in its capacity as Administrative Agent
and as Collateral Agent, in each case for the Lenders hereunder, and shall
include any successor to the Agent appointed pursuant to Article XI and Article
XII.
"Agent-Related Persons" has the meaning specified in Section 11.03.
"Aggregate Commitment" means the combined Commitments of the Lenders
in the initial principal amount of $165,000,000 as such amount may be reduced
from time to time pursuant to this Agreement.
"Aggregate Revolving Commitment" means the combined Revolving
Commitments of the Lenders in the initial principal amount of $50,000,000 as
such amount may be reduced from time to time pursuant to this Agreement.
"Aggregate Tranche A Term Loan Commitment" means the combined Tranche
A Term Loan Commitments of the Lenders in the initial principal amount of
$60,000,000 as such amount may be reduced from time to time pursuant to this
Agreement.
"Aggregate Tranche B Term Loan Commitment" means the combined Tranche
B Term Loan Commitments of the Lenders in the initial principal amount of
$55,000,000 as such amount may be reduced from time to time pursuant to this
Agreement.
"Agreement" means this Credit Agreement as from time to time amended,
modified or supplemented.
"Applicable Margin" means the margin to be added to the Eurodollar
Rate or the Base Rate, as the case may be, in accordance with Section 2.09(a).
"Arranger" means BancAmerica Robertson Stephens.
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"Asset Contribution" means the contribution by Holdings to the
Borrower of all of Holdings' material assets (other than the capital stock of
the Borrower) pursuant to the terms of the Asset Contribution Documents.
"Asset Contribution Documents" means all documents entered into to
evidence the Asset Contribution.
"Asset Sale" means the direct or indirect sale, lease (other than
operating leases entered into in the ordinary course of business), transfer,
conveyance or other disposition (including, without limitation, dispositions
pursuant to sale and leaseback transactions), in a single transaction or a
series of transactions, by Holdings or any of its Subsidiaries to any Person
(other than to Holdings or any of its Wholly-Owned Subsidiaries) of any property
or assets of Holdings or any of its Subsidiaries (including any capital stock
held by Holdings or any such Subsidiary other than such Person's own capital
stock), other than sales or transfers of assets pursuant to Sections 8.02(ii),
(iii), (iv), (vii), (viii), (ix), (xi), (xii), (xiii), (xiv), (xv) and (xvi).
"Assignee" has the meaning specified in Section 12.07(a).
"Assignment and Acceptance" has the meaning specified in Section
12.07(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel and, without
duplication, the allocated cost of internal legal services and all reasonable
disbursements of internal counsel.
"B Lender" means each Lender that has outstanding Tranche B Term Loans
hereunder.
"Bank of America" means Bank of America National Trust and Savings
Association, a national banking association, in its individual capacity and
shall include any successor thereto by merger or otherwise.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S) 101, et seq.).
"Base Rate" means, for any day, the higher of (a) the Reference Rate
or (b) the Federal Funds Rate plus 1/2%, in each case as in effect for such day.
"Base Rate Loan" means each Swingline Loan and each other Loan that
bears interest based on the Base Rate.
"Borrower" has the meaning specified in the preamble hereto.
"Borrower Senior Subordinated Note Documents" means the Borrower
Senior Subordinated Note Indenture, the Borrower Senior Subordinated Notes and
all other documents and agreements executed and delivered pursuant to the
Borrower Senior Subordinated Note Indenture.
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<PAGE>
"Borrower Senior Subordinated Note Exchange Offer" means the exchange
offer for the Borrower Senior Subordinated Notes pursuant to the applicable
Borrower Senior Subordinated Note Documents for new Borrower Senior Subordinated
Notes which have been registered under the Securities Act.
"Borrower Senior Subordinated Note Indenture" means the Indenture,
dated as July 31, 1998, between the Borrower and Norwest Bank Minnesota,
National Association, as trustee, as amended, modified or supplemented from time
to time in accordance with the terms hereof and thereof.
"Borrower Senior Subordinated Notes" means the Borrower's 10% senior
subordinated notes due 2008 (which term includes the senior subordinated notes
of the Borrower issued as part of the Borrower Senior Subordinated Note Exchange
Offer), as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof.
"Borrowing" means a borrowing hereunder consisting of one or more
Loans under a single Tranche made to the Borrower on the same Borrowing Date by
the Lenders having Commitments of the respective Tranche or by the Swingline
Lender, as the case may be, in each case pursuant to Section 2.01, and may be a
Tranche A Term Loan Borrowing, a Tranche B Term Loan Borrowing, a Revolving
Borrowing or a Swingline Borrowing.
"Borrowing Date" means, in relation to any Loan, the date of the
borrowing of such Loan as specified in the relevant Notice of Borrowing for a
Tranche A Term Loan Borrowing, a Tranche B Term Loan Borrowing or a Revolving
Borrowing or as specified in the relevant request for a Swingline Loan, as the
case may be.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in San Francisco, Chicago or New York City are
authorized or required by law to close and, if such term is used in relation to
any Eurodollar Loan or the Interest Period therefor, any such day on which
dealings are carried on by and between banks in Dollar deposits in the
applicable interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law (but with which a
Lender customarily complies) regarding capital adequacy of any Lender or of any
corporation controlling a Lender.
"Capital Expenditures" means, for any period and with respect to any
Person, the aggregate of all expenditures by such Person and its Subsidiaries
for the acquisition or leasing of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements during
such period) which is capitalized under GAAP on a consolidated balance sheet of
such Person and its Subsidiaries.
"Capital Lease" has the meaning specified in the definition of
"Capital Lease Obligations".
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"Capital Lease Obligations" means all monetary obligations of Holdings
or any of its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease ("Capital Lease").
"Cash Collateralize" means to pledge and deposit with or deliver to
the Administrative Agent, for the benefit of the Administrative Agent, the
Issuing Lenders and the Lenders, as collateral for the Letter of Credit
Obligations, cash or deposit account balances pursuant to documentation in form
and substance reasonably satisfactory to the Administrative Agent and the
Issuing Lenders (which documents are hereby consented to by the Lenders).
Derivatives of such term shall have corresponding meanings. Cash Collateral
shall be invested in Cash Equivalents of a tenor reasonably satisfactory to the
Administrative Agent and as instructed by the Borrower, which Cash Equivalents
shall be held in the name of, and under the control of, the Administrative Agent
in a manner reasonably satisfactory to the Collateral Agent.
"Cash Equivalents" means any or all of the following: (i) obligations
of, or guaranteed as to interest and principal by, the United States Government
maturing within one year after the date on which such obligations are purchased;
(ii) marketable direct obligations issued by any state of the United States or
any political subdivision or public instrumentality of such state, in each case
having maturities of not more than one year from the date of acquisition and, at
the time of acquisition thereof, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) open market commercial paper of any
corporation (other than Holdings or any of its Subsidiaries) incorporated under
the laws of the United States or any State thereof or the District of Columbia
rated P-1 or its equivalent by Moody's or A-1 or its equivalent or higher by
S&P; (iv) time deposits or certificates of deposit maturing within one year
after the issuance thereof issued by commercial banks organized under the laws
of any country which is a member of the OECD and having a combined capital and
surplus in excess of $250,000,000 or which is a Lender; (v) repurchase
agreements with a term of not more than seven days with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iv) above; (vi) bankers'
acceptances with maturities not exceeding one year and overnight bank deposits
in each case with an office of a bank or trust company meeting the criteria
specified in clause (iv) above; and (vii) money market, mutual or similar funds
substantially all of whose investments are comprised of the investments
described in clauses (i) through (vi) above.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as the same may be amended from time to time, 42
U.S.C. (S) 9601 et seq.
"Change of Control" means (a) (i) prior to a Qualified Public Equity
Offering, the Permitted Holders shall cease to own on a fully diluted basis at
least 51% of the economic and voting interest in Holdings capital stock, and
(ii) on and after the consummation of a Qualified Public Equity Offering, (x)
the consummation of a transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as such term is defined
in Section 13(d) (3) of the Exchange Act) or group of related persons, together
with any Affiliates thereof (other than the Permitted Holders), becomes the
"beneficial owner" (as such term is
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<PAGE>
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the Voting Stock of Holdings (as determined on a
fully diluted basis as measured by voting power rather than by number of
shares), provided that the Permitted Holders "beneficially own" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of Holdings
than such other "person" or group of related persons 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 Holdings or (y) the first day
on which a majority of the members of the Board of Directors of Holdings are not
Continuing Directors, (b) Holdings shall cease to own 100% of the issued and
capital stock of the Borrower or (c) a "Change of Control" shall occur under the
Borrower Senior Subordinated Note Documents or the Holdings Senior Discount Note
Documents.
"CHS" means Code, Hennessy & Simmons III, L.P., a Delaware limited
partnership.
"CHS Management" means CHS Management III, L.P., a Delaware limited
partnership.
"CHS Management Agreement" means the Management Agreement, dated as of
July 31, between the Borrower and CHS Management, as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof.
"Closing Date" means the date on or before September 15, 1998 on which
all conditions precedent set forth in Sections 5.01 and 5.02 have been satisfied
or waived in accordance with this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" means all property with respect to which any security
interest has been granted (or purported to be granted) pursuant to any
Collateral Document, as well as any property which serves as Cash Collateral for
any Obligations.
"Collateral Agent" means the Administrative Agent acting as collateral
agent for the Lenders pursuant to the Collateral Documents.
"Collateral Documents" means the Pledge Agreement, the Subsidiary
Guaranty, the Security Agreement, each Mortgage, each Additional Security
Document and each Guarantor Supplement.
"Commitment" means any of the commitments of any Lender, i.e., whether
the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment or Revolving
Commitment.
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<PAGE>
"Commitment Percentage" means, as to any Lender, such Lender's Tranche
A Term Loan Commitment Percentage, Tranche B Term Loan Commitment Percentage or
Revolving Commitment Percentage, as applicable.
"Compliance Certificate" has the meaning specified in Section 7.02(a).
"Consolidated Current Assets" means, at any time, the consolidated
current assets of Holdings and its Subsidiaries at such time.
"Consolidated Current Liabilities" means, at any time, the
consolidated current liabilities of Holdings and its Subsidiaries at such time,
but excluding the current portion of any Indebtedness under this Agreement and
the current portion of any other long-term Indebtedness which would otherwise be
included therein.
"Consolidated EBIT" means, for any period, Consolidated Net Income for
such period before Consolidated Interest Expense (calculated without regard to
the proviso contained in the definition thereof) and provision for taxes for
such period and without giving effect to (w) any extraordinary gains or losses,
(x) any gains or losses from sales of assets other than from sales of inventory
sold in the ordinary course of business, (y) any premiums, fees or expenses
incurred in connection with any Permitted Acquisition and any related
financings, and (z) the amortization or depreciation of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets, in each
case arising in connection with any Permitted Acquisition) and 17 (including
non-cash charges relating to intangibles and goodwill arising in connection with
any Permitted Acquisition).
"Consolidated EBITDA" means, for any period, Consolidated EBIT for
such period, adjusted by adding thereto, without duplication, the sum of (i) the
amount of all amortization of goodwill and other intangibles (including debt
issuance and other deferred financing, legal and accounting costs (including
those associated with the Transaction and the issuance of the Holdings Senior
Discount Notes)) and depreciation, (ii) all fees and expenses incurred in
connection with the Transaction, the issuance of the Holdings Senior Discount
Notes and each Exchange Offer and (iii) other non-cash charges and expenses
(including non-cash charges or expenses included in costs of goods sold), in
each case to the extent that same were deducted in arriving at Consolidated EBIT
for such period and (y) subtracting therefrom, without duplication, the sum of
(i) the amount of all non-cash credits to the extent that same were included in
arriving at Consolidated EBIT for such period (but which will be added back to
Consolidated EBITDA in any subsequent period to the extent cash is received in
respect of any such non-cash credits in such subsequent period) and (ii) the
amount of all cash payments made in such period to the extent that same relate
to a non-cash charge incurred in a previous period.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (x) the remainder of (A) Consolidated EBITDA for such period minus (B)
the sum of (I) the amount of all Capital Expenditures made by Holdings and its
Subsidiaries for such period (other than Capital Expenditures (i) to the extent
financed with equity proceeds, Asset Sale Proceeds, insurance proceeds or
Indebtedness or (ii) to the extent constituting a Permitted Acquisition or a
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Permitted Capital Expansion), and (II) the amount of all cash payments made by
Holdings and its Subsidiaries in respect of taxes or tax liabilities for such
period to (y) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense that is paid or payable in
cash for such period and (ii) the scheduled principal amount of all amortization
payments on all Indebtedness (including, without limitation, the principal
component of all Capitalized Lease Obligations but excluding the repayment of
the Indebtedness to be Refinanced) of Holdings and its Subsidiaries for such
period (as determined on the first day of such period).
"Consolidated Indebtedness" means, at any time, the principal amount
of all Indebtedness of Holdings and its Subsidiaries at such time determined on
a consolidated basis to the extent that such Indebtedness would be accounted for
as debt on the liability side of a balance sheet in accordance with GAAP plus,
without duplication, (i) the maximum amount available to be drawn under all
letters of credit (including any Letters of Credit), bankers acceptances and
similar obligations issued for the account of Holdings and its Subsidiaries and
all unpaid drawings or reimbursement obligations in respect thereof, (ii) the
principal amount of all bonds issued by Holdings and its Subsidiaries in
connection with workers' compensation obligations, lease obligations, surety and
similar obligations, and (iii) the amount of all Contingent Obligations of
Holdings and its Subsidiaries determined on a consolidated basis in respect of
Indebtedness of other Persons of the type described above in this definition,
provided that Consolidated Indebtedness shall exclude Indebtedness in respect of
any Holdings Junior Subordinated Notes, any Holdings Senior Discount Notes and
any Holdings Shareholder Subordinated Notes.
"Consolidated Interest Coverage Ratio" means, for any period, the
ratio of (x) Consolidated EBITDA for such period to (y) Consolidated Interest
Expense that is paid or payable in cash for such period (including all such cash
interest expense on the Holdings Senior Discount Notes).
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of Holdings and its Subsidiaries for such period
(calculated without regard to any limitations on the payment thereof) (net of
interest income of Holdings and its Subsidiaries for such period) plus, without
duplication, that portion of Capital Lease Obligations of Holdings and its
Subsidiaries representing the interest factor for such period, and including the
net costs or benefits under Interest Rate Protection Agreements, provided that
(w) the amortization of debt issuance and deferred financing, legal and
accounting costs with respect to this Agreement, the Borrower Senior
Subordinated Notes and the Holdings Senior Discount Notes, (x) all fees and
expenses incurred in connection with the Transaction and the issuance of the
Holdings Senior Discount Notes, (y) all interest on the Holdings Junior
Subordinated Notes to the extent paid in kind and (z) all interest on any
Holdings Shareholder Subordinated Notes in each case shall be excluded from
Consolidated Interest Expense to the extent same would otherwise have been
included therein. Any cash payments (other than in respect of principal) made
under or on account of the Holdings Junior Subordinated Notes (whether or not
characterized as interest) to
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<PAGE>
the holders thereof shall be included as interest expense for purposes of this
Agreement except to the extent permitted by Sections 8.11(iii), 8.11(v) and
8.11(vi).
"Consolidated leverage Ratio" means, at any time, the ratio of (i)
Consolidated Indebtedness at such time to (ii) Consolidated EBITDA for the
Measurement Period then most recently ended, it being agreed that (A)
Consolidated EBITDA for Holdings' fiscal quarters ended September 30, 1997,
December 31, 1997, March 31, 1998 and June 30, 1998, was $9,787,080,
$13,018,896, $13,089,423 and $12,728,288, respectively, and (B) in determining
the Consolidated Leverage Ratio at any time, there shall be excluded from
Consolidated Indebtedness at such time an amount equal to the amount of
unrestricted cash and/or Cash Equivalents of Holdings and its Subsidiaries as
would be reflected on the consolidated balance sheet of Holdings at such time.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Holdings and its Subsidiaries for such period, determined on a
consolidated basis (after any deduction for minority interests), provided that
(i) in determining Consolidated Net Income, the net income of any other Person
which is not a Subsidiary of Holdings or is accounted for by Holdings by the
equity method of accounting shall be included only to the extent of the payment
of cash dividends or distributions by such other Person to Holdings or a
Subsidiary thereof during such period, (ii) the net income of any Subsidiary of
Holdings (other than the Borrower) shall be excluded to the extent that the
declaration or payment of cash dividends or similar distributions by that
Subsidiary of that net income is not at the date of determination permitted by
operation of its charter or any agreement, instrument or law applicable to such
Subsidiary, (iii) the net income (or loss) of any other Person acquired by such
specified Person or a Subsidiary of such Person in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, and (iv) in determining the Consolidated Leverage Ratio in Sections
2.07(f) and 8.10 and in determining the Applicable Margin, the commitment fee
and the letter of credit fee there shall be included (to the extent not already
included) in determining Consolidated Net Income for any period the net income
(or loss) of any Person, business, property or asset acquired during such period
pursuant to a Permitted Acquisition and not subsequently sold or otherwise
disposed of by Holdings or one of its Subsidiaries during such period (each such
Person, business, property or asset acquired and not subsequently disposed of
during such period, an "Acquired Entity or Business"), in each case based on the
actual net income (or loss) of such Acquired Entity or Business for the entire
period (including the portion thereof occurring prior to such Permitted
Acquisition).
"Contingent Obligation" means, as applied to any Person, any
obligation of such Person as a result of such Person being a general partner of
the other Person, unless the underlying obligation is expressly made non-
recourse as to such general partner, and any direct or indirect liability of
that Person with respect to any Indebtedness, lease, dividend, letter of credit
or other obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor; (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to
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maintain the net worth or solvency or any balance sheet item, level of income or
financial condition of the primary obligor; (c) to purchase property, securities
or services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof; in each case, including
arrangements wherein the rights and remedies of the holder of the primary
obligation are limited to repossession or sale of certain property of such
Person. The amount of any Contingent Obligation shall be deemed equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or if less, the stated or determinable amount of
such Contingent Obligation) or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"Continuation Date" means any date on which the Borrower elects to
continue a Eurodollar Loan as a Eurodollar Loan for a further Interest Period in
accordance with the provisions of Section 2.04.
"Contractual Obligations" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion Date" means any date on which the Borrower elects to
convert a Base Rate Loan to a Eurodollar Loan, or a Eurodollar Loan to a Base
Rate Loan, in each case in accordance with the provisions of Section 2.04.
"Credit Party" means each of Holdings, the Borrower and each
Subsidiary Guarantor.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Defaulting Lender" means any Lender with respect to which a Lender
Default is in effect.
"Disbursement Date" has the meaning specified in Section 3.03(b).
"Dividend" with respect to any Person means that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
as such or made any other distribution, payment or delivery of property or cash
to its stockholders as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for consideration any shares of any class of
its capital stock outstanding on or after the Closing Date (or any options or
warrants issued by such Person with respect to its capital stock), or set aside
any funds for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock of such Person outstanding on or
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after the Closing Date (or any options or warrants issued by such Person with
respect to its capital stock).
"Dollars" and "$" each mean lawful money of the United States.
"Domestic Lending Office" has the meaning provided in the definition
of "Lending Office".
"Domestic Subsidiary" means each Subsidiary of Holdings that is
incorporated under the laws of the United States or any State thereof.
"Eligible Assignee" means and includes (a) a commercial bank or (b) a
financial institution, a fund or other "accredited investor" (as defined in
Regulation D of the Securities Act) that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business.
"Environmental Claims" means all actions, suits, proceedings or claims
by any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release of
Hazardous Materials or injury to the environment or threat to public health,
personal injury (including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence, placement, discharge,
emission or release (including intentional and unintentional, negligent and non-
negligent, sudden or non-sudden, accidental or non-accidental placement, spills,
leaks, discharges, emissions or releases) of any Hazardous Material at, in, or
from property, whether or not owned by Holdings or any of its Subsidiaries, or
(b) any other violation, or alleged violation, of any Environmental Law.
"Environmental Law" has the meaning specified in the definition of
"Hazardous Material".
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" means each person (as defined in Section 3(9) of
ERISA) which together with Holdings or a Subsidiary of Holdings would be deemed
to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o)
of the Code.
"Eurodollar Lending Office" has the meaning provided in the definition
of "Lending Office".
"Eurodollar Loan" means a Loan (other than a Swingline Loan) that
bears interest based at the Eurodollar Rate.
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"Eurodollar Rate" means, for any Interest Period with respect to
Eurodollar Loans comprising part of the same Borrowing, the per annum rate of
interest (rounded upward to the next 1/100th of 1%) determined by the
Administrative Agent (whose determination shall be conclusive in the absence of
manifest error) as follows:
Eurodollar Rate = Eurodollar Base Rate
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day (whether or not applicable to any
Lender) under regulations issued from time to time by the Federal Reserve Board
for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" as defined in
Regulation D). The Eurodollar Rate for any outstanding Eurodollar Loans shall be
adjusted automatically as of the effective date of any change in the Eurodollar
Reserve Percentage.
"Eurodollar Base Rate" means the interest rate per annum (rounded
upward to the next 1/16 of 1%) at which deposits in Dollars are offered by Bank
of America's (or any successor Administrative Agent) applicable Lending Office
to prime international banks in the offshore dollar market at or about 11:00
a.m. (New York City time), two Business Days before the first day of the
applicable Interest Period in an aggregate amount approximately equal to the
amount of the Loan made by Bank of America (or any successor Administrative
Agent) with respect to such Eurodollar Loan and for a period of time comparable
to the number of days in the applicable Interest Period.
The determination of the Eurodollar Reserve Percentage and the
Eurodollar Base Rate by the Administrative Agent shall be conclusive in the
absence of manifest error.
"Event of Default" means any of the events or circumstances specified
in Section 9.01.
"Excess Cash Flow" means, for any period, the remainder of (a) the sum
of, without duplication, (i) Consolidated Net Income for such period, (ii) the
amount of all non-cash charges (including, without limitation or duplication,
depreciation, amortization and non-cash interest expense but excluding any non-
cash charges deducted in determining Adjusted Consolidated Working Capital)
included in determining Consolidated Net Income for such period, and (iii) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, minus (b) the sum of, without duplication, (i) the
amount of (1) all Capital Expenditures (including those in connection with a
Permitted Capital Expansion) made by Holdings and its Subsidiaries during such
period (other than Capital Expenditures (including those in connection with a
Permitted Capital Expansion) to the extent financed with equity proceeds, Asset
Sale proceeds, insurance proceeds or Indebtedness) plus (or minus, if negative)
(2) the Rollover Amount for such period to be carried forward to the next period
less the
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Rollover Amount (if any) for the preceding period carried forward to the current
period, (ii) the amount of all Permitted Acquisitions made by Holdings and its
Subsidiaries during such period (other than Permitted Acquisitions to the extent
financed with equity proceeds, Asset Sale proceeds, insurance proceeds or
Indebtedness), (iii) the aggregate amount of permanent principal payments of
Indebtedness of Holdings and its Subsidiaries during such period (other than
repayments of Loans, provided that repayments of Loans shall be deducted in
determining Excess Cash Flow if such repayments were (x) required as a result of
a Scheduled Repayment under Section 2.08(a) or (b) or (y) made as a voluntary
prepayment with internally generated funds (but in the case of a voluntary
prepayment of Revolving Loans or Swingline Loans only to the extent accompanied
by a voluntary reduction to the Aggregate Revolving Commitment)), (iv) the
increase, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, (v) any non-cash credits (including from sales of
assets and insurance recoveries) included in determining Consolidated Net Income
for such period, (vi) gains from sales of assets or insurance recoveries (other
than sales of inventory in the ordinary course of business) included in
determining Consolidated Net Income for such period, (vii) non-cash charges
added back in a previous period pursuant to clause (a)(ii) above to the extent
any such charge has become a cash item in the current period, and (viii) any
cash payments made during such period under Section 8.03(ii), 8.05(xviii),
8.11(iii) or 8.11(iv) in each case to the extent not deducted in determining
Consolidated Net Income for such period (except to the extent that such cash
payments were financed with equity proceeds or Indebtedness).
"Excess Cash Payment Date" means the date occurring 90 days after the
last day of each fiscal year of Holdings (beginning with its fiscal year ending
on December 31, 1999).
"Excess Cash Payment Period" means, with respect to the repayment
required on each Excess Cash Payment Date, the immediately preceding fiscal year
of Holdings.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the Borrower Senior Subordinated Note Exchange
Offer and the Holdings Senior Discount Note Exchange Offer.
"Existing Letter of Credit" has the meaning specified in the
definition of Issuing Lender.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day the appropriate rate for such previous day
is not yet published in H.15(519), the rate for such day will be the arithmetic
mean of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by the
Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
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"First Adjustment Date" has the meaning specified in the definition of
the term "Adjustment Date".
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America or any territory thereof by
Holdings or any one or more of its Subsidiaries primarily for the benefit of
employees of Holdings or such Subsidiaries residing outside the United States of
America, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or
payments to be made upon termination of employment, and which plan is not
subject to ERISA or the Code.
"Foreign Subsidiary" means each Subsidiary of Holdings which is not a
Domestic Subsidiary.
"Form 4224" has the meaning specified in Section 4.01(f).
"Form 1001" has the meaning specified in Section 4.01(f).
"Form W-8" has the meaning specified in Section 4.01(f).
"Fund Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person. A Person shall be deemed to control another
Person for purposes of this definition if such Person possesses, directly or
indirectly, the power (i) to vote 50% or more of the securities having ordinary
voting power for the election of directors of such Person or (ii) to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and including, in the case of any Lender that is an insurance company, the
National Association of Insurance Commissioners.
"Guaranteed Creditors" means and includes each of the Administrative
Agent, the Collateral Agent, the Issuing Lenders, the Lenders and, in the case
of any Interest Rate Protection Agreements or Other Hedging Agreements, also any
Affiliate of a Lender which has entered into
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an Interest Rate Protection Agreement or Other Hedging Agreement (even if such
Lender subsequently ceases to be a Lender under this Agreement for any reason).
"Guaranteed Obligations" means (i) the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest on each note issued by, and Loans made to, the Borrower
under this Agreement and all reimbursement obligations and unpaid drawings with
respect to Letters of Credit, together with all the other obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of the Borrower to the
Lenders, the Administrative Agent, the Issuing Lenders and the Collateral Agent
now existing or hereafter incurred under, arising out of or in connection with
this Agreement or any other Loan Document and the due performance and compliance
by the Borrower with all the terms, conditions and agreements contained in the
Loan Documents and (ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) of the Borrower owing under any Interest Rate
Protection Agreement or Other Hedging Agreement entered into by the Borrower
with any Lender or any other Guaranteed Creditor so long as such Lender or
affiliate participates in such Interest Rate Protection Agreement or Other
Hedging Agreement, and their subsequent assigns, if any, whether now in
existence or hereafter arising, and the due performance and compliance with all
terms, conditions and agreements contained therein.
"Guarantor" means and includes Holdings and each Subsidiary Guarantor.
"Guarantor Supplement" means a supplement to the Subsidiary Guaranty,
the Pledge Agreement and the Security Agreement substantially in the form of
Exhibit E, whereby a Subsidiary of the Borrower becomes a party to each such
Loan Document.
"Guaranty" means and includes the guaranty of Holdings pursuant to
Article X and the Subsidiary Guaranty.
"Hazardous Material" means and includes (a) any asbestos, urea-
formaldehyde, PCBs or dioxins or other material composed of or containing
asbestos, PCBs or dioxins, (b) crude oil, any fraction thereof, and any
petroleum product, (c) any natural gas, natural gas liquids, liquefied natural
gas or other natural gas product or synthetic gas, and (d) any hazardous or
toxic waste, substance or material or pollutant or contaminant defined as such
in (or for purposes of) or that may result in the imposition of liability under
any "Environmental Law", defined as the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund", or any other
applicable Federal, state, local or other statute, law, ordinance, code, rule,
regulation, order or decree, as now or at any time hereafter in effect,
regulating, relating to, or imposing liability concerning the environment, the
impact of the environment on human health, or any hazardous or toxic waste,
substance or material or pollutant or contaminant.
"Holdings" has the meaning specified in the preamble hereto.
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"Holdings Common Stock" has the meaning specified in Section 6.22.
"Holdings Junior Subordinated Notes" means the junior subordinated
promissory notes issued by Holdings pursuant to the Recapitalization Documents.
"Holdings Preferred Stock" has the meaning specified in Section 6.22.
"Holdings Senior Discount Note Documents" means the Holdings Senior
Discount Note Indenture, the Holdings Senior Discount Notes and all other
documents and agreements executed and delivered pursuant to the Holdings Senior
Discount Note Indenture.
"Holdings Senior Discount Note Exchange Offer" means the exchange
offer for Holdings Senior Discount Notes pursuant to the applicable Holdings
Senior Discount Note Documents for new Holdings Senior Discount Notes which have
been registered under the Securities Act.
"Holdings Senior Discount Note Indenture" means the Indenture to be
entered into between Holdings and a trustee pursuant to which the Holdings
Senior Discount Notes are to be issued, as amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"Holdings Senior Discount Notes" means Holdings' senior unsecured
discount notes due no earlier than 2009 (which term includes the senior discount
notes of Holdings issued as part of the Holdings Senior Discount Note Exchange
Offer), as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof (which notes shall not be guaranteed or
supported in any way by any Subsidiary of Holdings).
"Holdings Shareholder Subordinated Note" means an unsecured junior
subordinated note issued by Holdings (and not guaranteed or supported in any way
by any Subsidiary of Holdings) in the form of Exhibit J (appropriately
completed), as amended, modified or supplemented from time to time in accordance
with the terms of this Agreement.
"Holdings Tax Sharing Agreement" means the Tax Sharing Agreement,
dated as of July 31, 1998, between Holdings and the Borrower, as amended,
modified or supplemented from time to time to time in accordance with the terms
hereof and thereof.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than (i)
trade payables entered into in the ordinary course of business pursuant to
ordinary terms and (ii) ordinary course purchase price adjustments); (c) all
reimbursement or payment obligations with respect to letters of credit or non-
contingent reimbursement or payment obligations with respect to bankers'
acceptances and similar documents; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or other
title retention agreement or sales of accounts receivable, in any such case with
respect to property acquired by
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the Person (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such
property); (f) all Capital Lease Obligations; (g) all net obligations with
respect to Interest Rate Protection Agreements and Other Hedging Agreements; (h)
all indebtedness referred to in clauses (a) through (g) above and clause (i)
below secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
valued, in the case of Indebtedness not assumed, at the lesser of the amount of
such obligation and the fair market value of the encumbered property or asset;
and (i) all Contingent Obligations. Notwithstanding the foregoing, Indebtedness
shall not include trade payables and accrued expenses incurred by any Person in
accordance with customary practices and in the ordinary course of business of
such Person.
"Indebtedness to be Refinanced" means the Indebtedness described in
Schedule 1.01(d).
"Indemnified Liabilities" has the meaning provided in Section 12.05.
"Indemnified Person" has the meaning provided in Section 12.05.
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors or similar proceedings, or (b) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangement in respect of its creditors generally; in each case
undertaken under U.S. Federal, State or foreign law, including the Bankruptcy
Code.
"Intercompany Loan" has the meaning provided in Section 8.05(xi).
"Intercompany Note" means a promissory note in the form of Exhibit M.
"Interest Payment Date" means, (a) with respect to any Base Rate Loan,
the last day of the last calendar month of each calendar quarter and in
addition, in the case of Revolving Loans maintained as Base Rate Loans, the
Revolving Termination Date, and (b) with respect to any Eurodollar Loan, the
last day of each Interest Period applicable to such Eurodollar Loan and the date
such Eurodollar Loan is repaid or prepaid; provided, however, that if any
Interest Period for any Eurodollar Loan exceeds three months, then also the date
which falls three months after the beginning of such Interest Period and, if
applicable, at three month intervals thereafter shall also be an "Interest
Payment Date".
"Interest Period" means, in relation to any Eurodollar Loan, the
period commencing on the applicable Borrowing Date or any Conversion Date or
Continuation Date with respect thereto and ending on the date one, two, three or
six months thereafter, as selected or deemed selected by the Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation (provided that the
Borrower shall have the right, with the consent of the Administrative Agent, to
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select an Interest Period for the Term Loans with a term of between seven days
and two months in order to ensure compliance with clause (iv) below); provided
--------
that:
(i) if any Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month which is one, two, three or six
months, as the case may be, after the calendar month in which such Interest
Period began;
(iii) no Interest Period for any Revolving Loan shall extend beyond
the Revolving Termination Date; and
(iv) no Interest Period in respect of any Tranche A Term Loans or
Tranche B Term Loans, as the case may be, shall be selected which extends
beyond any date upon which a mandatory repayment of such Tranche of Term
Loans will be required to be made under Section 2.08(a) or (b), as the case
may be, if the aggregate principal amount of Tranche A Term Loans or
Tranche B Term Loans, as the case may be, which have Interest Periods which
will expire after such date will be in excess of the aggregate principal
amount of Tranche A Term Loans or Tranche B Term Loans, as the case may be,
then outstanding less the aggregate amount of such required prepayment.
"Interest Rate Protection Agreement" means an interest rate swap, cap,
collar or similar arrangement entered into to hedge interest rate risk (and not
for speculative purposes).
"Investment" has the meaning provided in Section 8.05.
"Issuing Lender" means (i) Bank of America or any Affiliate thereof in
its capacity as issuer of Letters of Credit hereunder and (ii) Fleet National
Bank but solely in respect of the Standby Letter of Credit in the amount of
$1,000,000 issued for the benefit of the North River Insurance Company, and
expiring on January 1, 1999 (the "Existing Letter of Credit"). Upon termination
of the Existing Letter of Credit and the payment of all amounts (if any) owing
in respect thereof, Fleet National Bank shall cease to be an Issuing Lender
hereunder.
"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land ,
improvements and/or fixtures.
"Lender Affiliate" means an Affiliate of a Lender, including, in the
case of any Lender that is a fund that invests in loans, any other fund that
invests in loans and is managed or is advised by the same investment advisor of
such Lender or by a Fund Affiliate of such investment advisor.
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"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any Borrowing (including
a Mandatory Borrowing) or to fund its portion of any unreimbursed payment under
Section 3.03(c) or (ii) a Lender having notified the Administrative Agent and/or
the Borrower that it does not intend to comply with the obligations under
Section 2.01(a), 2.01(b), 2.01(c), 2.01(d)(iv) or 3.03(c), in the case of either
clause (i) or (ii) above as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority.
"Lenders" has the meaning specified in the preamble hereto.
"Lending Office" means, with respect to any Lender, the office or
offices of such Lender specified as its "Lending Office", "Domestic Lending
Office" or "Eurodollar Lending Office", as the case may be, on Schedule 1.01(a),
or such other office or offices of such Lender as it may from time to time
notify the Borrower and the Administrative Agent.
"Letter of Credit" means any letter of credit issued by any Issuing
Lender pursuant to Article III.
"Letter of Credit Amendment Application" means an application form for
an amendment to any outstanding standby or commercial documentary letter of
credit as shall at any time be in use by the respective Issuing Lender, as such
Issuing Lender shall request.
"Letter of Credit Application" means an application form for an
issuance of any standby or commercial documentary letter of credit as shall at
any time be in use at the Issuing Lender, as such Issuing Lender shall request.
"Letter of Credit Borrowing" means an extension of credit resulting
from a drawing under any Letter of Credit which shall not have been reimbursed
on or before the Business Day following the respective Disbursement Date when
made nor converted into a Borrowing of Revolving Loans under Section 3.03(b).
"Letter of Credit Commitment" means the commitment of the Issuing
Lenders to issue Letters of Credit, the Letter of Credit Obligations in respect
thereof not to exceed in aggregate amount on any date the lesser of (i) the
Aggregate Revolving Commitment on such date and (ii) $5,000,000.
"Letter of Credit Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding plus (b) the
amount of all outstanding Letter of Credit Borrowings.
"Letter of Credit Related Documents" means the Letters of Credit, the
Letter of Credit Applications, the Letter of Credit Amendment Applications and
any other document relating to any Letter of Credit, including any of each
Issuing Lender's standard form documents for letter of credit issuances.
"Level I" has the meaning specified in Section 2.09(a)(ii).
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"Level II" has the meaning specified in Section 2.09(a)(ii).
"Level III" has the meaning specified in Section 2.09(a)(ii).
"Level IV" has the meaning specified in Section 2.09(a)(ii).
"Level V" has the meaning specified in Section 2.09(a)(ii).
"Leverage Ratio Certificate" means a certificate duly executed by a
Responsible Officer of Holdings, substantially in the form of Exhibit G (with
such changes thereto as may be agreed upon from time to time by the
Administrative Agent and Holdings), and including therein, among other things,
calculations supporting the information contained therein.
"Lien" means any interest in any real or personal property or fixture
which secures payment or performance of any obligation and shall include any
mortgage, lien, pledge, encumbrance, charge or other security interest of any
kind, whether arising under a Security Instrument or as a matter of law,
judicial process or otherwise, including the retained security title of a
conditional vendor or lessor.
"Loan" means an extension of credit by a Lender to the Borrower
pursuant to Article II and shall include Tranche A Term Loans, Tranche B Term
Loans, Revolving Loans and Swingline Loans.
"Loan Documents" means this Agreement, each Collateral Document and
all other agreements, instruments, certificates or other documents evidencing,
guaranteeing or securing the Loans, Letter of Credit Borrowings or the other
obligations of the Borrower or any Guarantor hereunder or under any Collateral
Document.
"Majority Lenders" of any Tranche means at any time those Lenders
which would constitute the Required Lenders under, and as defined in, this
Agreement if all outstanding Obligations of the other Tranches under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Mandatory Borrowing" has the meaning specified in Section
2.01(d)(iv).
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), a material adverse
effect on:
(a) the operations, business, assets, properties, liabilities,
condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole (although the term "prospects" shall not
apply to any representation or warranty made in connection with the
incurrence of Loans on the Closing Date); or
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(b) the rights and remedies of the Administrative Agent, the
Collateral Agent, the Issuing Lender and the Lenders under this Agreement
or under any other Loan Document.
"Measurement Period" means any period of four consecutive fiscal
quarters of Holdings (taken as one accounting period), provided, however, for
purposes of determining compliance with Section 8.08 for any Measurement Period
ending on or prior to June 30, 1999, each such Measurement Period means the
period from the Closing Date to the last day of the fiscal quarter of Holdings
then last ended (in each case taken as one accounting period).
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith, Inc.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means a mortgage, deed of trust, leasehold mortgage,
leasehold deed of trust or similar Security Instrument.
"Mortgage Policies" has the meaning specified in Section 5.01(g).
"Mortgaged Property" means each parcel of Real Property owned or
leased by any Credit Party which is encumbered by a Mortgage.
"Net Debt Proceeds" means, with respect to any incurrence of
Indebtedness for borrowed money, the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith
(including attorneys' fees, accountants' fees and investment banking fees))
received by the respective Person from the respective incurrence of such
Indebtedness for borrowed money.
"Net Equity Proceeds" means, with respect to each issuance or sale of
any equity by any Person or any capital contribution to such Person, the cash
proceeds (net of underwriting discounts and commissions and other reasonable
costs associated therewith (including attorneys' fees, accountants' fees and
investment banking fees)) received by such Person from the respective sale or
issuance of its equity or from the respective capital contribution.
"Net Insurance Proceeds" means, with respect to any Recovery Event,
the cash proceeds (net of reasonable costs and taxes incurred in connection with
such Recovery Event) received by the respective Person in connection with the
respective Recovery Event.
"Net Sale Proceeds" means, in connection with any Asset Sale, the cash
proceeds (including any cash payments received by way of deferred payment
pursuant to a promissory note, receivable or otherwise, but only as and when
received in cash) of such Asset Sale net of (i) reasonable transaction costs
(including any underwriting, brokerage or other customary selling commissions
and reasonable legal, advisory and other fees and expenses, including title and
recording expenses, associated therewith actually incurred), (ii) required debt
payments (other than pursuant hereto), (iii) taxes estimated to be paid as a
result of such Asset Sale and (iv) any portion of such cash proceeds which
Holdings determines in good faith should be reserved for
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post-closing adjustments or liabilities (to the extent Holdings delivers to the
Administrative Agent a certificate signed by a Responsible Officer of Holdings
as to such determination).
"Non-Defaulting Lender" shall mean each Lender other than a Defaulting
Lender.
"Notice of Borrowing" means a notice given by the Borrower to the
Administrative Agent pursuant to Section 2.03(a), in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice given by the
Borrower to the Administrative Agent pursuant to Section 2.04(b), in
substantially the form of Exhibit B.
"Obligations" means all Loans, Letter of Credit Borrowings and other
indebtedness, advances, debts, liabilities, obligations, indemnities, fees,
expenses (including, without limitation, Attorney Costs), covenants and duties,
of any kind or nature, owing by the Borrower or any Guarantor to any Lender, the
Administrative Agent, the Collateral Agent, the Swingline Lender or any Issuing
Lender in connection with this Agreement or any other Loan Document, in each
case whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and however acquired (including those
acquired by assignment) or arising and whether or not for the payment of money
or evidenced by any note, guarantee or other instrument.
"OECD" means the Organization for Economic Cooperation and
Development.
"Originating Lender" has the meaning provided in Section 12.07(d).
"Other Hedging Agreement" means any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency or
commodity values.
"Other Taxes" has the meaning specified in Section 4.01(b).
"Participant" has the meaning specified in Section 12.07(d).
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" has the meaning specified in Section 8.02(x).
"Permitted Capital Expansion" means (i) in addition to the current
expansion of the Borrower's Tuscaloosa, Alabama facility, any other expansion of
a manufacturing facility owned or leased by the Borrower or any of its
Subsidiaries on the Closing Date (including any additional expansion of the
Tuscaloosa, Alabama facility) and (ii) the construction of any new manufacturing
facility by the Borrower or any of its Subsidiaries.
"Permitted Encumbrance" means, with respect to any Mortgaged Property,
such exceptions to title as are set forth in the Mortgage Policy delivered with
respect thereto, all of
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which exceptions must be reasonably acceptable, on the date of delivery of such
Mortgage Policy, to the Administrative Agent.
"Permitted Holders" means Code, Hennessy & Simmons, Inc., Code
Hennessy & Simmons LLC, CHS and their respective Affiliates.
"Permitted Liens" has the meaning provided in Section 8.01.
"Permitted Retained Equity Transactions" means, collectively,
Permitted Acquisitions, Capital Expenditures (including Permitted Capital
Expansions), Investments made pursuant to Section 8.05 (xviii), Dividends made
pursuant to Section 8.03(iv) and payments made pursuant to Section 8.11 (v).
"Person" means any natural person, corporation, firm, trust,
partnership, limited liability company, business trust, association, government,
governmental agency or authority, or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" means any pension plan as defined in Section 3(2) of ERISA,
which is maintained or contributed to by (or to which there is an obligation to
contribute of) Holdings or a Subsidiary of Holdings or an ERISA Affiliate, and
each such plan for the five year period immediately following the latest date on
which Holdings or a Subsidiary of Holdings or an ERISA Affiliate maintained,
contributed to or had an obligation to contribute to such plan.
"Pledge Agreement" means the Pledge Agreement in the form of Exhibit
C, as amended, modified or supplemented from time to time in accordance with the
terms thereof and hereof.
"Pledged Securities" has the meaning specified in the Pledge
Agreement.
"Pro Forma Balance Sheet" means the pro forma consolidated balance
sheet of Holdings and its Subsidiaries as of June 30, 1998 after giving effect
to the transactions contemplated hereunder, which pro forma consolidated balance
sheet has been prepared, in all material respects, in accordance with GAAP.
"Projections" means the projections prepared by, or on behalf of,
Holdings, dated July 1, 1998 and furnished to the Lenders prior to the Closing
Date.
"Qualified Public Equity Offering" means a bona fide underwritten sale
to the public of common stock of Holdings pursuant to a registration statement
(other than on Form S-8 or any other form relating to securities issuable under
any benefit plan of Holdings or any of its Subsidiaries, as the case may be)
that is declared effective by the Securities and Exchange Commission and such
offering results in gross cash proceeds to Holdings (exclusive of underwriter's
discounts and commissions and other expenses) of at least $50,000,000.
"Real Property" of any Person means all the right, title and interest
of such Person in and to land, improvements and fixtures, including Leaseholds.
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"Recapitalization" means the recapitalization of Holdings pursuant to
the Recapitalization Documents.
"Recapitalization Agreement" means the Agreement and Plan of Merger,
dated as of June 23, 1998, by and between Holdings and Globe Acquisition
Company, as amended, modified and supplemented from time to time.
"Recapitalization Documents" means the Recapitalization Agreement and
all other documents and agreements entered into pursuant to the Recapitalization
Agreement.
"Recovery Event" means the receipt by Holdings or any of its
Subsidiaries of any cash insurance proceeds or condemnation awards payable by
reason of theft, loss, physical destruction, damage, taking or any other similar
event with respect to any property or assets of Holdings or any of its
Subsidiaries.
"Reference Rate" means the rate of interest publicly announced from
time to time by Bank of America in San Francisco (or any successor
Administrative Agent) as its "reference rate". It is a rate set by Bank of
America based upon various factors, including Bank of America's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above or below
such announced rate. Any change in the Reference Rate announced by Bank of
America shall take effect at the opening of business on the day specified in the
public announcement of such change.
"Refinancing" means, collectively, the repayment of all Indebtedness
to be Refinanced, together with all accrued interest, premiums, fees,
commissions and expenses owing in connection therewith, and the termination of
all commitments thereunder.
"Register" has the meaning specified in Section 2.02(a).
"Regulation D" means Regulation D of the Federal Reserve Board or from
time to time in effect and any successor to all or a portion thereof
establishing reserve requirements.
"Replaced Lender" has the meaning specified in Section 4.08(b).
"Replacement Lender" has the meaning specified in Section 4.08(b).
"Reportable Event" means an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Lenders" means Lenders, the sum of whose outstanding Term
Loans and Revolving Commitments (or after the termination thereof, outstanding
Revolving Loans and Revolving Commitment Percentages of Swingline Loans and
Letter of Credit Obligations) represent at least 50.1% of the sum of all
outstanding Term Loans and the Aggregate Revolving Commitment (or after the
termination thereof, the sum of the then total outstanding Revolving
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Loans and the aggregate Revolving Commitment Percentages of the total
outstanding Swingline Loans and Letter of Credit Obligations at such time).
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of a court or of a
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" means, for Holdings, the Borrower or any
Subsidiary thereof, its chief executive officer, its president, any of its
executive vice presidents, its chief operating office, its chief financial
officer or its treasurer or any other officer having substantially the same
authority and responsibility as any of the foregoing officers.
"Retained Equity Amount" means, at any time, an amount equal to the
remainder of (A) the sum of (I) 50% of all Net Equity Proceeds theretofore
received by Holdings after the Closing Date (other than Net Equity Proceeds
referred to in the parenthetical of Section 2.07(e)) plus (II) the amount of all
other Net Equity Proceeds received by Holdings after the Closing Date as
described in clauses (ii), (iii) and (iv) of the parenthetical in Section
2.07(e), in each case to the extent that such Net Equity Proceeds are not used
to voluntarily prepay outstanding Term Loans, less (B) the amount of all
Permitted Retained Equity Transactions previously made which utilized the
Retained Equity Amount.
"Revolving Borrowing" means a Borrowing hereunder consisting of
Revolving Loans made to the Borrower on the same Borrowing Date by the Lenders
ratably according to their respective Revolving Commitment Percentages and in
the case of Eurodollar Loans, having the same Interest Periods, provided that
any Base Rate Loans incurred pursuant to Section 4.02 shall be considered as
part of the related Revolving Borrowing of Eurodollar Loans.
"Revolving Commitment" means, for each Lender, the amount set forth
opposite such Lender's name in Schedule 1.01(b) directly below the column
entitled "Revolving Commitment," as such amount may be modified from time to
time pursuant to the terms hereof.
"Revolving Commitment Percentage" of any Lender at any time means a
fraction (expressed as a percentage) the numerator of which is the Revolving
Commitment of such Lender at such time and the denominator of which is the
Aggregate Revolving Commitment at such time, provided that if the Revolving
Commitment Percentage of any Lender is to be determined after the Aggregate
Revolving Commitment has been terminated, then the Revolving Commitment
Percentages of the Lenders shall be determined immediately prior (and without
giving effect) to such termination.
"Revolving Loan" means a Loan by a Lender to the Borrower under
Section 2.01(c), which may be a Eurodollar Loan or a Base Rate Loan.
"Revolving Termination Date" means the earliest to occur of (a)
January 15, 2005, (b) the date on which all outstanding Tranche A Term Loans are
repaid or prepaid in full or
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(c) the date on which the Revolving Commitments shall otherwise terminate in
accordance with the provisions hereof.
"RL Lender" means, at any time, each Lender with a Revolving
Commitment or with outstanding Revolving Loans.
"Rollover Amount" has the meaning specified in Section 8.07(b).
"S&P" means Standard & Poor's Ratings Service, a division of McGraw
Hill, Inc.
"Scheduled Repayment" means any Scheduled A Repayment or any Scheduled
B Repayment.
"Scheduled A Repayment" has the meaning specified in Section 2.08(a).
"Scheduled B Repayment" has the meaning specified in Section 2.08(b).
"Section 4.01(f) Certificate" has the meaning specified in Section
4,01(f)(i)(B)(x).
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Agreement" means the Security Agreement in the form of
Exhibit F, as amended, modified or supplemented from time to time in accordance
with the terms thereof and hereof.
"Security Instrument" means any security agreement, chattel mortgage,
assignment, pledge agreement, financing or similar statement or notice,
continuation statement, other agreement or instrument, or amendment or
supplement to any thereof, providing for, evidencing or perfecting any security
interest.
"Significant Subsidiary" means any Subsidiary of the Borrower that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the Closing Date.
"Specified Default" means (i) any Default under Section 9.01(a),
9.01(f) or 9.01(g) or (ii) any Event of Default under Section 9.01(a), 9.01(b),
9.01(c) (but only as a result of a breach of Section 8.07, 8.08, 8.09 or 8.10),
9.01(e), 9.01(f). 9.01(g), 9.01(i), 9.01(j) or 9.01(k).
"Standby Letter of Credit" has the meaning specified in Section
3.01(a).
"Subsidiary" of a Person means any corporation, association, limited
liability company, partnership or other business entity of which more than 50%
of the voting stock or other voting equity interests (in the case of Persons
other than corporations) is owned or controlled directly or indirectly by such
Person, or one or more of the Subsidiaries of the Person, or a combination
thereof.
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"Subsidiary Guarantor" means each of the Domestic Subsidiaries of the
Borrower listed on Schedule 1.01(c) and each other Domestic Subsidiary of the
Borrower (and, to the extent Section 7.12 is operative, each Foreign Subsidiary
of the Borrower) that hereafter executes and delivers the Subsidiary Guaranty or
a Guarantor Supplement.
"Subsidiary Guaranty" means the Guaranty in the form of Exhibit D, as
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof.
"Swingline Amount" means an aggregate amount of $5,000,000.
"Swingline Borrowing" means a Borrowing of a Swingline Loan hereunder
on any Borrowing Date.
"Swingline Lender" means Bank of America.
"Swingline Loan" means a Loan by the Swingline Lender to the Borrower
pursuant to Section 2.01(d).
"Syndication Agent" means Merrill Lynch.
"Taxes" has the meaning specified in Section 4.01(a).
"Term Borrowing" means the Tranche A Term Loan Borrowing and the
Tranche B Term Loan Borrowing.
"Term Loan" means each Tranche A Term Loan and each Tranche B Term
Loan.
"Trade Letter of Credit" has the meaning specified in Section 3.01(a).
"Tranche" means the respective facility and commitments utilized in
making Loans hereunder, with there being four separate Tranches, i.e., Tranche A
Term Loans, Tranche B Term Loans, Revolving Loans and Swingline Loans.
"Tranche A Term Loan" means a Loan made by a Lender to the Borrower
under Section 2.01(a), which may be a Base Rate Loan or a Eurodollar Loan.
"Tranche A Term Loan Borrowing" means the Borrowing hereunder
consisting of Tranche A Term Loans made to the Borrower on the Closing Date by
the Lenders ratably according to their respective Tranche A Term Loan Commitment
Percentages and in the case of Eurodollar Loans, having the same Interest
Periods, provided that any Base Rate Loans incurred pursuant to Section 4.02
shall be considered as part of the related Tranche A Term Loan Borrowing of
Eurodollar Loans.
"Tranche A Term Loan Commitment" means, for each Lender, the amount
set forth opposite such Lender's name in Schedule 1.01(b) directly below the
column entitled "Tranche A Term Loan Commitment", as such amount may be modified
from time to time pursuant to the terms hereof.
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"Tranche A Term Loan Commitment Percentage" of any Lender at any time
means (i) prior to the incurrence of Tranche A Term Loans on the Closing Date, a
fraction (expressed as a percentage) the numerator of which is the Tranche A
Term Loan Commitment of such Lender at such time and the denominator of which is
the Aggregate Tranche A Term Loan Commitment at such time and (ii) at any time
thereafter, a fraction (expressed as a percentage) the numerator of which is the
outstanding Tranche A Term Loans of such Lender at such time and the denominator
of which is the aggregate outstanding Tranche A Term Loans of all Lenders at
such time.
"Tranche B Term Loan" means a Loan made by a Lender to the Borrower
under Section 2.01(b), which Loan may be a Eurodollar Loan or a Base Rate Loan.
"Tranche B Term Loan Borrowing" means the Borrowing hereunder
consisting of Tranche B Term Loans made to the Borrower on the Closing Date by
the Lenders ratably according to their respective Tranche B Term Loan Commitment
Percentages and in the case of Eurodollar Loans, having the same Interest
Periods, provided that any Base Rate Loans incurred pursuant to Section 4.02
shall be considered as part of the related Tranche B Term Loan Borrowing of
Eurodollar Loans.
"Tranche B Term Loan Commitment" means, for each Lender, the amount
set forth opposite such Lender's name in Schedule 1.01(b) directly below the
column entitled "Tranche B Term Loan Commitment", as such amount may be modified
from time to time pursuant to the terms hereof.
"Tranche B Term Loan Commitment Percentage" of any Lender at any time
means (i) prior to the incurrence of Tranche B Term Loans on the Closing Date, a
fraction (expressed as a percentage) the numerator of which is the Tranche B
Term Loan Commitment of such Lender at such time and the denominator of which is
the Aggregate Tranche B Term Loan Commitment at such time and (ii) at any time
thereafter, a fraction (expressed as a percentage) the numerator of which is the
outstanding Tranche B Term Loans of such Lender at such time and the denominator
of which is the aggregate outstanding Tranche B Term Loans of all Lenders at
such time.
"Transaction" means, collectively, (i) the Recapitalization, (ii) the
Refinancing, (iii) the issuance of the Borrower Senior Subordinated Notes, (iv)
the issuance by Holdings of the Holdings Junior Subordinated Notes, (v) the
equity issuances referred to in Section 5.01(l)(ii), (vi) the Asset Contribution
and (vii) the entering into of this Agreement and the occurrence of the Closing
Date.
"Transaction Documents" means this Agreement, the other Loan
Documents, the Borrower Senior Subordinated Note Documents, the Holdings Junior
Subordinated Notes, the Recapitalization Documents, the Asset Contribution
Documents and the documents that evidence the equity issuances referred to in
Section 5.01(l)(ii).
"Transferee" has the meaning specified in Section 12.08.
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"UCC" means the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any, by
which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"United States" and "U.S." each means the United States of America.
"Voting Stock" of any Person as of any date means the capital stock of
such Person that is of that time entitled to vote in the election of the Board
of Directors of such Person.
"Waivable Mandatory Repayment" has the meaning specified in Section
2.07(j).
"Wholly-Owned Domestic Subsidiary" means each Domestic Subsidiary of
Holdings that is also a Wholly-Owned Subsidiary of Holdings.
"Wholly-Owned Foreign Subsidiary" means each Foreign Subsidiary of
Holdings that is also a Wholly-Owned Subsidiary of Holdings.
"Wholly-Owned Subsidiary" means, as to any Person, (i) any corporation
100% of whose capital stock (other than director's or other qualifying shares)
is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries
of such Person and (ii) any partnership, association or other entity in which
such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a
100% equity interest at such time.
1.02 Other Definitional Provisions.
(a) Defined Terms. Unless otherwise specified herein or therein, all
terms defined in this Agreement shall have such defined meanings when used in
any certificate or other document made or delivered pursuant hereto. The
meaning of defined terms shall be equally applicable to the singular and plural
forms of the defined terms. Terms (including uncapitalized terms) not otherwise
defined herein and that are defined in the UCC shall have the meanings therein
described.
(b) The Agreement. The words "hereof", "herein", "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
section, subsection, schedule and exhibit references are to this Agreement
unless otherwise specified.
(c) Certain Common Terms. (i) The term "documents" includes any and
all instruments, documents, agreements, certificates, indentures, notices and
other writings, however evidenced.
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(ii) The terms "including" or "include" are not limiting and mean
"including without limitation" or "include without limitation".
(d) Performance; Time. Subject to the definition of the term
"Interest Period" in Section 1.01, whenever any performance obligation hereunder
shall be stated to be due or required to be satisfied on a day other than a
Business Day, such performance shall be made or satisfied on the next succeeding
Business Day. In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words "to"
and "until" each mean "to but excluding"; and the word "through" means "to and
including". If any provision of this Agreement refers to any action taken or to
be taken by any Person, or which such Person is prohibited from taking, such
provision shall be interpreted to encompass any and all means, direct or
indirect, of taking, or not taking, such action.
(e) Contracts. Unless otherwise expressly provided herein, references
to agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of any
Loan Document.
(f) Laws. References to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, amending or
replacing such statute or regulation.
1.03 Accounting Principles. Except as provided to the contrary
herein, all accounting terms used herein shall be interpreted in accordance with
GAAP. Unless the context otherwise clearly requires, all financial computations
required under this Agreement shall be made in accordance with generally
accepted accounting principles applied in a manner consistent with those in
effect on December 31, 1997.
ARTICLE II.
THE CREDIT FACILITIES
---------------------
2.01 Amounts and Terms of Commitments.
(a) The Tranche A Term Loans. Each Lender with a Tranche A Term Loan
Commitment severally agrees, on the terms and conditions hereinafter set forth,
to make a Tranche A Term Loan to the Borrower on the Closing Date, which Tranche
A Term Loans (i) shall be made and initially maintained as a single Borrowing of
Base Rate Loans and (ii) shall be made by each such Lender in that initial
aggregate principal amount as is equal to the Tranche A Term Loan Commitment of
such Lender on such date. Once repaid or prepaid, Tranche A Term Loans incurred
hereunder may not be reborrowed.
(b) The Tranche B Term Loans. Each Lender with a Tranche B Term Loan
Commitment severally agrees, on the terms and conditions hereinafter set forth,
to make a
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Tranche B Term Loan to the Borrower on the Closing Date, which Tranche B Term
Loans (i) shall be made and initially maintained as a single Borrowing of Base
Rate Loans and (ii) shall be made by each such Lender in that initial aggregate
principal amount as is equal to the Tranche B Term Loan Commitment of such
Lender on such date. Once repaid or prepaid, Tranche B Term Loans incurred
hereunder may not be reborrowed.
(c) The Revolving Loans. Each Lender with a Revolving Commitment
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Loans to the Borrower from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding the amount of such Lender's
Revolving Commitment; provided, however, that (i) no more than $8,500,000 of
Revolving Loans may be incurred on the Closing Date and all such Revolving Loans
shall be made and initially maintained as a single Borrowing of Base Rate Loans
and (ii) after giving effect to any Revolving Borrowing, the aggregate principal
amount of all outstanding Revolving Loans, together with the aggregate principal
amount of all outstanding Swingline Loans (exclusive of Swingline Loans which
are repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) plus the aggregate amount of all
outstanding Letter of Credit Obligations (exclusive of unpaid drawings under any
Letter of Credit which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans), shall not
exceed the Aggregate Revolving Commitment. Within such limits, and subject to
the other terms and conditions hereof, the Borrower may borrow Revolving Loans
under this Section 2.01(c), prepay pursuant to Section 2.06 or 2.07(a) and
reborrow pursuant to this Section 2.01(c).
(d) The Swingline Loans.
(i) The Swingline Lender agrees, on the terms and conditions
hereinafter set forth, to make Swingline Loans to the Borrower on any
Business Day during the period from the Closing Date to the Revolving
Termination Date, in an aggregate amount not to exceed at any time
outstanding the Swingline Amount; provided, however, (x) each Swingline
Loan shall be made and maintained as a Base Rate Loan and (y) that after
giving effect to any Swingline Borrowing, the aggregate principal amount of
all outstanding Swingline Loans, together with the aggregate principal
amount of all outstanding Revolving Loans plus the aggregate amount of all
outstanding Letter of Credit Obligations (exclusive of unpaid drawings
under any Letter of Credit which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans), shall not exceed the Aggregate Revolving Commitment.
Within such limits, and subject to the other terms and conditions hereof,
the Borrower may borrow Swingline Loans under this Section 2.01(d), prepay
pursuant to Section 2.06 or 2.07(a) and reborrow pursuant to this Section
2.01(d). Notwithstanding the foregoing, the Swingline Lender shall not be
obligated to make any Swingline Loans at a time when a Lender Default
exists unless the Swingline Lender has entered into arrangements
satisfactory to it and the Borrower to eliminate the Swingline Lender's
risk with respect to the Defaulting Lender's or Lenders' participation in
such Swingline Loans, including
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by Cash Collateralizing such Defaulting Lender's or Lenders' Revolving
Commitment Percentage of the outstanding Swingline Loans.
(ii) The Swingline Lender shall not be responsible for or liable to
any Lender for determining whether (A) any representation or warranty of
the Borrower in connection with any request for a Swingline Loan is correct
or (B) any Default or Event of Default exists or would result from the
making of any such Swingline Loan; provided, however, that the Swingline
Lender shall not make any Swingline Loan after receiving a written notice
from the Borrower or the Required Lenders stating that a Default or an
Event of Default exists and is continuing until such time as the Swingline
Lender shall have received written notice from the Administrative Agent
that such Default or Event of Default has been cured or waived.
(iii) Each Swingline Loan shall reduce the available Aggregate
Revolving Commitment. For purposes of Section 2.10(a), each Swingline Loan
shall be deemed to utilize only the Revolving Commitment of the Swingline
Lender but not any other Lender (it being understood that the aggregate
principal amount of Swingline Loans at any time outstanding may exceed the
otherwise unutilized portion of the Revolving Commitment of the Swingline
Lender).
(iv) On any Business Day, the Swingline Lender may, in its sole
discretion, give notice to the RL Lenders that its outstanding Swingline
Loans shall be funded with a Revolving Borrowing (provided that each such
notice shall be deemed to have been automatically given upon the occurrence
of a Default or an Event of Default under Section 9.01(f) or 9.01(g) or
upon the exercise of any of the remedies provided in Section 9.02), in
which case a Revolving Borrowing constituting Base Rate Loans (each such
Revolving Borrowing, a "Mandatory Borrowing") shall be made no later than
11:00 a.m. (New York City time) on the immediately succeeding Business Day
by all RL Lenders pro rata based on each RL Lender's Revolving Commitment
Percentage, and the proceeds thereof shall be applied directly to repay the
Swingline Lender for such outstanding Swingline Loans. Each RL Lender
hereby irrevocably agrees to make Base Rate Loans upon one Business Day's
notice pursuant to each Mandatory Borrowing in the amount and in the manner
specified in the preceding sentence and on the date specified in writing by
the Swingline Lender notwithstanding (i) that the amount of the Mandatory
Borrowing may not comply with the minimum borrowing denominations set forth
in Section 2.03(a), (ii) whether any of the conditions precedent set forth
in Section 5.02 is then satisfied and (iii) whether the borrowing
limitations set forth in this Agreement are met or the amount of the
Aggregate Revolving Commitment then in effect (including the fact that the
Aggregate Revolving Commitment may have been terminated). In the event
that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code in respect of the
Borrower), each RL Lender hereby agrees that it shall forthwith purchase
from the Swingline Lender (without recourse or warranty) such assignment of
the outstanding Swingline Loans as shall be necessary to cause the RL
Lenders to share in such Swingline Loans ratably
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based upon their respective Revolving Commitment Percentages, provided that
all interest payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date the respective assignment is purchased and,
to the extent attributable to the purchased assignment, shall be payable to
the RL Lender purchasing same from and after such date of purchase. The
failure of any RL Lender to pay such amount to the Swingline Lender shall
not relieve any other RL Lender of its obligation to make the payment to be
made by it.
2.02 Loan Accounts and Register; Notes. (a) The Loans made by, and
the Commitments of, each Lender shall be evidenced by one or more loan accounts
maintained by such Lender and the Register maintained by the Administrative
Agent in the ordinary course of business. The Register maintained by the
Administrative Agent shall, in the event of a discrepancy between the entries in
the Administrative Agent's books and any Lender's books relating to such
matters, be controlling and, absent manifest error, shall be conclusive as to
the amount of the Loans made by the Lenders to the Borrower, the interest and
payments thereon and any other amounts owing in respect of this Agreement. Any
failure to make a notation in the Register or any such loan account or any error
in doing so shall not limit or otherwise affect the obligations of the Borrower
hereunder to pay any amount owing with respect to the Loans. The Borrower
hereby designates the Administrative Agent to serve as the Borrower's agent,
solely for purposes of this Section 2.02, to maintain a register (the
"Register") on which it will record the Commitments from time to time of each of
the Lenders, the Loans made by each of the Lenders and each repayment in respect
of the principal amount of the Loans of each Lender. With respect to any
Lender, the transfer of the Commitments of such Lender and the rights to the
principal of, and interest on, any Loan made pursuant to such Commitments shall
not be effective until such transfer is recorded on the Register maintained by
the Administrative Agent with respect to ownership of such Commitments and Loans
and prior to such recordation all amounts owing to the transferor with respect
to such Commitments and Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Commitments and
Loans shall be recorded by the Administrative Agent on the Register only upon
the acceptance by the Administrative Agent of a properly executed and delivered
Assignment and Acceptance pursuant to Section 12.07(a). The Borrower agrees to
indemnify the Administrative Agent from and against any and all losses, claims,
damages and liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Administrative Agent in performing its duties under
this Section 2.02 (other than any losses, claims, damages and liabilities to the
extent incurred by reason of the gross negligence or willful misconduct of the
Administrative Agent as finally determined by a court of competent
jurisdiction).
(b) If requested by any Lender for purposes of Section 12.07(e), the
Borrower shall execute and deliver to such Lender (and deliver a copy thereof to
the Administrative Agent) one or more promissory notes evidencing the Loans
owing to such Lender pursuant to this Agreement. Any such note shall be in a
form prescribed by the Borrower and the Administrative Agent and shall be
entitled to all of the rights and benefits of this Agreement and the other Loan
Documents.
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<PAGE>
2.03 Procedure for Borrowing. (a) Each Borrowing of Tranche A Term
Loans, Tranche B Term Loans and Revolving Loans (other than a Borrowing of
Revolving Loans pursuant to Section 2.01(d)(iv) or Section 3.03(b)) shall be
made upon the Borrower's irrevocable written notice delivered to the
Administrative Agent in accordance with Section 12.02 in the form of a Notice of
Borrowing (which notice must be received by the Administrative Agent (i) prior
to 11:00 a.m. (New York City time) not less than three Business Days prior to
the requested Borrowing Date, in the case of Eurodollar Loans and (ii) prior to
11:00 a.m. (New York City time) on the requested Borrowing Date, in the case of
Base Rate Loans, specifying:
(A) whether the Borrowing is to be comprised of Tranche A Term Loans,
Tranche B Term Loans or Revolving Loans;
(B) the amount of the Borrowing, which shall be in an aggregate
minimum principal amount of $1,000,000 or any multiple of $100,000 in
excess thereof (or, such lesser multiple as may be acceptable to the
Administrative Agent);
(C) the requested Borrowing Date, which shall be a Business Day;
(D) in the case of a Revolving Borrowing after the Closing Date,
whether such Borrowing is to be comprised of Eurodollar Loans or Base Rate
Loans; and
(E) the duration of the Interest Period, if any, applicable to the
respective Revolving Loans included in such notice. If the Notice of
Borrowing shall fail to specify the duration of the Interest Period for any
Borrowing comprised of Eurodollar Loans, such Interest Period shall be one
month.
(b) Upon receipt of the Notice of Borrowing, the Administrative Agent
will promptly notify each Lender with a Commitment for such Loan of the contents
thereof and of the amount of such Lender's Commitment Percentage of the
requested Borrowing.
(c) Each Lender will make the amount of its Commitment Percentage of
each Tranche A Term Loan Borrowing, Tranche B Term Loan Borrowing or Revolving
Borrowing, as applicable, available to the Administrative Agent for the account
of the Borrower at the Administrative Agent's Payment Office by 2:00 p.m. (New
York City time) on the Borrowing Date (or by 3:00 p.m. (New York City time) on
such Borrowing Date in the case of a Borrowing of Base Rate Loans made on same
day notice) requested by the Borrower in funds immediately available to the
Administrative Agent. Unless any applicable condition of Article V has not been
satisfied or waived in writing by the Required Lenders, the proceeds of all such
Loans will then be made available to the Borrower by the Administrative Agent by
wire transfer in accordance with written instructions provided to the
Administrative Agent by the Borrower. Each Lender will make the amount of its
Commitment Percentage of each Mandatory Borrowing available to the
Administrative Agent for the account of the Swingline Lender at the
Administrative Agent's Payment Office by 2:00 p.m. (New York City time) on the
date specified in Section 2.01(d)(iv).
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<PAGE>
(d) Upon the occurrence and during the continuance of (x) any
Default under Section 9.01(a), 9.01(f) or 9.01(g) or (y) any Event of Default,
the Borrower shall not have the right to elect (and shall not elect) to have a
Loan be made as a Eurodollar Loan.
(e) After giving effect to any Borrowing, there shall not be more
than ten different Interest Periods in effect in respect of all Term Loans and
Revolving Loans.
(f)(i) Whenever the Borrower desires to make a Swingline Borrowing
hereunder, the Borrower shall give the Administrative Agent and the Swingline
Lender not later than 2:00 p.m. (New York City time) on the date that a
Swingline Loan is to be made, written notice or telephonic notice promptly
confirmed in writing of each Swingline Loan to be made hereunder. Each such
notice shall be irrevocable and specify in each case:
(A) the amount of the Swingline Loan, which shall be in an
aggregate minimum principal amount of $250,000 or any multiple of $50,000
in excess thereof (or, in either case, such lesser amount as may be
acceptable to the Administrative Agent); and
(B) the requested Borrowing Date, which shall be a Business Day.
(ii) The Swingline Lender shall not incur any liability to the
Borrower in acting upon any telephonic notice which the Swingline Lender
believes in good faith to have been given by any officer authorized to act on
behalf of the Borrower.
2.04 Conversion and Continuation Elections for Loans. (a) The
Borrower may upon irrevocable written notice to the Administrative Agent in
accordance with paragraph (b) below:
(i) elect to convert on any Business Day, any Base Rate Loans (or
any part thereof in an amount of not less than $1,000,000 or an integral
multiple of $25,000 in excess thereof (or, in either case, such other
amount as may be acceptable to the Administrative Agent in the case of any
Tranche of Term Loans)) into Eurodollar Loans;
(ii) elect to convert on the last day of the Interest Period with
respect thereto, any Eurodollar Loans (or any part thereof in an amount of
not less than $1,000,000 or an integral multiple of $25,000 in excess
thereof (or, in either case, such other amount as may be acceptable to the
Administrative Agent)) into Base Rate Loans; or
(iii) elect to continue on the last day of the Interest Period with
respect thereto, any Eurodollar Loans (or any part thereof in an amount of
not less than $1,000,000 or an integral multiple of $25,000 in excess
thereof (or, in either case, such other amount as may be acceptable to the
Administrative Agent)) as a new Borrowing of Eurodollar Loans;
provided, however, (x) that if the aggregate amount of a Borrowing comprised of
Eurodollar Loans shall have been reduced, by payment, prepayment or conversion
of part thereof to be less than $1,000,000, the Eurodollar Loans comprising such
Borrowing shall automatically convert
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<PAGE>
into Base Rate Loans, and on and after such date the right of the Borrower to
continue such Loans as, and convert such Loans into, Eurodollar Loans shall
terminate and (y) Swingline Loans may not be converted pursuant to this Section
2.04.
(b) The Borrower shall deliver a Notice of Conversion/Continuation in
accordance with Section 12.02 to be received by the Administrative Agent not
later than (i) 11:00 a.m. (New York City time) not less than three Business Days
in advance of the Conversion Date or Continuation Date, if the Loans are to be
converted into or continued as Eurodollar Loans and (ii) 11:00 a.m. (New York
City time) not less than one Business Day in advance of the Conversion Date, if
the Loans are to be converted into Base Rate Loans, specifying:
(A) the Loans to be converted or continued;
(B) the proposed Conversion Date or Continuation Date which shall be
a Business Day;
(C) the aggregate principal amount of Loans to be converted or
continued;
(D) whether such Loans are converted into, or continued as, Base Rate
Loans or Eurodollar Loans; and
(E) the duration of the requested Interest Period, if applicable.
(c) If upon the expiration of any Interest Period applicable to
Eurodollar Loans, the Borrower has failed to select timely a new Interest Period
or the Borrower is not permitted to elect a new Interest Period, such Loans
shall automatically convert into Base Rate Loans.
(d) Upon receipt of a Notice of Conversion/Continuation, the
Administrative Agent will promptly notify each Lender with Loans affected
thereby of the contents thereof, or, if no timely notice is provided by the
Borrower, the Administrative Agent will promptly notify each such Lender of the
details of any automatic conversion. All conversions and continuations shall be
made pro rata according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given.
(e) Upon the occurrence and during the continuance of (x) any Default
under Section 9.01(a), 9.01(f) or 9.01(g) or (y) any Event of Default, the
Borrower shall not elect (and shall not have the right to elect) to have a Loan
converted into or continued as a Eurodollar Loan.
(f) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Loans, there shall
not be more than ten different Interest Periods in effect in respect of all Term
Loans and Revolving Loans.
2.05 Reduction and Termination of Commitments. (a) The Borrower
may, upon not less than three Business Days' prior notice to the Administrative
Agent, terminate the Aggregate Revolving Commitment (including the Letter of
Credit Commitment) or permanently
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<PAGE>
reduce the Aggregate Revolving Commitment (including the Letter of Credit
Commitment) by an aggregate minimum amount of $2,000,000 or any multiple of
$100,000 in excess thereof; provided, however, that no such reduction or
termination shall be permitted if after giving effect thereto and to any
prepayment of the Revolving Loans and/or Swingline Loans made on the effective
date thereof, (i) the then outstanding principal amount of the Revolving Loans
and Swingline Loans plus the outstanding Letter of Credit Obligations would
exceed the Aggregate Revolving Commitment then in effect or (ii) the aggregate
amount of Letter of Credit Obligations would exceed the Letter of Credit
Commitment then in effect; and, provided further, that once reduced in
accordance with this Section 2.05, the Aggregate Revolving Commitment
(including the Letter of Credit Commitment) may not be increased.
(b) The Aggregate Commitment (and the Commitments of each Lender)
shall terminate in their entirety on September 15, 1998 unless the Closing Date
shall have occurred on or prior to such date.
(c) The Aggregate Tranche A Term Loan Commitment (and the Tranche A
Term Loan Commitment of each Lender) shall terminate in its entirety on the
Closing Date (after giving effect to the making of the Tranche A Term Loans on
such date).
(d) The Aggregate Tranche B Term Loan Commitment (and the Tranche B
Term Loan Commitment of each Lender) shall terminate in its entirety on the
Closing Date (after giving effect to the making of the Tranche B Term Loans on
such date).
(e) The Aggregate Revolving Commitment (and the Revolving Commitment
of each Lender) shall terminate in its entirety on the Revolving Termination
Date.
(f) The Aggregate Commitment (and the Commitments of each Lender)
shall terminate in their entirety on the date on which a Change of Control
occurs.
(g) The Aggregate Revolving Commitment shall be permanently reduced
on the dates, and in the amounts, required by Sections 2.07(i) and 2.07(j).
(h) Any reduction of the Aggregate Revolving Commitment and the
Letter of Credit Commitment pursuant to this Section 2.05 shall be applied pro
rata to each Lender's Revolving Commitment in accordance with such Lender's
Revolving Commitment Percentage. The amount of any such reduction of the
Aggregate Revolving Commitment shall not be applied to the Letter of Credit
Commitment unless otherwise specified by the Borrower or required by the
definition thereof. All accrued commitment and letter of credit fees to the
effective date of any reduction or termination of Aggregate Revolving
Commitment, shall be paid on the effective date of such reduction or
termination. The Administrative Agent shall promptly notify the Lenders of any
reduction or termination of the Aggregate Revolving Commitment.
2.06 Voluntary Prepayments. (a) (i) The Borrower may, prior to
11:00 a.m. (New York City time), upon at least three Business Days' notice to
the Administrative Agent in the case of Eurodollar Loans, and prior to 11:00
a.m. (New York City time), upon same Business Day notice to the Administrative
Agent in the case of Base Rate Loans, prepay Tranche A Term
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<PAGE>
Loans, Tranche B Term Loans or Revolving Loans, in whole or in part in amounts
of $1,000,000 or an integral multiple of $25,000 in excess thereof, and with
each such prepayment to be applied ratably among the Lenders holding the Tranche
of Loans so prepaid.
(ii) The Borrower may at any time prepay Swingline Loans, in whole or
in part in minimum amounts of $100,000 or an integral multiple of $50,000 in
excess thereof; provided, however, that notice of such prepayment shall be
required to be delivered to the Administrative Agent by 1:00 p.m. (New York City
time) on the date of such prepayment.
(b) Any notice of prepayment delivered pursuant to this Section 2.06
shall specify the date and amount of such prepayment, whether Tranche A Term
Loans, Tranche B Term Loans, Revolving Loans or Swingline Loans are to be
prepaid and the type of Loans to be prepaid, including whether such prepayment
is of Base Rate Loans or Eurodollar Loans or any combination thereof. Each such
notice shall be irrevocable by the Borrower and the Administrative Agent will
promptly notify each Lender thereof and of such Lender's Commitment Percentage
of such prepayment, if applicable. If such notice is given by the Borrower, the
Borrower shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to each such date on the amount prepaid and the amounts, if
any, required pursuant to Section 4.04; provided that interest shall be paid in
connection with any such prepayment of Base Rate Loans (other than a prepayment
in full) on the next occurring Interest Payment Date.
(c) Each voluntary prepayment of Term Loans pursuant to this Section
2.06 shall consist of a voluntary prepayment of both Tranche A Term Loans and
Tranche B Term Loans, and with the amount of such voluntary prepayment to be
allocated between both Tranches of Term Loans on a pro rata basis (based upon
the then outstanding principal amount of Tranche A Term Loans and Tranche B Term
Loans). Each prepayment of principal of any Tranche of Term Loans pursuant to
this Section 2.06 shall be applied to reduce the then remaining Scheduled
Repayments of the respective Tranche of Term Loans pro rata based upon the then
remaining principal amounts of the Scheduled Repayments of the respective
Tranche after giving effect to all prior reductions thereto.
2.07 Mandatory Prepayments. (a) (i) If on any date (A) the
aggregate unpaid principal amount of all outstanding Revolving Loans and
Swingline Loans plus the outstanding Letter of Credit Obligations (to the extent
not Cash Collateralized pursuant to clause (ii) below or as provided for in
Section 3.07) exceeds the Aggregate Revolving Commitment or (B) the aggregate
unpaid principal amount of Swingline Loans exceeds the Swingline Amount, in each
such case the Borrower shall immediately prepay the amount of such excess.
(ii) If on any date the aggregate amount of all Letter of Credit
Obligations shall exceed either (x) the Letter of Credit Commitment or (y) the
Aggregate Revolving Commitment, the Borrower shall Cash Collateralize on such
date its obligations in respect of Letters of Credit in an amount equal to such
excess.
(b) On each date upon which Holdings or any of its Subsidiaries
receives any proceeds from any incurrence by Holdings or any of its Subsidiaries
of Indebtedness for
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<PAGE>
borrowed money (other than Indebtedness for borrowed money permitted to be
incurred under Section 8.04 as in effect on the Closing Date), an amount equal
to 100% of the Net Debt Proceeds of the respective incurrence of Indebtedness
shall be applied on such date as a mandatory repayment of principal of
outstanding Term Loans and/or reduction to the Aggregate Revolving Commitment
pursuant to Section 2.07(i). Nothing in this paragraph (b) shall be deemed to
permit the issuance of any Indebtedness not otherwise permitted under this
Agreement.
(c) Within two Business Days after Holdings or any of its Subsidiaries
receives any proceeds from any Asset Sale, an amount equal to 100% of the Net
Sale Proceeds from such Asset Sale shall be applied on such date as a mandatory
repayment of principal of outstanding Term Loans and/or as a reduction to the
Aggregate Revolving Commitment pursuant to Section 2.07(i), provided that with
respect to no more than $2,000,000 in the aggregate of such Net Sale Proceeds in
any fiscal year of Holdings, such Net Sale Proceeds shall not give rise to a
repayment and/or reduction pursuant to this paragraph (c) to the extent that no
Default or Event of Default then exists and Holdings has delivered a certificate
to the Administrative Agent on or prior to such date stating that such Net Sale
Proceeds shall be used to purchase assets used or to be used in the Borrower's
or any of its Subsidiaries' business within 270 days following the date of
receipt of the Net Sale Proceeds from such Asset Sale (which certificate shall
set forth the estimates of the proceeds to be so expended), and provided
further, that if all or any portion of such Net Sale Proceeds are not so
reinvested within such 270-day period (or such earlier date, if any, as Holdings
or the Borrower determines not to so reinvest such Net Sale Proceeds), such
remaining portion shall be applied on the last day of such period (or such
earlier date, as the case may be) as a mandatory repayment of principal of
outstanding Term Loans and/or as a reduction to the Aggregate Revolving
Commitment pursuant to Section 2.07(i). Nothing in this paragraph (c) shall be
deemed to permit any Asset Sale not otherwise permitted under this Agreement.
(d) Within 10 days following each date upon which Holdings or any of
its Subsidiaries receives any cash proceeds from any Recovery Event, an amount
equal to 100% of the Net Insurance Proceeds from such Recovery Event shall be
applied on such date as a mandatory repayment of principal of outstanding Term
Loans and/or as a reduction to the Aggregate Revolving Commitment pursuant to
Section 2.07(i), provided that so long as no Default or Event of Default then
exists and such Net Insurance Proceeds from such Recovery Event do not exceed
$10,000,000, such Net Insurance Proceeds shall not give rise to a repayment
and/or reduction pursuant to this paragraph (d) on such date to the extent that
Holdings has delivered a certificate to the Administrative Agent on or prior to
such date stating that such Net Insurance Proceeds shall be used to replace or
restore any properties or assets in respect of which such Net Insurance Proceeds
were paid within 365 days following the date of receipt of such Net Insurance
Proceeds (which certificate shall set forth the estimates of the Net Insurance
Proceeds to be so expended), and provided further, that (i) if the amount of
such Net Insurance Proceeds exceeds $10,000,000, then the entire amount of such
Net Insurance Proceeds and not just the portion in excess of $10,000,000 shall
be applied as provided above in this paragraph (d), and (ii) if all or any
portion of such Net Insurance Proceeds are not contractually committed to be
used within 280 days after the date of receipt of such Net Insurance Proceeds
and are not actually used within 365 days after the date of receipt of such Net
Insurance Proceeds to effect such restoration
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<PAGE>
or replacement (or such earlier date, if any, as Holdings or the Borrower
determines not to reinvest such Net Insurance Proceeds, such remaining portion
shall be applied on the last day of such 280-day or 365-day period, as the case
may be (or such earlier date as the case may be), as provided above in this
paragraph (d).
(e) On each date after the Closing Date upon which Holdings or any of
its Subsidiaries receives any cash proceeds from any capital contribution or any
sale or issuance of its equity (other than (i) proceeds received by any
Subsidiary of the Borrower from equity contributions made by the Borrower or any
Subsidiary of the Borrower, (ii) up to $2,000,000 of proceeds in the aggregate
in any fiscal year of Holdings from the issuance of shares of Holding Common
Stock (including as a result of the exercise of any options to purchase such
shares) to officers and employees of Holdings or any of its Subsidiaries, (iii)
up to $10,000,000 of proceeds in the aggregate (other than from a registered
public equity offering) the proceeds of which are used to fund a Permitted
Retained Equity Transaction and (iv) up to $20,000,000 of additional proceeds in
the aggregate to the extent made by one or more Permitted Holders and/or other
shareholders of Holdings on the Closing Date the proceeds of which are used to
fund a Permitted Retained Equity Transaction), an amount equal to 50% of the Net
Equity Proceeds of such capital contribution or sale or issuance of equity shall
be applied as a mandatory repayment of principal of outstanding Term Loans
and/or as a reduction to the Aggregate Revolving Commitment pursuant to Section
2.07(i).
(f) On each Excess Cash Payment Date, an amount equal to 75% of the
Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as
a mandatory repayment of principal of outstanding Term Loans and/or as a
reduction to the Aggregate Revolving Commitment pursuant to Section 2.07(i);
provided, however, that the foregoing percentage shall be reduced to 50% if the
Consolidated Leverage Ratio is less than 3.75:1.00 on the last day of the
Measurement Period for the relevant Excess Cash Payment Period (after giving
effect to any repayment of Term Loans on such date).
(g) The Borrower shall pay, together with each prepayment made by the
Borrower under this Section 2.07, accrued interest on the amount prepaid and any
amounts required pursuant to Section 4.04; provided that interest shall be paid
in connection with any such prepayment of Base Rate Loans (other than a
prepayment in full) on the next occurring Interest Payment Date.
(h) Any prepayments pursuant to this Section 2.07 made on a day other
than an Interest Payment Date for any Loan shall be applied first to any Base
Rate Loans then outstanding and then to Eurodollar Loans with the shortest
Interest Periods remaining.
(i) Subject to paragraph (j) of this Section 2.07, each repayment of
Term Loans pursuant to this Section 2.07 shall be applied to the Tranche A Term
Loans and the Tranche B Term Loans on a pro rata basis (based upon the then
outstanding principal amount of Tranche A Term Loans and Tranche B Term Loans).
Each repayment of principal of any Tranche of Term Loans pursuant to this
Section 2.07 shall be applied to reduce the then remaining Scheduled Repayments
of the respective Tranche of Term Loans pro rata based upon
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<PAGE>
the then remaining principal amounts of the Scheduled Repayments of the
respective Tranche after giving effect to all prior reductions thereto. After
all Term Loans have been repaid in full, any amounts required to be applied
pursuant to this Section 2.07(i) shall be applied to reduce the Aggregate
Revolving Commitment.
(j) Notwithstanding anything to the contrary contained in this Section
2.07, so long as any Tranche A Term Loans remain outstanding the Borrower shall
have the option, in its sole discretion, to give the B Lenders the option to
waive their pro rata share of a mandatory repayment of Tranche B Term Loans
which is to be made pursuant to Section 2.07(b), (c), (d), (e) or (f) (each such
repayment, a "Waivable Mandatory Repayment") upon the terms and provisions set
forth in this Section 2.07(j). If the Borrower elects to exercise the option
referred to in the immediately preceding sentence, the Borrower shall give to
the Administrative Agent written notice of the Borrower's intention to give the
B Lenders the right to waive a Waivable Mandatory Repayment (including in such
notice, the aggregate amount of such proposed repayment) at least five Business
Days prior to the date of the proposed repayment, which notice the
Administrative Agent shall promptly forward to all B Lenders (indicating in such
notice the amount of such repayment to be applied to each such B Lender's
outstanding Tranche B Term Loans). The Borrower's offer to permit the B Lenders
to waive any such Waivable Mandatory Repayment may apply to all or part of such
repayment, provided that any offer to waive part of such repayment must be made
ratably to the B Lenders on the basis of their outstanding Tranche B Term Loans.
In the event that any such B Lender desires to waive its pro rata share of such
B Lender's right to receive any such Waivable Mandatory Repayment in whole or in
part, such B Lender shall so advise the Administrative Agent no later than 5:00
P.M. (New York City time) on the date which is two Business Days after the date
of such notice from the Administrative Agent, which notice shall also include
the amount such B Lender desires to receive in respect of such repayment. If
any B Lender does not reply to the Administrative Agent within the two Business
Days, such B Lender will be deemed not to have waived any part of such
repayment. If any B Lender does not specify an amount it wishes to receive,
such B Lender will be deemed to have accepted 100% of its share of such
repayment. In the event that any such B Lender waives all or any part of its
share of any such Waivable Mandatory Repayment, the Administrative Agent shall
apply 100% of the amount so waived by such B Lender (1) first, to the
outstanding Tranche A Term Loans in accordance with Section 2.07(i) and (2)
second, to the extent that any amount remains after the application pursuant to
preceding clause (1), to permanently reduce the Aggregate Revolving Commitment.
(k) The Borrower shall repay in full all outstanding Loans on the date
on which a Change of Control occurs.
2.08 Repayment of Principal. (a) The Tranche A Term Loans. On each
date set forth below, the Borrower shall repay that principal amount of Tranche
A Term Loans, to the extent then outstanding, as is set forth opposite such date
below (each such repayment, as the same may be reduced as provided in Sections
2.06(c) and 2.07(i), a "Scheduled A Repayment"):
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<TABLE>
<CAPTION>
Scheduled A Amount
------
Repayment Date
--------------
<S> <C>
January 15, 2000 $ 2,500,000
July 15, 2000 $ 2,500,000
January 15, 2001 $ 3,500,000
July 15, 2001 $ 3,500,000
January 15, 2002 $ 5,000,000
July 15, 2002 $ 5,000,000
January 15, 2003 $ 6,000,000
July 15, 2003 $ 6,000,000
January 15, 2004 $ 7,500,000
July 15, 2004 $ 7,500,000
January 15, 2005 $11,000,000
</TABLE>
(b) The Tranche B Term Loans. On each date set forth below, the
Borrower shall repay that principal amount of Tranche B Term Loans, to the
extent then outstanding, as is set forth opposite such date below (each such
repayment, as the same may be reduced as provided in Sections 2.06(c) and
2.07(i), a "Scheduled B Repayment"):
<TABLE>
<CAPTION>
Scheduled B Amount
------
Repayment Date
--------------
<S> <C>
January 15, 2000 $275,000
July 15, 2000 $275,000
January 15, 2001 $275,000
July 15, 2001 $275,000
January 15, 2002 $275,000
July 15, 2002 $275,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Scheduled B Amount
------
Repayment Date
--------------
<S> <C>
January 15, 2003 $ 275,000
July 15, 2003 $ 275,000
January 15, 2004 $ 275,000
July 15, 2004 $ 275,000
January 15, 2005 $ 275,000
July 15, 2005 $ 275,000
January 15, 2006 $25,850,000
July 15, 2006 $25,850,000
</TABLE>
(c) The Revolving Loans. The Borrower shall repay in full on the
Revolving Termination Date the aggregate principal amount of the Revolving Loans
outstanding on such date.
(d) The Swingline Loans. The Borrower shall repay to the Swingline
Lender in full on the Revolving Termination Date the aggregate principal amount
of the Swingline Loans outstanding on such date.
2.09 Interest. (a) Each Loan under a respective Tranche shall bear
interest on the outstanding principal amount thereof from the Borrowing Date
applicable thereto until it becomes due at a rate per annum equal to the Base
Rate or the Eurodollar Rate, as the case may be, plus the Applicable Margin for
such Tranche of Loans then in effect as set forth below:
(i) for the period commencing on the Closing Date to the First
Adjustment Date:
<TABLE>
<CAPTION>
Applicable Margin/Tranche A Applicable Margin
Term Loans, Revolving Loans and Swingline Loans Tranche B Term Loans
----------------------------------------------- --------------------
<S> <C>
Base Rate 1.25% 1.75%
Eurodollar Rate 2.25% 2.75%
</TABLE>
(ii) from and after the First Adjustment Date, for each period from an
Adjustment Date to the next succeeding Adjustment Date, the rate per annum
for the relevant type of Loan of the respective Tranche set forth below
opposite the Consolidated Leverage Ratio determined as at the end of the
last fiscal quarter ended prior to the first day of such period:
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<TABLE>
<CAPTION>
Applicable Margin/
Tranche A Term Loans, Revolving
Loans and Applicable Margin/
Swingline Loans Tranche B Term Loans
----------------------------------- -----------------------------------
Eurodollar Rate Base Rate Eurodollar Rate Base Rate
------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
Consolidated Leverage Ratio is
less than or equal to 3.00 to 1.25% 0.25% 2.00% 1.00%
1.00 ("Level I")
Consolidated Leverage Ratio is
less than or equal to 3.50 to 1.50% 0.50% 2.25% 1.25%
1.0 but greater than 3.00 to
1.00 ("Level II")
Consolidated Leverage Ratio is
less than or equal to 4.00 to 1.75% 0.75% 2.25% 1.25%
1.00 but greater than 3.50 to
1.00 ("Level III")
Consolidated Leverage Ratio is
less than or equal to 4.50 to 2.00% 1.00% 2.75% 1.75%
1.00 but greater than 4.00 to
1.00 ("Level IV")
Consolidated Leverage Ratio is
greater than 4.50 to 1.00 2.25% 1.25% 2.75% 1.75%
("Level V")
</TABLE>
(iii) If by the last day for determining any Adjustment Date,
Holdings has failed to deliver a Leverage Ratio Certificate as at the end
of the fiscal quarter ended immediately prior to such Adjustment Date,
interest for the next succeeding period from such Adjustment Date to the
next succeeding Adjustment Date shall be computed as if the Consolidated
Leverage Ratio were at Level V; provided, however, to the extent that
Holdings thereafter delivers a Leverage Ratio Certificate during such
succeeding period, interest for the remainder of such succeeding period
shall be computed at the rate prescribed by Section 2.09(a)(ii). In
addition, at any time that a Specified Default shall exist, the Applicable
Margin shall be computed as if the Consolidated Leverage Ratio were at
Level V.
(b) Except as provided in the last sentence of Section 2.09(a)(iii)
or in the proviso to the first sentence of Section 2.09(a)(iii), any change in
the Applicable Margin due to a change in the Consolidated Leverage Ratio shall
be effective on the applicable Adjustment Date and shall apply to all Loans that
are outstanding at any time during the period commencing on such Adjustment Date
and ending on the next Adjustment Date.
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(c) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of any
portion of Loans (excluding Base Rate Loans) for the portion of such Loans so
prepaid and upon payment (including prepayment) of any Loans (including Base
Rate Loans) in full. In addition, interest which accrues under Section 2.09(d)
also shall be paid on demand by the Administrative Agent or the Required
Lenders.
(d) If any amount of principal of or interest on any Loan, or any
other regularly scheduled amount payable hereunder or under any other Loan
Document is not paid in full when due (whether at stated maturity, by
acceleration, demand or otherwise), the Borrower shall pay interest (after as
well as before judgment) on the overdue principal amount of all outstanding
Loans at the applicable rate per annum provided in this Section 2.09 plus 2% and
on all other overdue amounts (including interest to the extent permitted by
law), at a rate per annum equal to the Base Rate plus the Applicable Margin for
the relevant Tranche of Loans plus 2%.
(e) Anything herein to the contrary notwithstanding, the obligations
of the Borrower hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by the respective Lender would be contrary to the
provisions of any law applicable to such Lender limiting the highest rate of
interest which may be lawfully contracted for, charged or received by such
Lender, and in such event the Borrower shall only pay such Lender interest at
the highest rate permitted by applicable law.
2.10 Fees. In addition to fees described in Section 3.08:
(a) Commitment Fees. The Borrower shall pay to the Administrative
Agent for the account of each RL Lender which is Non-Defaulting Lender a
commitment fee on the daily unused portion of such Lender's Revolving Commitment
(subject to Section 2.01(d)(iii) in the case of the Swingline Lender), computed
on a quarterly basis in arrears, on each Interest Payment Date for Base Rate
Loans based upon the daily utilization for the previous three month period as
calculated by the Administrative Agent, equal to (A) for the period from the
Closing Date to the First Adjustment Date, 0.500% per annum and (B) from and
after the First Adjustment Date, for each period from an Adjustment Date to the
next succeeding Adjustment Date, the rate per annum set forth below opposite the
relevant Level of Consolidated Leverage Ratio determined as at the end of the
last fiscal quarter ended prior to the first day of such period:
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Consolidated Leverage Ratio
---------------------------
Level I .300%
Level II .375%
Level III .425%
Level IV .500%
Level V .500%
provided, however, that if by the last day for determining any Adjustment Date,
Holdings has failed to deliver a Leverage Ratio Certificate as at the end of the
fiscal quarter ended immediately prior to such Adjustment Date, the commitment
fee for the next succeeding period from such Adjustment Date to the next
succeeding Adjustment Date shall be computed as if the Consolidated Leverage
Ratio were at Level V; provided further, however, to the extent that Holdings
thereafter delivers a Leverage Ratio Certificate during such succeeding period
the commitment fee for the remainder of such succeeding period shall be computed
at the rate prescribed in the table above in this Section 2.10(a). In addition,
at any time that a Specified Default shall exist, the commitment fee shall be
computed as if the Consolidated Leverage Ratio were at Level V. Such commitment
fees shall be paid in arrears on each Interest Payment Date for Base Rate Loans.
(b) Other Fees. The Borrower shall pay such other fees as have or
may be agreed between or among CHS and/or the Borrower and the Administrative
Agent from time to time.
2.11 Computation of Fees and Interest. (a) All computations of
interest payable in respect of Base Rate Loans shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All
computations of fees and other interest under this Agreement shall be made on
the basis of a 360-day year (of 12 months with 30 days each) and actual days
elapsed. Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) The Administrative Agent will promptly notify the Borrower and
the Lenders of each determination of the Eurodollar Rate; provided, however,
that any failure to do so shall not relieve the Borrower of any liability
hereunder. Except as otherwise provided in the last sentence of Section
2.09(a)(iii) or in the proviso to the first sentence of Section 2.09(a)(iii),
any change in the interest rate on a Loan resulting from a change in the
Applicable Margin shall become effective as of the opening of business on the
relevant Adjustment Date. The Administrative Agent will promptly notify the
Borrower and the Lenders of the effective date and the amount of each such
change, provided, however, that any failure to do so shall not relieve the
Borrower of any liability hereunder.
(c) Each determination of an interest rate by the Administrative
Agent shall be conclusive and binding on the Borrower and the Lenders in the
absence of manifest error.
2.12 Payments by the Borrower. (a) All payments (including
prepayments) to be made by the Borrower on account of principal, interest,
drawings under Letters of Credit, fees
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and other amounts required hereunder shall be made, except as otherwise
expressly provided herein, without set-off or counterclaim and shall, except as
otherwise expressly provided with respect to drawings under Letters of Credit
and elsewhere herein, be made to the Administrative Agent for the ratable
account of the Lenders entitled thereto at the Administrative Agent's Payment
Office, and shall be made in Dollars and in immediately available funds, no
later than 2:00 p.m. (New York City time) on the date specified herein. The
Administrative Agent will promptly distribute to each Lender its share, if any,
of such principal, interest, fees or other amounts, in like funds as received.
Any payment which is received by the Administrative Agent later than 2:00 p.m.
(New York City time) shall be deemed to have been received on the immediately
succeeding Business Day and any applicable interest or fees shall continue to
accrue until such payment is deemed to have been received.
(b) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be, subject to the provisions
set forth in the definition of the term "Interest Period" herein.
(c) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make the payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent as required hereunder on such date in immediately
available funds and the Administrative Agent may (but shall not be so required),
in reliance upon such assumption, cause to be distributed to each Lender
entitled thereto on such due date an amount equal to the amount then due such
Lender. If and to the extent the Borrower shall not have made such payment in
full to the Administrative Agent, each such Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate as in effect for each such day.
2.13 Payments by the Lenders to the Administrative Agent. (a)
Unless the Administrative Agent shall have received notice from a Lender on the
Closing Date or, with respect to each Borrowing after the Closing Date, at least
one Business Day prior to the date of any proposed Borrowing (other than a
Borrowing of a Swingline Loan which in accordance with Section 2.03(f) is funded
directly by the Swingline Lender), that such Lender will not make available to
the Administrative Agent for the account of the Borrower the amount of such
Lender's Commitment Percentage of the Loans included in such Borrowing, the
Administrative Agent may assume that each such Lender has made such amount
available to the Administrative Agent as required hereunder on the Borrowing
Date and the Administrative Agent may (but shall not be so required), in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent any such Lender shall not have made
its full amount available to the Administrative Agent in immediately available
funds and the Administrative Agent in such circumstances has made available to
the Borrower such amount, such Lender shall immediately make such amount
available to the Administrative Agent, together with interest at the Federal
Funds Rate from the Borrowing Date with respect to such
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<PAGE>
Borrowing to the date on which the Administrative Agent recovers such amount
from such Lender or the Borrower. A notice of the Administrative Agent submitted
to any Lender with respect to amounts owing under this Section 2.13(a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Administrative Agent shall constitute such Lender's Loan on the
Borrowing Date for all purposes of this Agreement. If such amount is not made
available to the Administrative Agent on the next Business Day following such
Borrowing Date, the Administrative Agent may notify the Borrower of such failure
to fund and, within one Business Day of demand by the Administrative Agent, the
Borrower shall pay such amount to the Administrative Agent for the
Administrative Agent's account, together with interest thereon for each day
elapsed since such Borrowing Date, at a rate per annum equal to the interest
rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
2.14 Sharing of Payments, etc. (a) If, other than as expressly
provided elsewhere herein, any Lender shall obtain on account of the Obligations
owing to it any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) in excess of its Commitment Percentage of
payments on account of the respective Obligations of the same kind obtained by
all the Lenders entitled thereto, such Lender shall forthwith (i) notify the
Administrative Agent of such fact, and (ii) purchase from the other such Lenders
such participations in such Obligations made by them as shall be necessary to
cause such purchasing Lender to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Lender, such purchase shall to that
extent be rescinded and each other such Lender shall repay to the purchasing
Lender the purchase price paid therefor, together with an amount equal to such
paying Lender's Commitment Percentage (according to the proportion of (A) the
amount of such paying Lender's required repayment to (B) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Administrative Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased pursuant
to this Section 2.14 and will in each case notify the Lenders following any such
purchases.
(b) The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.14 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 12.09) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.
2.15 Security and Guaranties. (a) All Obligations of the Borrower
and the Guarantors under this Agreement and all other Loan Documents to which
they are a party shall be secured in accordance with the Collateral Documents.
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<PAGE>
(b) All Obligations of the Borrower under this Agreement and all
other Loan Documents to which it is a party shall be unconditionally guaranteed
by each Guarantor pursuant to its Guaranty.
ARTICLE III.
THE LETTERS OF CREDIT
---------------------
3.01 The Letter of Credit Subfacility. (a) On the terms and
conditions set forth herein, (i) each Issuing Lender agrees, (A) from time to
time, on any Business Day during the period from the Closing Date to the date
which is 30 days prior to the Revolving Termination Date to issue (x)
irrevocable sight standby Letters of Credit (each such standby Letter of Credit,
a "Standby Letter of Credit") for the account of the Borrower and (y)
irrevocable sight commercial Letters of Credit (each such commercial Letter of
Credit, a "Trade Letter of Credit" and each such Trade Letter of Credit and each
Standby Letter of Credit (including the Existing Letter of Credit), a "Letter of
Credit") for the account of the Borrower, and to amend or renew Letters of
Credit previously issued by it, in accordance with Sections 3.02(b), 3.02(c) and
3.02(d), and (B) to honor drafts under the Letters of Credit; and (ii) the RL
Lenders severally agree to participate in Letters of Credit issued for the
account of the Borrower; provided, however, that no Issuing Lender shall issue
any Letter of Credit if as of the date of, and after giving effect to, the
issuance of such Letter of Credit, (x) the aggregate amount of all Letter of
Credit Obligations (exclusive of unpaid drawings under any Letter of Credit
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) plus the aggregate principal
amount of all Revolving Loans and all Swingline Loans shall exceed the Aggregate
Revolving Commitment or (y) the Letter of Credit Obligations (exclusive of
unpaid drawings under any Letter of Credit which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) shall exceed the Letter of Credit Commitment. All Letters of
Credit shall be denominated in Dollars. Notwithstanding the foregoing, in the
event a Lender Default exists, no Issuing Lender shall be required to issue any
Letter of Credit unless such Issuing Lender has entered into arrangements
satisfactory to it and the Borrower to eliminate such Issuing Lender's risk with
respect to the participation in Letters of Credit of the Defaulting Lender or
Lenders, including by Cash Collateralizing such Defaulting Lender's or Lenders'
Revolving Commitment Percentage of the Letter of Credit Obligations.
Notwithstanding anything to the contrary contained herein, Fleet National Bank
shall be the Issuing Lender only in respect of the Existing Letter of Credit and
with the Existing Letter of Credit being deemed issued for all purposes of this
Agreement on the Closing Date.
(b) No Issuing Lender shall be under any obligation to issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority
shall by its terms purport to enjoin or restrain such Issuing Lender from
issuing such Letter of Credit, or any Requirement of Law applicable to such
Issuing Lender or any request or directive (whether or not having the force
of law) from any Governmental Authority with jurisdiction over such Issuing
Lender shall prohibit, or request that such Issuing Lender
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<PAGE>
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon such Issuing Lender with respect
to such Letter of Credit any restriction, reserve or capital requirement
(for which such Issuing Lender is not otherwise compensated hereunder) not
in effect on the Closing Date or shall impose upon such Issuing Lender any
unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which such Issuing Lender in good faith deems material to it;
(ii) such Issuing Lender has received written notice from the
Required Lenders, the Administrative Agent, the Borrower or any other
Credit Party on or prior to the Business Day prior to the requested date of
issuance of such Letter of Credit, that one or more of the applicable
conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of Credit (x) is more
than (A) in the case of Standby Letters of Credit, one year after the date
of issuance or (B) in the case of Trade Letters of Credit, 180 days after
the date of issuance, unless (in each case) the Required Lenders, the
Administrative Agent and the respective Issuing Lender have approved such
expiry date in writing or (y) is later than the 30th day prior to the
Revolving Termination Date;
(iv) any requested Letter of Credit is not in form and substance
acceptable to the respective Issuing Lender, or the issuance, of a Letter
of Credit shall violate any applicable policies of such Issuing Lender; or
(v) such Letter of Credit is in a face amount less than $100,000.
3.02 Issuance, Amendment and Renewal of Letters of Credit. (a) Each
Letter of Credit (other than the Existing Letter of Credit) shall be issued upon
the irrevocable written request of the Borrower received by the respective
Issuing Lender (with a copy sent by the Borrower to the Administrative Agent) at
least five Business Days (or such shorter time as such Issuing Lender may agree
in a particular instance in its sole discretion) prior to the proposed date of
issuance. Each such request for issuance of a Letter of Credit shall be by
facsimile, confirmed immediately in an original writing, in the form of a Letter
of Credit Application, and shall specify in form and detail satisfactory to the
respective Issuing Lender: (i) the proposed date of issuance of the Letter of
Credit (which shall be a Business Day); (ii) the face amount of the Letter of
Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address
of the beneficiary thereof; (v) the documents to be presented by the beneficiary
of the Letter of Credit in case of any drawing thereunder; (vi) the full text of
any certificate to be presented by the beneficiary in case of any drawing
thereunder; and (vii) such other matters as the respective Issuing Lender may
reasonably require.
(b) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, each Issuing Lender will, upon the
written request of the Borrower received by such Issuing Lender (with a copy
sent by the Borrower to the Administrative Agent) at least five Business Days
(or such shorter time as such Issuing Lender may agree in a particular instance
in its sole discretion) prior to the proposed date of amendment, amend any
Letter of Credit issued by it. Each such request for amendment of a Letter of
Credit shall be made by fac-
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simile, confirmed immediately in an original writing, made in the form of a
Letter of Credit Amendment Application and shall specify in form and detail
satisfactory to the respective Issuing Lender: (i) the Letter of Credit to be
amended; (ii) the proposed date of amendment of the Letter of Credit (which
shall be a Business Day); (iii) the nature of the proposed amendment; and (iv)
such other matters as such Issuing Lender may reasonably require. No Issuing
Lender shall be under any obligation to amend any Letter of Credit if: (A) such
Issuing Lender would have no obligation at such time to issue such Letter of
Credit in its amended form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed amendment
to the Letter of Credit.
(c) The Administrative Agent will promptly notify the RL Lenders of
the receipt by it of any Letter of Credit Application or Letter of Credit
Amendment Application.
(d) The Issuing Lenders and the Lenders agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
of the Borrower and upon the written request of the Borrower received by the
respective Issuing Lender (with a copy sent by the Borrower to the
Administrative Agent) at least five Business Days (or such shorter time as such
Issuing Lender may agree in a particular instance in its sole discretion) prior
to the proposed date of notification of renewal, such Issuing Lender shall be
entitled to authorize the automatic renewal of any Letter of Credit issued by
it. Each such request for renewal of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the form of a Letter
of Credit Amendment Application, and shall specify in form and detail
satisfactory to the respective Issuing Lender: (i) the Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of the Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as such Issuing Lender may
reasonably require. No Issuing Lender shall be under any obligation to renew
any Letter of Credit if such Issuing Lender would have no obligation at such
time to issue or amend such Letter of Credit in its renewed form under the terms
of this Agreement. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from the respective Issuing Lender that such Letter of Credit shall not be
renewed, and if at the time of renewal such Issuing Lender would be entitled to
authorize the automatic renewal of such Letter of Credit in accordance with this
Section 3.02(d) upon the request of the Borrower but such Issuing Lender shall
not have received any Letter of Credit Amendment Application from the Borrower
with respect to such renewal or other written direction by the Borrower with
respect thereto, such Issuing Lender shall nonetheless be permitted to allow
such Letter of Credit to be renewed, and the Borrower and the Lenders hereby
authorize such renewal, and, accordingly, such Issuing Lender shall be deemed to
have received a Letter of Credit Amendment Application from the Borrower
requesting such renewal.
(e) This Agreement shall control in the event of any conflict with any
Letter of Credit Related Document (other than any Letter of Credit).
(f) Each Issuing Lender will also deliver to the Administrative Agent,
concurrently or promptly following its delivery of a Letter of Credit issued by
it, or amendment to or
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renewal of a Letter of Credit issued by it, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of any such Letter of Credit.
3.03 Participations, Drawings and Reimbursements. (a) Immediately
upon the issuance of each Letter of Credit, each RL Lender shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the
respective Issuing Lender a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Revolving
Commitment Percentage of such RL Lender times (ii) the maximum amount available
to be drawn under such Letter of Credit and the amount of such drawing,
respectively. For purposes of Section 2.10(a), each issuance of a Letter of
Credit shall be deemed to utilize the Revolving Commitment of each RL Lender by
an amount equal to the amount of such participation.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the respective Issuing Lender
will promptly notify the Borrower. The Borrower shall reimburse the respective
Issuing Lender prior to 2:00 p.m. (New York City time), on the Business Day
immediately following each date that any amount is paid by such Issuing Lender
under any Letter of Credit (each such date on which any amount is so paid by
such Issuing Lender, a "Disbursement Date"), in an amount equal to the amount so
paid by the Issuing Lender. In the event the Borrower shall fail to reimburse
the respective Issuing Lender for the full amount of any drawing under any
Letter of Credit by 2:00 p.m. (New York City time) on the Business Day
immediately following the respective Disbursement Date, such Issuing Lender will
promptly notify the Administrative Agent and the Administrative Agent will
promptly notify each RL Lender thereof, and the Borrower shall be deemed to have
requested that Revolving Loans consisting of Base Rate Loans be made by the RL
Lenders (and hereby irrevocably consents to such deemed request) pursuant to
Section 2.01(c) to be disbursed on the Business Day immediately following the
respective Disbursement Date under such Letter of Credit. Any notice given by
an Issuing Lender or the Administrative Agent pursuant to this Section 3.03(b)
may be oral if immediately confirmed in writing (including by facsimile);
provided, however, that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(c) Each RL Lender shall upon receipt of any notice pursuant to
Section 3.03(b) make available to the Administrative Agent for the account of
the respective Issuing Lender an amount in Dollars and in immediately available
funds equal to its Revolving Commitment Percentage of the amount of the
unreimbursed drawing, whereupon the participating RL Lenders shall (subject to
Section 3.03(d)) each be deemed to have made a Revolving Loan consisting of a
Base Rate Loan to the Borrower in that amount. If any RL Lender so notified
shall fail to make available to the Administrative Agent for the account of the
respective Issuing Lender the amount of such RL Lender's Revolving Commitment
Percentage of the amount of the unreimbursed drawing by no later than 2:00 p.m.
(New York City time) on the Business Day immediately following the respective
Disbursement Date, then interest shall accrue on such RL Lender's obligation to
make such payment, from the Business Day immediately following the respective
Disbursement Date to the date such RL Lender makes such payment, at a rate per
annum equal to (i) the Federal Funds Rate in effect from time to time during the
period
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commencing on the later of the Business Day immediately following the respective
Disbursement Date and the date such RL Lender receives notice of the
Disbursement Date prior to 2:00 p.m. (New York City time) on such date and
ending on the date three Business Days thereafter, and (ii) thereafter at the
Base Rate as in effect from time to time plus the Applicable Margin for
Revolving Loans maintained as Base Rate Loans. The Administrative Agent will
promptly give notice of the occurrence of the Disbursement Date, but failure of
the Administrative Agent to give any such notice on the Disbursement Date or in
sufficient time to enable any RL Lender to effect such payment on such date
shall not relieve such RL Lender from its obligations under this Section 3.03.
(d) With respect to any unreimbursed drawing which is not converted
into Revolving Loans consisting of Base Rate Loans to the Borrower in whole or
in part, because of the Borrower's failure to satisfy the conditions set forth
in Section 5.02 or for any other reason, the Borrower shall be deemed to have
incurred from the respective Issuing Lender a Letter of Credit Borrowing in the
amount of such unreimbursed drawing, which Letter of Credit Borrowing shall be
due and payable on demand (together with interest) and shall bear interest from
the respective Disbursement Date at a rate per annum equal to the Base Rate,
plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans,
plus in the case of any Letter of Credit Borrowing outstanding after the
respective Disbursement Date, 2% per annum, and each RL Lender's payment to such
Issuing Lender pursuant to Section 3.03(c) shall be deemed payment in respect of
its participation in such Letter of Credit Borrowing.
(e) Each RL Lender's obligation in accordance with this Agreement to
make the Revolving Loans or fund its participation in any Letter of Credit
Borrowing, as contemplated by this Section 3.03, as a result of a drawing under
a Letter of Credit shall be absolute and unconditional and without recourse to
the respective Issuing Lender and shall not be affected by any circumstance,
including (i) any set-off, counterclaim, defense or other right which such RL
Lender may have against the Issuing Lender, the Borrower or any other Person for
any reason whatsoever; (ii) the occurrence or continuance of a Default, an Event
of Default or a Material Adverse Effect; (iii) the amount of the Aggregate
Revolving Commitment at such time; or (iv) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
3.04 Repayment of Participations. (a) On (and only upon) receipt by
the Administrative Agent for the account of the respective Issuing Lender of
funds from the Borrower (i) in reimbursement of any payment made by such Issuing
Lender under the Letter of Credit issued by it and with respect to which any RL
Lender has paid the Administrative Agent for the account of such Issuing Lender
for such RL Lender's participation in the Letter of Credit pursuant to Section
3.03, or (ii) in payment of interest on amounts described in clause (i), the
Administrative Agent will pay to each RL Lender, in the same funds as those
received by the Administrative Agent for the account of such Issuing Lender, the
amount of such RL Lender's Revolving Commitment Percentage of such funds, and
such Issuing Lender shall receive the amount of the Revolving Commitment
Percentage of such funds of any RL Lender that did not so pay the Administrative
Agent for the account of such Issuing Lender.
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(b) If the Administrative Agent or any Issuing Lender is required at
any time to return to the Borrower, or to a trustee, receiver, liquidator,
custodian, or any similar official in any Insolvency Proceeding, any portion of
the payments made by the Borrower to the Administrative Agent for the account of
such Issuing Lender pursuant to Section 3.04(a) in reimbursement of a payment
made under the Letter of Credit or interest or fee thereon, each RL Lender
shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent or such Issuing Lender the amount of its Revolving
Commitment Percentage of any amounts so returned by the Administrative Agent or
such Issuing Lender plus interest thereon from the date such demand is made to
the date such amounts are returned by such RL Lender to the Administrative Agent
or such Issuing Lender, at a rate per annum equal to the Federal Funds Rate in
effect from time to time.
3.05 Role of the Issuing Lenders. (a) Each Lender and the Borrower
agree that, in paying any drawing under a Letter of Credit, no Issuing Lender
shall have any responsibility to obtain any document (other than any sight draft
and certificates expressly required by the Letter of Credit issued by such
Issuing Lender) or to ascertain or inquire as to the validity or accuracy of any
such document or the authority of the Person executing or delivering any such
document.
(b) No Issuing Lender nor any of the respective correspondents,
participants or assignees of such Issuing Lender shall be liable to any Lender
for: (i) any action taken or omitted in connection herewith at the request or
with the approval of the Required Lenders; (ii) any action taken or omitted in
the absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any Letter of Credit
Related Document.
(c) The Borrower hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit.
No Issuing Lender nor any of the respective correspondents, participants or
assignees of such Issuing Lender, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; provided,
however, that the Borrower may have a claim against the respective Issuing
Lender, and such Issuing Lender may be liable to the Borrower, to the extent,
but only to the extent, of any direct, as opposed to consequential or exemplary,
damages suffered by the Borrower which the Borrower proves were caused by such
Issuing Lender's willful misconduct or gross negligence or such Issuing Lender's
willful failure to pay under any Letter of Credit issued by it after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) each Issuing Lender may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) each Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Borrower under
this Agreement and any Letter of Credit Related Document to reimburse each
Issuing Lender for a
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drawing under a Letter of Credit issued by such Issuing Lender, and to repay any
Letter of Credit Borrowing and any drawing under a Letter of Credit converted
into Revolving Loans, shall (except as expressly provided in the proviso to the
second sentence of Section 3.05(c)) be unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement and each such
other Letter of Credit Related Document under all circumstances, including the
following:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document or any Letter of Credit Related Document;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of the Borrower in respect
of any Letter of Credit or any other amendment or waiver of or any consent
to departure from all or any of the Letter of Credit Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower or any Subsidiary of the Borrower may have at any time
against any beneficiary or any transferee of any Letter of Credit (or any
Person for whom any such beneficiary or any such transferee may be acting),
any Issuing Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the Letter of Credit
Related Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit;
(v) any payment by the respective Issuing Lender under any Letter
of Credit issued by it against presentation of a draft or certificate that
does not strictly comply with the terms of any Letter of Credit; or any
payment made by the respective Issuing Lender under any Letter of Credit
issued by it to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection
with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any
other guaranty, for all or any of the obligations of the Borrower in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor.
3.07 Cash Collateral Pledge. Upon (a) the request of the
Administrative Agent, (i) if the respective Issuing Lender has honored any full
or partial drawing request on any Letter
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of Credit issued by such Issuing Lender and such drawing has resulted in a
Letter of Credit Borrowing hereunder, or (ii) if, as of the Revolving
Termination Date, any Letters of Credit may for any reason remain outstanding
and partially or wholly undrawn, or (b) the occurrence of the circumstances
described in Section 2.07(a) requiring the Borrower to Cash Collateralize
Letters of Credit, then the Borrower shall immediately Cash Collateralize the
Letter of Credit Obligations in an amount equal to such Letter of Credit
Obligations (or in the case of clause (b) above, the excess amount required
pursuant to Section 2.07(a)) and such cash will be held as security for all
Obligations of the Borrower to the Lenders hereunder in a cash collateral
account to be established by the Administrative Agent, and during the existence
of an Event of Default, the Administrative Agent may, upon the request of the
Required Lenders, apply such amounts so held to the payment of such outstanding
Obligations.
3.08 Letter of Credit Fees. (a) The Borrower shall pay to the
Administrative Agent for the account of each RL Lender a letter of credit fee
with respect to the Letters of Credit computed on the average daily maximum
amount available to be drawn of the outstanding Letters of Credit, on each
Interest Payment Date for Base Rate Loans based upon Letters of Credit
outstanding for the previous three-month period. The letter of credit fee shall
be equal to (i) for the period from the Closing Date to the First Adjustment
Date, 2.25% per annum and (ii) from and after the First Adjustment Date, for
each period from an Adjustment Date to the next succeeding Adjustment Date, the
rate per annum set forth below opposite the relevant Level of Consolidated
Leverage Ratio determined as at the end of the last fiscal quarter ended prior
to the first day of such period:
Consolidated Leverage Ratio
---------------------------
Level I 1.25%
Level II 1.50%
Level III 1.75%
Level IV 2.00%
Level V 2.25%
provided, however, that if by the day for determining any Adjustment Date
Holdings has failed to deliver a Leverage Ratio Certificate as at the end of the
fiscal quarter ended immediately prior to such Adjustment Date, the letter of
credit fee for the next succeeding period from such Adjustment Date to the next
succeeding Adjustment Date shall be computed as if the Consolidated Leverage
Ratio were at Level V; provided further, however, to the extent that Holdings
thereafter delivers a Leverage Ratio Certificate during such succeeding period,
the letter of credit fee for the remainder of such succeeding period shall be
computed at the rate prescribed in the table above in this Section 3.08(a). In
addition, at any time that a Specified Default shall exist, the letter of credit
fee shall be computed as if the Consolidated Leverage Ratio were at Level V.
Such letter of credit fee shall be due and payable in arrears on each Interest
Payment Date for Base Rate Loans.
(b) The Borrower shall pay to each Issuing Lender a letter of credit
fronting fee for each Letter of Credit issued by such Issuing Lender equal to
0.25% per annum of the face
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amount of such Letter of Credit. Such Letter of Credit fronting fee shall be due
and payable in arrears on each Interest Payment Date for Base Rate Loans.
(c) The Borrower shall pay to each Issuing Lender from time to time
on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges with respect to Letters of Credit
issued by it, of such Issuing Lender relating to letters of credit as from time
to time in effect.
3.09 Uniform Customs and Practice. The Uniform Customs and Practice
for Documentary Credits as most recently published by the International Chamber
of Commerce shall in all respects be deemed a part of this Article III as if
incorporated herein and (unless otherwise expressly provided in the Letters of
Credit) shall apply to the Letters of Credit.
ARTICLE IV.
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.01 Taxes. (a) Subject to Section 4.01(g), any and all payments
made by the Borrower to any Lender or the Administrative Agent under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any and all present or future taxes, levies, imposts,
deductions, duties, fees, assessments or other charges or withholdings, and all
liabilities with respect thereto now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments, excluding, in the case of each Lender and the Administrative
Agent (except as otherwise provided in Section 4.01(c)), as the case may be,
such taxes as are imposed on or measured by such Person's net income or net
profits by the jurisdiction under the laws of which such Person is organized or
has its principal office or in which the Lending Office of such Person is
located or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, duties, fees, assessments or other charges,
withholdings and liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Borrower shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Subject to Section 4.01(g), the Borrower shall indemnify and
hold harmless each Lender and the Administrative Agent for (i) the full amount
of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under Section 4.01(d) and this Section 4.01(c))
and (ii) the full amount of all taxes imposed on or measured by the net income
or net profits of such Lender or the Administrative Agent pursuant to the laws
of the jurisdiction in which such Lender or the Administrative Agent is
organized or has its principal office or in which the Lending Office of such
Person is located or under the laws
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of any political subdivision or taxing authority of any such jurisdiction in
which such Lender or the Administrative Agent is organized or has its principal
office or in which its respective Lending Office is located paid by such Lender
or the Administrative Agent as a result of amounts payable by the Borrower under
Section 4.01(d) and this Section 4.01(c), and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such taxes or other liabilities were correctly
or legally asserted.
(d) If the Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent, then, subject to Section 4.01(g):
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 4.01(d)) such Lender or the
Administrative Agent, as the case may be, receives an amount equal to the
sum it would have received had no such deductions or withholdings been
made;
(ii) the Borrower shall make such deductions; and
(iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(e) Within 30 days after the date of any payment by the Borrower of
Taxes or Other Taxes, such Person shall furnish to the Administrative Agent, at
its address referred to in Section 12.02, the original or a certified copy of a
receipt evidencing payment thereof, or other evidence of payment satisfactory to
the Administrative Agent.
(f) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees that:
(i) it shall, no later than the Closing Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 12.07 after the
Closing Date, the date upon which such Lender becomes a party hereto unless
the respective Lender was already a Lender hereunder immediately prior to
such assignment or transfer) deliver to the Borrower and the Administrative
Agent either (A) two accurate and complete signed originals of Internal
Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two
accurate and complete signed originals of Internal Revenue Service Form
1001 or any successor thereto ("Form 1001"), as appropriate, in each case
indicating that such Lender is on the date of delivery thereof entitled to
a complete exemption from United States withholding tax with respect to
payments to be made under this Agreement and under any note, or (B) if the
Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (f)(i)(A), (x) a certificate substantially in the form
of Exhibit N ("Section 4.01(f) Certificate") and (y) two accurate and
complete signed originals of Internal Revenue Service Form W-8 or any
successor thereto ("Form W-8") certifying to such Lender's entitlement on
the date of delivery thereof to a complete exemption from
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United States withholding tax with respect to payments of interest to be
made under this Agreement or any note.
(ii) if at any time a Lender that provides forms pursuant to
paragraph (f)(i)(A) above makes any change in its place of incorporation or
fiscal residence necessitating a new Form 4224 or Form 1001, such Lender
shall promptly deliver to the Borrower through the Administrative Agent in
replacement for, or in addition to, the forms previously delivered by such
Lender hereunder, two accurate and complete signed originals of Form 4224
or Form 1001 or Form W-8 and a Section 4.01(f) Certificate, as appropriate,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive all payments under this Agreement free from withholding
of United States Federal income tax;
(iii) it shall, to the extent it is legally entitled to do so,
before or promptly after a Lender that provides forms pursuant to paragraph
(f)(i)(A) above makes any change of a Lending Office or its principal
office, or the occurrence of any event (including the passing of time but
excluding any event mentioned in clause (ii) above) requiring a change in
or renewal of the most recent Form 4224 or Form 1001 previously delivered
by such Lender, deliver to the Borrower through the Administrative Agent
two accurate and complete original signed copies of Form 4224 or Form 1001
in replacement for the forms previously delivered by such Lender indicating
that such Lender continues to be entitled to receive all payments under
this Agreement free from any withholding of any United States Federal
income tax;
(iv) it shall, to the extent it is legally entitled to do so,
promptly upon the Borrower's or the Administrative Agent's reasonable
request to that effect, deliver to the Borrower or the Administrative Agent
(as the case may be) such other forms or similar documentation as may be
required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's complete exemption from
withholding on all payments under this Agreement; and
(v) without limiting or restricting any Lender's right to increased
amounts under Section 4.01(d) from the Borrower upon satisfaction of such
Lender's obligations under the provisions of this Section 4.01(f), if such
Lender is entitled to a reduction in the applicable withholding tax, the
Administrative Agent may (but shall not be obligated to) withhold from any
interest to such Lender an amount equivalent to the applicable withholding
tax after taking into account such reduction. If the forms or other
administrative documentation required by clause (i) are not delivered to
the Administrative Agent, then the Administrative Agent shall withhold from
any interest payment to any such Lender not providing such forms or other
documentation, an amount equivalent to the applicable withholding tax and
in addition, the Administrative Agent shall also withhold against periodic
payments other than interest payments to the extent United States
withholding tax is not eliminated by obtaining Form 4224, Form 1001 or Form
W-8 and Section 4.01(f) Certificate. The Borrower shall indemnify and hold
harmless the Administrative Agent and each of its officers, directors,
employees, counsel, agents and attorney-in-fact,
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on an after tax basis, from and against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges,
expenses or disbursements (including Attorney Costs) of any kind whatsoever
incurred as a result of or in connection with the Administrative Agent's
failure to withhold as provided pursuant to the preceding sentence, unless
such failure constitutes gross negligence or willful misconduct of the
Administrative Agent itself as the same is determined by a final judgment
of a court of competent jurisdiction and the obligations in this sentence
shall survive payment of all other Obligations.
(g) The Borrower will not be required to pay any additional amounts in
respect of Taxes imposed by the United States Federal government pursuant to
Section 4.01(a) or 4.01(d) to any Lender if and to the extent the obligation to
pay such additional amounts would not have arisen but for a failure by such
Lender to comply with its obligations under Section 4.01(f) in respect of its
Lending Office.
(h) Each Lender agrees that it shall, at any time upon reasonable
advance request in writing by the Borrower or the Administrative Agent, promptly
deliver such certification or other documentation as may be required under the
law or regulation in any applicable jurisdiction and which such Lender is
entitled to submit to avoid or reduce withholding taxes on amounts to be paid by
the Borrower and received by such Lender pursuant to this Agreement or any other
Loan Document; provided, however, a Lender will not be obligated to deliver any
tax returns, income tax schedules or computations, or other documentation that
would require such bank to disclose any other information that would adversely
affect such Lender, as determined solely by such Lender.
(i) Subject to Section 4.01(g), the Borrower shall indemnify each
Lender and the Administrative Agent, to the extent required by this Section 4.01
within 30 days after receipt of written request from such Lender or the
Administrative Agent thereof accompanied by a written statement describing in
reasonable detail the Taxes or Other Taxes or other additional amounts that are
the subject of the basis for such indemnity and the computation of the amount
payable.
(j) If the Borrower is required to pay additional amounts to any
Lender or the Administrative Agent pursuant to Section 4.01(d), then such Lender
shall, upon the Borrower's request, use its reasonable best efforts (consistent
with policy considerations of such Lender) to change the jurisdiction of its
Lending Office so as to reduce or eliminate any such additional payment which
may thereafter accrue if such change in the sole judgment of such Lender is not
otherwise disadvantageous to such Lender.
(k) Each Lender agrees that it will (i) take all reasonable actions
reasonably requested by the Borrower (consistent with policy considerations by
such Lender) to maintain all exemptions, if any, available to it from
withholding taxes (whether available by treaty or existing administrative
waiver), and (ii) to the extent reasonable, otherwise cooperate with the
Borrower to minimize any amounts payable by the Borrower under this Section
4.01, in any case described
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in the preceding clauses (i) and (ii), however, only if such action or
cooperation is not disadvantageous to such Lender in the sole judgment of such
Lender.
4.02 Illegality. (a) If any Lender shall determine that (i) the
introduction of any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration thereof, has made it unlawful, or
(ii) any central bank or other Governmental Authority has asserted that it is
unlawful for any Lender or its Lending Office to make a Eurodollar Loan or to
convert any Base Rate Loan to a Eurodollar Loan, then, on notice thereof by such
Lender to the Borrower through the Administrative Agent, the obligation of such
Lender to make or convert any such Loans shall be suspended until such Lender
shall have notified the Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender shall determine that it is unlawful to maintain any
Eurodollar Loan, the Borrower shall, unless otherwise permitted under paragraph
(c) below, prepay in full all Eurodollar Loans of such Lender then outstanding,
together with interest accrued thereon, either on the last day of the Interest
Period thereof if such Lender may lawfully continue to maintain such Eurodollar
Loans to such day, or immediately, if such Lender may not lawfully continue to
maintain such Eurodollar Loans, together with any amounts required to be paid in
connection therewith pursuant to Section 4.04.
(c) If the Borrower is required to prepay any Eurodollar Loan
immediately, then concurrently with such prepayment, the Borrower shall borrow
from the affected Lender, in the aggregate amount of such repayment, Base Rate
Loans of the respective Tranche.
(d) Before giving any notice to the Administrative Agent pursuant to
this Section 4.02, the affected Lender shall designate a different Lending
Office with respect to its Eurodollar Loans if such designation will avoid the
need for giving such notice or making such demand and will not, in the judgment
of such Lender, be illegal, inconsistent with the policies of such Lender or
otherwise disadvantageous to such Lender.
4.03 Increased Costs and Reduction of Return. (a) If any Lender or
any Issuing Lender shall determine that, due to either (i) the introduction of
or any change in or in the interpretation or administration of any law or
regulation (other than any law or regulation relating to taxes, including those
relating to Taxes and Other Taxes) after the Closing Date or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law) made after the Closing Date,
there shall be any increase in the cost to such Lender of agreeing to make or
making, funding or maintaining any Eurodollar Loans or participating in any
Letter of Credit Obligations, or any increase in the cost to such Issuing Lender
of agreeing to issue, issuing or maintaining any Letter of Credit or of agreeing
to make or making, funding or maintaining any unpaid drawing under any Letter of
Credit, then the Borrower shall be liable for, and shall from time to time,
within ten days of demand therefor by such Lender or such Issuing Lender, as the
case may be (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such
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Lender or such Issuing Lender, additional amounts as are sufficient to
compensate such Lender or the Issuing Lender for such increased costs.
(b) If any Lender or any Issuing Lender shall have determined that
(i) the introduction of any Capital Adequacy Regulation after the Closing Date,
(ii) any change in any Capital Adequacy Regulation after the Closing Date, (iii)
any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof after the Closing Date, or (iv)
compliance by any Lender (or its Lending Office) or any Issuing Lender, as the
case may be, or any corporation controlling such Lender or such Issuing Lender,
as the case may be, with any Capital Adequacy Regulation adopted after the
Closing Date, affects or would affect the amount of capital required or expected
to be maintained by such Lender or such Issuing Lender or any corporation
controlling such Lender or such Issuing Lender and (taking into consideration
such Lender's, such Issuing Lender's or such corporation's policies with respect
to capital adequacy and such Lender's, such Issuing Lender's or corporation's
desired return on capital) determines that the amount of such capital is (or is
required to be) increased as a consequence of any of its Commitments, Loans,
participations in Letters of Credit, or obligations under this Agreement, then,
within ten days of demand by such Lender or such Issuing Lender (with a copy to
the Administrative Agent), the Borrower shall be liable for and shall
immediately pay to such Lender or such Issuing Lender, from time to time as
specified by such Lender or such Issuing Lender, additional amounts sufficient
to compensate such Lender or such Issuing Lender for such increase.
4.04 Funding Losses. The Borrower agrees to reimburse each Lender
and to hold each Lender harmless from any loss, cost or expense (other than loss
of margin) which such Lender may sustain or incur as a consequence of:
(a) any failure by the Borrower to make any payment of principal of
any Eurodollar Loan (including payments made after any acceleration
thereof) when due;
(b) any failure by the Borrower to borrow a Eurodollar Loan or
continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan
after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation, as the case may be;
(c) any failure by the Borrower to make any prepayment of a
Eurodollar Loan after the Borrower has given a notice in accordance with
Section 2.06; or
(d) any payment or prepayment (including pursuant to Section 2.07,
Section 2.08 or after acceleration thereof) of a Eurodollar Loan for any
reason whatsoever on a day which is not the last day of the Interest Period
with respect thereto;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain any Eurodollar Loan hereunder or from fees
payable to terminate the deposits from which such funds were obtained.
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4.05 Inability to Determine Rates. Notwithstanding any provisions
herein to the contrary, if, in relation to any proposed Eurodollar Loan, (a) the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon all parties hereto) that by reason of circumstances
affecting the interbank markets adequate and fair means do not exist for
ascertaining the Eurodollar Rate to be applicable to such Eurodollar Loan or (b)
the Administrative Agent shall have received notice from the Required Lenders
that the Eurodollar Rate determined or to be determined for any Interest Period
will not adequately and fairly reflect the cost to such Lenders (as conclusively
certified by such Lenders) of making or maintaining their affected Eurodollar
Loans during such affected Interest Period, then, the obligation of the Lenders
to make, continue or maintain Eurodollar Loans or to convert Base Rate Loans
into Eurodollar Loans shall be suspended until (x) in the case of (a) above, the
Administrative Agent determines adequate and fair means for ascertaining the
Eurodollar Rate to be applicable to such Eurodollar Loan exists or (y) in the
case of (b) above, the Administrative Agent upon the instruction of the Required
Lenders revokes such notice in writing. If, notwithstanding the provisions of
this Section 4.05, any Lenders has made available to the Borrower its Commitment
Percentage of any such proposed Eurodollar Loan, then such Eurodollar Loan shall
immediately be converted into a Base Rate Loan.
4.06 Increased Costs on Eurodollar Loans. At any time that any
Lenders shall incur increased costs or reductions in the amounts received or
receivable hereunder with respect to any Eurodollar Loans (other than any
increased cost or reduction in the amount received or receivable resulting from
the imposition of or a change in the rate of net income taxes or similar
charges) because of (x) any change since the date of this Agreement in any
Requirement of Law or governmental guideline, order or request (whether or not
having the force of law), or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule, regulation,
guideline, order or request (such as, for example, but not limited to, a change
in official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of the
Eurodollar Rate) and/or (y) other circumstances affecting such Lender, the
interbank Eurodollar market or the position of such Lender in such market, then
the Borrower shall pay to each such Lender, within ten days after such Lender's
written demand therefor (accompanied by the written notice referred to in
Section 4.07 below), such additional amounts (in the form of an increased rate
of, or a different method of calculating, interest or otherwise as such Lender
in its sole discretion shall determine) as shall be required to compensate such
Lender for such increased costs or reductions in amounts received or receivable
hereunder.
4.07 Certificates of Lenders. Any Lender, the Swingline Lender or
any Issuing Lender claiming reimbursement or compensation pursuant to this
Article IV shall deliver to the Borrower (with a copy to the Administrative
Agent) a certificate setting forth in reasonable detail the amount payable to
such Person hereunder and such certificate shall be conclusive and binding on
the Borrower in the absence of manifest error. In determining any amounts
payable under Section 4.03(b), each Lender or each Issuing Lender, as the case
may be, shall act reasonably and in good faith and will use averaging and
attribution methods which are reasonable.
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4.08 Change of Lending Office, Replacement Lender, etc. (a) Each
Lender agrees that upon the occurrence of an event giving rise to the operation
of Section 4.01, 4.02, 4.03 or 4.06 with respect to such Lender, it will if so
requested by the Borrower, use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different Lending
Office for any Loans affected by such event with the object of avoiding the
consequence of the event giving rise to the operation of such section; provided,
however, that such designation would not, in the sole judgment of such Lender,
be otherwise disadvantageous to such Lender. Nothing in this Section 4.08(a)
shall affect or postpone any of the obligations of the Borrower or the right of
any Lender provided in Section 4.01, 4.02, 4.03 or 4.06.
(b) Notwithstanding anything to the contrary contained herein or in
any other Loan Document, (x) upon the occurrence of any event that obligates the
Borrower to pay any amount under Section 4.01 or giving rise to the operation of
Section 4.02, 4.03 or 4.06 with respect to such Lender, (y) if any Lender
becomes a Defaulting Lender or (z) as provided in Section 12.01(b) in the case
of certain refusals by a Lender to consent to certain proposed changes, waivers,
discharges or terminations with respect to this Agreement which have been
approved by the Required Lenders, the Borrower shall have the right, if no
Default or Event of Default then exists or will exist immediately after giving
effect to the respective replacement, to replace such Lender (the "Replaced
Lender") by designating another Non-Defaulting Lender or an Eligible Assignee
(such Non-Defaulting Lender or Eligible Assignee being herein called a
"Replacement Lender") to which such Replaced Lender shall assign, in accordance
with Section 12.07 and without recourse to or warranty by, or expense to, such
Replaced Lender, all of the rights and obligations of such Replaced Lender
hereunder and, upon such assignment, such Replaced Lender shall no longer be a
party hereto or have any rights hereunder (except for such rights as survive
repayment of the Loans), and such Replacement Lender shall succeed to the rights
and obligations of such Replaced Lender hereunder. The Borrower shall pay to
such Replaced Lender in same day funds on the date of replacement all interest,
fees and other amounts then due and owing such Replaced Lender by the Borrower
hereunder to and including the date of replacement, including, without
limitation, costs incurred under Section 4.01, 4.02, 4.03 or 4.06.
(c) Notwithstanding anything to the contrary contained in Section
4.01, 4.02, 4.03 or 4.06, unless a Lender gives notice to the Borrower that the
Borrower is obligated to pay an amount under any such Section within 180 days
after the later of (x) the date such Lender incurs the respective increased
costs, loss, expense or liability, reduction in amounts received or receivable
or reduction in return on capital or (y) the date such Lender has actual
knowledge of its incurrence of the respective increased costs, loss, expense or
liability, reductions in amounts received or receivable or reduction in return
on capital, then such Lender shall only be entitled to be compensated for such
amount by the Borrower pursuant to said Section 4.01, 4.02, 4.03 or 4.06, as the
case may be, to the extent the respective increased costs, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on
capital are incurred or suffered on or after the date which occurs 180 days
prior to such Lender giving such notice to the Borrower as provided above that
the Borrower is obligated to pay the respective amounts pursuant to said Section
4.01, 4.02, 4.03 or 4.06, as the case may be. This paragraph (c) shall
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have no applicability to any Section of this Agreement other than said Section
4.01, 4.02, 4.03 or 4.06.
4.09 Survival. The agreements and obligations of the Borrower in
this Article IV shall survive the payment of all other Obligations.
ARTICLE V.
CONDITIONS PRECEDENT
--------------------
5.01 Conditions to Loans and Letters of Credit on the Closing Date.
The occurrence of the Closing Date, the obligation of each Lender to make Loans
hereunder and the obligation of each Issuing Lender to issue Letters of Credit
on the Closing Date is subject to the condition that the Administrative Agent
shall be reasonably satisfied that the following conditions have been satisfied
or waived in writing by the Lenders on or before the Closing Date and, to the
extent applicable, shall have received on or before the date for making such
Loans and/or issuing such Letters of Credit all of the following, in form and
substance reasonably satisfactory to the Administrative Agent and each Lender
and (except for the instruments or documents representing Pledged Securities) in
sufficient copies for each Lender:
(a) Credit Agreement. This Agreement executed by Holdings, the
Borrower, the Administrative Agent, each Issuing Lender, the Swingline
Lender and each of the Lenders (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of facsimile or other
written confirmation from such party of execution of a counterpart hereof
by such party).
(b) Resolutions; Incumbency. (i) Copies of the resolutions of the
Board of Directors of the Borrower approving and authorizing the execution,
delivery and performance by the Borrower of this Agreement and the other
Loan Documents to be delivered by the Borrower, and authorizing the
borrowing of the Loans and the issuance of the Letters of Credit, certified
as of the Closing Date by the Secretary or an Assistant Secretary of the
Borrower;
(ii) Copies of the resolutions of the Board of Directors of Holdings
approving and authorizing the execution, delivery and performance by
Holdings of this Agreement (including the guaranty of the Obligations of
the Borrower) and the other Transaction Documents to be delivered by
Holdings hereunder, certified by the Secretary or an Assistant Secretary of
Holdings;
(iii) Copies of the resolutions of the Board of Directors of each
Subsidiary Guarantor (if any) approving and authorizing the execution,
delivery and performance by such Subsidiary Guarantor of the Subsidiary
Guaranty, the Pledge Agreement, the Security Agreement and the other Loan
Documents to be delivered by such Subsidiary
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Guarantor, certified by the Secretary or an Assistant Secretary of such
Subsidiary Guarantor; and
(iv) Certificates of the Secretary or Assistant Secretary of
Holdings, the Borrower and each Subsidiary Guarantor (if any) certifying
the names and true signatures of the officers of Holdings, the Borrower and
such Subsidiary Guarantor authorized to execute, deliver and perform, as
applicable, this Agreement and all other Loan Documents, notices, requests
and other communications to be delivered hereunder or thereunder.
(c) Articles of Incorporation; By-laws and Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation (or equivalent
organizational documents) of Holdings, the Borrower and each
Subsidiary Guarantor (if any) as in effect on the Closing Date,
certified by the Secretary of State (or similar, applicable
Governmental Authority) of the State of such Credit Party's
organization as of a recent date and by the Secretary or Assistant
Secretary of Holdings, the Borrower and such Subsidiary Guarantor as
of the Closing Date, and the bylaws (or equivalent organizational
documents) of Holdings, the Borrower and such Subsidiary Guarantor as
in effect on the Closing Date, certified by the Secretary or Assistant
Secretary of Holdings, the Borrower and such Subsidiary Guarantor as
of the Closing Date; and
(ii) a good standing certificate as of a recent date for
Holdings, the Borrower and each Subsidiary Guarantor (if any) from the
Secretary of State of the State of such Credit Party's organization
and each state where Holdings, the Borrower and such Subsidiary
Guarantor is qualified to do business as a foreign corporation as of a
recent date; and
(iii) a bring-down certificate, to the extent reasonably
available, of Holdings, the Borrower and each Subsidiary Guarantor (if
any) from the Secretary of State of the State of such Credit Party's
organization, dated the Closing Date.
(d) Subsidiary Guaranty. The Subsidiary Guaranty, duly executed by
each Subsidiary Guarantor (if any).
(e) Pledge Agreement. (i) The Pledge Agreement, duly executed by
Holdings, the Borrower and each Subsidiary Guarantor (if any);
(ii) all certificated Pledged Securities (x) endorsed in blank in
the case of promissory notes representing Pledged Securities and (y)
together with an undated stock power executed in blank in the case of
capital stock representing Pledged Securities; and
(iii) with respect to Pledged Securities, if any, consisting of book-
entry shares, evidence that all actions described in the Pledge Agreement
which are necessary to create
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and perfect the security interests pursuant to the Pledge Agreement in
accordance with the New York UCC have been taken.
(f) Security Agreement. (i) The Security Agreement, duly executed
by each Credit Party;
(ii) proper financing statements (Form UCC-1 or the equivalent)
fully executed for filing under the UCC or other appropriate filing offices
of each jurisdiction as may be necessary or, in the reasonable opinion of
the Administrative Agent, desirable to perfect the security interests
purported to be created by the Security Agreement; and
(iii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
that name any Credit Party or any of its Subsidiaries as debtor and that
are filed in the jurisdictions referred to in clause (ii) above, together
with copies of such other financing statements that name any Credit Party
or any of its Subsidiaries as debtor (none of which shall cover the
Collateral except to the extent evidencing Permitted Liens or in respect of
which the Administrative Agent shall have received Form UCC-3 termination
statements or such other termination statements as shall be required by
local law fully executed for filing).
(g) Mortgages; Title Insurance; Survey, etc. (i) Fully executed
counterparts of Mortgages, in form and substance reasonably satisfactory to
the Administrative Agent, which Mortgages shall cover the Mortgaged
Properties owned or leased by the Credit Parties on the Closing Date as
designated on Schedule 6.09, together with evidence that counterparts of
such Mortgages have been delivered to the title insurance company insuring
the Lien of such Mortgages for recording in all places to the extent
necessary or, in the reasonable opinion of the Administrative Agent,
desirable, to effectively create a valid and enforceable first priority
mortgage lien (subject to Permitted Liens in respect thereof) on each such
Mortgaged Property in favor of the Collateral Agent (or such other trustee
as may be required or desired under local law) for the benefit of the
Secured Creditors;
(ii) a mortgagee title insurance policy (or a binding commitment
with respect thereto) on each such Mortgaged Property (the "Mortgage
Policies") issued by a title insurer reasonably satisfactory to the
Administrative Agent in amounts satisfactory to the Administrative Agent
assuring the Administrative Agent that the Mortgages on such Mortgaged
Properties are valid and enforceable first priority mortgage liens on the
respective Mortgaged Properties, free and clear of all defects and
encumbrances except Permitted Encumbrances and such Mortgage Policies shall
otherwise be in form and substance reasonably satisfactory to the
Administrative Agent, and shall include, as appropriate, an endorsement for
future advances under this Agreement and shall not include an exception for
mechanics' liens, shall provide for affirmative insurance and such
reinsurance as the Administrative Agent may reasonably request and shall
provide for any other matter that the Administrative Agent may reasonably
request; and
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(iii) a survey, in form and substance reasonably satisfactory to the
Administrative Agent of each Mortgaged Property, certified by a licensed
professional surveyor reasonably satisfactory to the Administrative Agent.
(h) Legal Opinions. (i) An opinion of Kirkland & Ellis, counsel to
Holdings, the Borrower and the Subsidiary Guarantors (if any), addressed to
the Administrative Agent, the Collateral Agent and the Lenders, containing
opinions substantially in the form of Exhibit H and as to such other
matters as the Administrative Agent may reasonably request;
(ii) an opinion of White & Case LLP, special counsel to the
Administrative Agent and the Lenders, containing opinions substantially in
the form of Exhibit I;
(iii) an opinion of Palmer & Dodge LLP, local Massachusetts counsel
to the Administrative Agent, addressed to the Administrative Agent, the
Collateral Agent and the Lenders;
(iv) an opinion of Maynard, Cooper & Gale, P.C., local Alabama
counsel to the Administrative Agent, addressed to the Administrative Agent,
the Collateral Agent and the Lenders; and
(v) an opinion of Moore & Van Allen, PLLC, local North Carolina
counsel to the Administrative Agent, addressed to the Administrative Agent
and the Lenders.
(i) Payment of Fees and Expenses. Evidence that all fees, costs and
expenses (including Attorney Costs of the Administrative Agent) payable by
the Borrower on or before the Closing Date have been paid to the extent
then invoiced.
(j) Certificates. (i) Certificates signed by a Responsible Officer
of Holdings and the Borrower, dated as of the Closing Date stating that:
(A) the representations and warranties of Holdings and the
Borrower contained in Article VI and in the other Loan Documents to
which they are party are true and correct in all material respects on
and as of such date, as though made on and as of such date (except to
the extent such representations and warranties expressly relate to an
earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date);
(B) no Default or Event of Default exists or would result from
any Borrowing on the Closing Date; and
(C) the conditions set forth in paragraphs (l), (m), (n) and
(o) of this Section 5.01 have been satisfied; and
(ii) Certificates signed by a Responsible Officer of each of the
Subsidiary Guarantors (if any), dated as of the Closing Date, stating that
the representations and war-
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ranties of such Subsidiary Guarantor contained in the Subsidiary Guaranty,
the Pledge Agreement and the Security Agreement are true and correct in all
material respects on and as of such date, as though made on and as of such
date (except to the extent such representations and warranties expressly
relate to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such
earlier date).
(k) Solvency Opinion. A solvency opinion issued by Valuation Research
Corporation.
(l) Transaction.
(i) The Transaction shall have been consummated in all material
respects in accordance with the Transaction Documents and all
applicable laws, and each of the conditions precedent to the
consummation of the Transaction shall have been satisfied and not
waived except with the consent of the Administrative Agent and the
Required Lenders;
(ii) Holdings shall have received gross cash proceeds of at least
(x) $20,000,000 from the issuance of Holdings Common Stock (of which
approximately $2,880,000 may be in the form of "roll-over" equity
(including options) by the existing shareholders of Holdings) and (y)
$30,000,000 from the issuance of Holdings Preferred Stock (of which
approximately $4,320,000 may be in the form of roll-over equity
(including options) by the existing shareholders of Holdings) ;
(iii) Holdings shall have received gross cash proceeds of at
least $25,000,000 from the issuance of Holdings' Junior Subordinated
Notes;
(iv) the creditors in respect of the Indebtedness to be
Refinanced shall have terminated and released all security interests
and Liens on the assets owned by Holdings and its Subsidiaries and all
guaranties in respect thereof, and the Administrative Agent shall have
received such releases of security interests in and Liens on the
assets owned by Holdings and its Subsidiaries as may have been
requested by the Administrative Agent;
(v) the Borrower shall have received $150,000,000 of gross cash
proceeds from the issuance of a like principal amount of Borrower
Senior Subordinated Notes; and
(vi) the Administrative Agent shall have received true and
correct copies of all Transaction Documents.
(m) Adverse Change. Since April 30, 1998, nothing shall have occurred
(and neither the Administrative Agent nor the Lenders shall have become
aware of any facts or conditions not previously known) which the
Administrative Agent or the Required
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Lenders shall reasonably determine has had, or could reasonably be expected
to have, a Material Adverse Effect.
(n) Governmental and Third Party Approvals. All governmental and
material third party approvals and consents (including the consent of BASF
Company) necessary in connection with the Transaction and the transactions
contemplated by this Agreement and the other Transaction Documents shall
have been obtained and be in full force and effect, and all applicable
waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or
otherwise impose materially adverse conditions on the Transaction or the
transactions contemplated by this Agreement or the other Transaction
Documents. Additionally, there shall not exist any judgment, order,
injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon, or materially delaying, or
making economically unfeasible, the consummation of the Transaction or the
transactions contemplated by this Agreement or the other Transaction
Documents.
(o) Litigation. There shall be no actions, suits or proceedings
pending or threatened (i) with respect to the Transaction or the
transactions contemplated by this Agreement or the other Transaction
Documents or (ii) which the Administrative Agent or the Required Lenders
reasonably determine could reasonably be expected to have a (x) material
adverse effect on the Transaction or the transactions contemplated by this
Agreement or the other Transaction Documents or (y) a Material Adverse
Effect.
(p) Shareholders' Agreements; Management Agreements and Tax Sharing
Agreements. (i) All agreements entered into by Holdings or any of its
Subsidiaries governing the terms and relative rights of its capital stock
and any agreements entered into by shareholders relating to any such entity
with respect to its capital stock;
(ii) all management and consulting agreements entered into by
Holdings or any of its Subsidiaries (including the CHS Management
Agreement); and
(iii) all tax sharing, tax allocation and other similar agreements
entered into by Holdings or any of its Subsidiaries (including the Holdings
Tax Sharing Agreement).
(q) Financial Statements. (i) The Pro Forma Balance Sheet;
(ii) the Projections.
(r) Insurance. Evidence of insurance complying with the requirements
of Section 7.05 for the business and properties of Holdings and its
Subsidiaries.
5.02 Conditions to all Borrowings and the Issuance of any Letters of
Credit. The obligation of each Lender to make any Loan hereunder and the
obligation of the Issuing Lender to issue, renew or amend any Letter of Credit
is subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date or date of issuance, as the case may be:
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(a) Notice. The Administrative Agent shall have received a Notice of
Borrowing; or in the case of a Swingline Loan, the notice required under
Section 2.03(f); or in the case of any issuance of any Letter of Credit
(other than the Existing Letter of Credit in respect of its deemed issuance
on the Closing Date), the respective Issuing Lender and the Administrative
Agent shall have received a Letter of Credit Application, as required under
Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI and in the other
Loan Documents shall be true and correct in all material respects on and as
of such Borrowing Date or such date of issuance (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct in all material respects as of such
earlier date);
(c) No Existing Default. No Default or Event of Default shall exist
or shall result from such Borrowing or issuance of such Letter of Credit;
and
(d) No Material Adverse Effect. Since April 30, 1998, nothing shall
have occurred which, individually or in the aggregate, has had, or could
reasonably be expected to have, a Material Adverse Effect.
Each Notice of Borrowing, request for a Swingline Loan or Letter of
Credit Application submitted by the Borrower hereunder shall be deemed to
constitute a representation and warranty by each of Holdings and the Borrower
hereunder, as of the date of each such notice or application and as of the date
of each Borrowing that the applicable conditions in Section 5.01 (with respect
to such credit events to occur on the Closing Date) and in this Section 5.02
(with respect to credit events to occur on and after the Closing Date) are
satisfied.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of Holdings and the Borrower represents and warrants with respect
to itself and its Subsidiaries to the Administrative Agent, each Issuing Lender
and each Lender as of the Closing Date and as of the date of each Borrowing of
Loans or issuance, renewal or amendment of each Letter of Credit that:
6.01 Existence and Power. Each of Holdings and the Borrower and each
of their respective Subsidiaries:
(a) is a corporation, partnership or limited liability company, as
the case may be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
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(b) has the power and authority and has or will have on or prior to
the date required to be obtained all governmental licenses, authorizations,
consents and approvals to execute, deliver and perform its obligations
under all of the Transaction Documents to which it is a party and has duly
executed and delivered each such Transaction Document, in each case other
than (i) immaterial third party authorizations, consents and approvals for
the Recapitalization and the Asset Contribution and (ii) filings necessary
to perfect the security interest in the Collateral under the Security
Agreement and the Mortgages (which filings, in the case of this clause
(ii), have been made to the extent that this representation and warranty is
made (or deemed made) after 10 days after the Closing Date);
(c) is duly qualified to do business as a foreign corporation and is
licensed and in good standing, under the laws of each jurisdiction where
its ownership, lease or operation of property or the nature or conduct of
its business requires such qualification or license except where the
failure so to qualify, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect; and
(d) is in compliance with all Requirements of Law, except to the
extent that the failure to do so, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
6.02 Authorization; No Contravention. The execution, delivery and
performance by each of Holdings, the Borrower and each other Credit Party of any
Transaction Document to which such Person is party have been duly authorized by
all necessary corporate, partnership or limited liability company action, as the
case may be, and do not and will not:
(a) contravene the terms of any of such Person's charter or by-laws
(or equivalent organizational documents);
(b) conflict with or result in any breach or contravention of, or the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Collateral Documents) under, any document
evidencing any material Contractual Obligation to which such Person is a
party or any order, injunction, writ or decree of any Governmental
Authority to which such Person or its property is subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, Holdings or any
of its Subsidiaries of any Transaction Document to which any such Person is a
party, in each case other than (i) immaterial third party authorizations,
consents and approvals for the Recapitalization and the Asset Contribution, (ii)
filings with the Securities and Exchange Commission in connection with the
Exchange Offer and (iii) filings necessary to perfect the security interest in
the Collateral under the Security Agreement and the Mortgages (which filings
have been made to the extent that this representation and warranty is made (or
deemed made) after 10 days after the Closing Date).
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6.04 Binding Effect. This Agreement and each other Transaction
Document to which Holdings or any of its Subsidiaries is a party constitute the
legal, valid and binding obligations of Holdings and each of its Subsidiaries to
the extent such Person is a party thereto, enforceable against such Person in
accordance with their respective terms, except to the extent that enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles of
general applicability.
6.05 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of Holdings and the Borrower,
threatened at law, in equity, in arbitration or before any Governmental
Authority, against Holdings or any of its Subsidiaries or any of their
respective properties or assets which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document; or
(b) either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
As of the Closing Date, no injunction, writ, temporary restraining order or
any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any other Transaction Document, or directing
that any other transaction provided for herein not be consummated as herein
provided.
6.06 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by Holdings, the Borrower or any
Subsidiary Guarantor. Neither Holdings nor any of its Subsidiaries is in
default under or with respect to any Contractual Obligation in any respect
which, either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
6.07 ERISA Compliance. (a) Each Plan (and each related trust,
insurance contract or fund) is in material compliance with its terms and with
all applicable laws, including, without limitation, ERISA and the Code; each
Plan (and each related trust, if any) which is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Sections 401(a)
and 501(a) of the Code; no Reportable Event has occurred; no Plan which is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or
in reorganization; no Plan has an Unfunded Current Liability which, when added
to the aggregate amount of Unfunded Current Liabilities with respect to all
other Plans, exceeds $2,500,000; no Plan which is subject to Section 412 of the
Code or Section 302 of ERISA has an accumulated funding deficiency, within the
meaning of such sections of the Code or ERISA, or has applied for or received a
waiver of an accumulated funding deficiency or an extension of any amortization
period, within the meaning of Section 412 of the Code or Section 303 or 304 of
ERISA; all contributions required to be made with respect to a Plan have been
timely made; neither Holdings nor any Subsidiary of Holdings nor any ERISA
Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section
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401(a)(29), 4971 or 4975 of the Code or expects to incur any such material
liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to Holdings or any Subsidiary of
Holdings or any ERISA Affiliate of incurring a material liability to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted to terminate or appoint a trustee to administer
any Plan which is subject to Title IV of ERISA; no action, suit, proceeding,
hearing, audit or investigation with respect to the administration, operation or
the investment of assets of any Plan (other than routine claims for benefits) is
pending, expected or threatened; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of Holdings and its Subsidiaries and its ERISA Affiliates to all
Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA)
in the event of a complete withdrawal therefrom, as of the close of the most
recent fiscal year of each such Plan ended prior to the date of the most recent
Borrowing Date, would not exceed $2,500,000; each group health plan (as defined
in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or
has covered employees or former employees of Holdings, any Subsidiary of
Holdings, or any ERISA Affiliate has at all times been operated in material
compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets
of Holdings or any Subsidiary of Holdings or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and Holdings and its Subsidiaries do not
maintain or contribute to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any plan
the obligations with respect to which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Each Foreign Pension Plan has been maintained (and all required
contributions have been made) in substantial compliance with its terms and with
the requirements of any and all applicable laws, statutes, rules, regulations
and orders and has been maintained, where required, in good standing with
applicable regulatory authorities. Neither Holdings nor any of its Subsidiaries
has incurred any material obligation in connection with the termination of or
withdrawal from any Foreign Pension Plan. The present value of the accrued
benefit liabilities (whether or not vested) under each Foreign Pension Plan,
determined as of the end of Holdings' most recently ended fiscal year on the
basis of actuarial assumptions, each of which is reasonable, did not exceed the
current value of the assets of such Foreign Pension Plan allocable to such
benefit liabilities.
6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are intended to be and shall be used solely for the purposes set forth in and
permitted by Section 7.14.
6.09 Title to Properties, etc. Holdings and each of its Subsidiaries
have good record and marketable title in fee simple to, or valid leasehold
interests in, all material property owned or leased by them, free and clear of
all Liens other than Permitted Liens. Schedule 6.09 contains a true and
complete list of each parcel of Real Property owned or leased by Holdings or any
of its Subsidiaries on the Closing Date, and the type of interest therein held
by Holdings or such Subsidiary.
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6.10 Taxes. Each of Holdings and its Subsidiaries has filed all
federal and state income tax returns and all other material tax returns,
domestic and foreign, required to be filed by it and has paid all taxes and
assessments payable by it which have become due, except for immaterial taxes and
taxes contested in good faith and adequately disclosed and fully provided for on
the financial statements of Holdings and its Subsidiaries in accordance with
GAAP. Holdings and each of its Subsidiaries have at all times paid, or have
provided adequate reserves (in the good faith judgment of the management of
Holdings) for the payment of, all federal, state, local and foreign income taxes
(other than immaterial taxes) applicable for all prior fiscal years and for the
current fiscal year to date. There is no material action, suit, proceeding,
investigation, audit or claim now pending or, to the best knowledge of Holdings
and the Borrower, threatened by any authority regarding any taxes relating to
Holdings or any of its Subsidiaries. As of the Closing Date, neither Holdings
nor any of its Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of Holdings or any of
its Subsidiaries, or is aware of any circumstances that would cause the taxable
years or other taxable periods of Holdings or any of its Subsidiaries not to be
subject to the normally applicable statute of limitations.
6.11 Financial Statements. All balance sheets, statements of
operations and other financial data of Holdings and its Subsidiaries which have
been or shall hereafter be furnished to the Administrative Agent and the Lenders
for the purposes of or in connection with this Agreement or any transaction
contemplated hereby have been prepared in accordance with GAAP and do and will
present fairly, in all material respects, the financial condition of Holdings
and its Subsidiaries as of the dates thereof and the results of their operations
for the period(s) covered thereby. The Projections which have been furnished by
(or on behalf of) Holdings pursuant to Section 5.01(q)(ii) represent
management's good faith estimates of future performance based upon historical
financial information and reasonable assumptions of management, it being
recognized that such Projections are not to be viewed as facts and do not
constitute a warranty as to the future performance of Holdings or its
Subsidiaries and that actual results may vary from projected results and such
variances may be material.
6.12 Securities Law, etc.; Compliance. All transactions contemplated
by this Agreement and the other Loan Documents comply with (x) Regulations T, U
and X of the Federal Reserve Board and (y) all other applicable laws and any
rules and regulations thereunder.
6.13 Governmental Regulation. Neither Holdings nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940 or
a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a holding
company", within the meaning of the Public Utility Holding Company Act of 1935.
6.14 Labor Controversies. There are no labor controversies pending
or, to the best of Holdings' and the Borrower's knowledge, threatened against it
or any of their respective
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Subsidiaries which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
6.15 Subsidiaries. Holdings has no Subsidiaries, except, on the
Closing Date, those Subsidiaries which are identified in Schedule 6.15 and,
thereafter, those Subsidiaries permitted to be formed or acquired in compliance
with the terms of this Agreement.
6.16 Patents, Trademarks, etc. Each of Holdings and each of its
Subsidiaries owns (or is licensed to use) and possesses all such patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, copyrights, permits, licenses and authorizations as
it considers necessary for the conduct of the business of Holdings and its
Subsidiaries as now conducted without, individually or in the aggregate, any
infringement upon rights of other Persons which could reasonably be expected to
have a Material Adverse Effect.
6.17 Accuracy of Information. All factual information (taken as a
whole) heretofore or contemporaneously herewith furnished by or on behalf of
Holdings or any of its Subsidiaries in writing to the Administrative Agent or
any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby and all other such factual information (taken as
a whole) hereafter furnished by or on behalf of Holdings or any of its
Subsidiaries to the Administrative Agent or any Lender when taken as a whole
will be true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as whole), in the light
of the circumstances existing at the time such information was delivered, not
misleading in any material respect, it being understood that any representation
or warranty in this Section 6.17 as to the Projections is qualified to the
extent set forth in Section 6.11.
6.18 Hazardous Materials. Neither Holdings nor any of its
Subsidiaries have caused or permitted any Hazardous Material to be disposed of
or otherwise released, either from, on or under any property currently or
formerly legally or beneficially owned, leased or operated by, or otherwise used
by, Holdings or any of its Subsidiaries, which, either individually or in the
aggregate, has or could reasonably be expected to have a Material Adverse
Effect. No such property has (or, with respect to the period of time prior to
which Holdings or any of its Subsidiaries legally or beneficially owned, leased
or operated such property, to the knowledge of Holdings and Borrower, no such
property has) ever been used as a dump site or storage site for any Hazardous
Materials or otherwise contains or contained Hazardous Materials, which, either
individually or in the aggregate, has or could reasonably be expected to have a
Material Adverse Effect. The failure, if any, of Holdings or any of its
Subsidiaries, in connection with their current and former properties or their
businesses, to be in compliance with any Environmental Law or to obtain any
permit, certificate, license, approval and other authorization under such
Environmental Laws has not had, nor is reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect. Neither Holdings
nor any of its Subsidiaries have entered into, have agreed to or are subject to
any judgment, decree or order or other similar requirement of any Governmental
Authority under any Environmental Law, including without limitation,
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relating to compliance or to investigation, cleanup, remediation or removal of
Hazardous Materials, which, either individually or in the aggregate, has or
could reasonably be expected to have a Material Adverse Effect. Neither Holdings
nor any of its Subsidiaries have contractually assumed any liabilities or
obligations under any Environmental Law which, either individually or in the
aggregate, have or could reasonably be expected to have a Material Adverse
Effect. There are no facts or circumstances which exist that could reasonably be
expected to give rise to liabilities with respect to Hazardous Materials or any
Environmental Law, which, either individually or in the aggregate, have or could
reasonably be expected to have a Material Adverse Effect.
6.19 Collateral Documents. (i) The provisions of the Pledge
Agreement will be, on and after the Closing Date, effective to create, in favor
of the Collateral Agent for the benefit of the Lenders and the Collateral Agent,
legal, valid and enforceable security interests in all of the Collateral
described therein, and upon the taking of and continued possession of such
Collateral by the Collateral Agent on or prior to the Closing Date, the Pledge
Agreement shall constitute, as of and after the Closing Date, a fully perfected
security interest in such Collateral superior in right to any other security
interests, existing or future, which any Person may have against such
Collateral, except to the extent, if any, otherwise provided in the Pledge
Agreement;
(ii) the provisions of the Security Agreement are effective to create
in favor of the Collateral Agent for the benefit of the Lenders and the
Collateral Agent, a legal, valid and enforceable security interest in all
right, title and interest in all of the Collateral described therein, and
the Security Agreement, upon the filing of Form UCC-1 financing statements
or the appropriate equivalent (which filing, if this representation is
being made more than 10 days after the Closing Date, has been made),
create a fully perfected first priority lien on, and security interest in,
all right, title and interest in all of the Collateral described in the
Security Agreement to the extent that such security interests can be
perfected by the filing of a financing statement under the UCC or in which
a filing may be made in the United States Patent and Trademark Office or in
the United States Copyright Office, subject to no other Liens other than
Permitted Liens.
(iii) the Mortgages create, for the obligations purported to be
secured thereby, a valid and enforceable perfected security interest in and
mortgage lien on the respective Mortgaged Properties covered thereby in
favor of the Collateral Agent (or such other trustee as may be required or
desired under local law) for the benefit of the Lenders, superior to and
prior to the rights of all third Persons (except that the security interest
and mortgage lien created in the Mortgaged Properties may be subject to the
Permitted Encumbrances related thereto) and subject to no other Liens
(other than Permitted Liens).
6.20 Solvency. On and as of the Closing Date and after giving effect
to the Transaction and to all Indebtedness being incurred, assumed or repaid and
Liens created by the Credit Parties in connection therewith (a) the sum of the
assets, at a fair valuation on a going-concern basis, of each of the Borrower on
a stand-alone basis and of Holdings and its Subsidiaries taken as a whole will
exceed its debts; (b) each of the Borrower on a stand-alone basis and Holdings
and its Subsidiaries taken as a whole has not incurred and does not intend to
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incur, and does not believe that it will incur, debts beyond its ability to pay
such debts as such debts mature; and (c) each of the Borrower on a stand alone
basis and Holdings and its Subsidiaries taken as a whole will have sufficient
capital with which to conduct its business. For purposes of this Section 6.20,
"debt" means any liability on a claim, and "claim" means (i) right to payment,
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured. The amount of contingent
liabilities at any time shall be computed as the amount that, in the light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
6.21 Representations and Warranties in the other Documents. All
representations and warranties made by any Credit Party in the Recapitalization
Documents and in the Borrower Senior Subordinated Note Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made) and shall be true and correct in all
material respects as of Closing Date as if such representations and warranties
were made on and as of such date, unless stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date.
6.22 Capitalization. (a) On the Closing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized capital stock of Holdings shall consist of (i) (x) 5,000,000 shares
of Class A common stock, $.01 par value per share, (y) 350,000 shares of Class B
common stock, $.01 par value per share, and (z) 600,000 shares of Class C common
stock, $.01 par value per share (collectively, "Holdings Common Stock"), and
(ii) 40,000 shares of preferred stock, $.01 par value per share ("Holdings
Preferred Stock"). All outstanding shares of capital stock of Holdings have
been duly and validly issued and are fully paid and non-assessable. Holdings
does not have outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock, except (i) for options to purchase
shares of Holdings' Common Stock which may be issued from time to time to
directors, officers and employees of Holdings or any of its Subsidiaries, (ii)
for shares of Holdings Preferred Stock which may be convertible into shares of
Holdings Common Stock, (iii) for warrants to purchase shares of Holdings Common
Stock which may be issued from time to time and (iv) as may be set forth in any
of the shareholders' agreements delivered pursuant to Section 5.01(p).
(b) On the Closing Date and after giving effect to the Transaction
and the other transactions contemplated hereby, the authorized capital stock of
the Borrower shall consist of 5,000 shares of common stock, $1.00 par value per
share, of which 1,000 shares shall be issued and outstanding and owned by
Holdings. All outstanding shares of capital stock of the Borrower have been
duly and validly issued, are fully paid and nonassessable. The Borrower
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does not have outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
6.23 Special Purpose Corporation. Holdings engages in no significant
business activities and, after giving effect to the Transaction, has no
significant assets (other than the capital stock of the Borrower, the capital
stock of Globe Elastic Thread, Ltd. (which is in the process of being
dissolved), immaterial assets used for the performance of those activities
permitted to be performed by Holdings pursuant to Section 8.14(b) and any
obligations held by it to the extent permitted by Section 8.05(vi)) or
liabilities (other than those liabilities incurred under this Agreement and
under the other Transaction Documents to which it is a party and those
liabilities permitted to be incurred by it under this Agreement).
6.24 Insurance. Schedule 6.24 sets forth a true and complete listing
of all insurance maintained by Holdings and its Subsidiaries as of the Closing
Date, and with the amounts insured (and any deductibles) set forth therein.
6.25 Subordination Provisions. (a) The subordination provisions
contained in the Borrower Senior Subordinated Notes and in other Borrower Senior
Subordinated Note Documents are enforceable against the Borrower, the Subsidiary
Guarantors and the holders of the Borrower Senior Subordinated Notes, and all
Obligations and Guaranteed Obligations (as defined herein and in the Subsidiary
Guaranty) are within the definition of "Senior Debt" or "Guarantor Senior Debt",
as the case may be, included in such subordination provisions.
(b) The subordination provisions contained in the Holdings Junior
Subordinated Notes are enforceable against Holdings and the holders of the
Holdings Junior Subordinated Notes and all Guaranteed Obligations are within the
definition of "Superior Debt" included in such subordination provisions.
6.26 Year 2000. Holdings and its Subsidiaries have reviewed the
areas within their business and operations which could be adversely affected by,
and have developed or are developing a program to address on a timely basis, the
risk that certain computer applications used by Holdings and its Subsidiaries
may be unable to recognize and perform properly date-sensitive functions
involving dates on, prior to and after December 31, 1999. Such risk will not
have a Material Adverse Effect.
ARTICLE VII.
AFFIRMATIVE COVENANTS
---------------------
Each of Holdings and the Borrower agrees with the Administrative Agent
and each Lender that, until all Commitments and Letters of Credit have
terminated and all
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Obligations (other than indemnities for which no request for payment has been
made) have been paid and performed in full:
7.01 Financial Statements. Each of Holdings and the Borrower shall
deliver to the Administrative Agent in form and detail reasonably satisfactory
to the Administrative Agent and the Required Lenders:
(a) as soon as available, but not later than 90 days after the end of
each fiscal year of Holdings, (i) a copy of the audited consolidated
balance sheet of Holdings and its Subsidiaries as at the end of such fiscal
year and the related audited consolidated statements of income or
operations, shareholders' equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, and certified by Ernst & Young LLP or another nationally-
recognized independent public accounting firm reasonably acceptable to the
Administrative Agent, together with a report of such accounting firm
stating that such consolidated financial statements present fairly, in all
material respects, the financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years (except
for changes agreed upon by Holdings and such auditors which are disclosed
and described in such statements) and in the course of its regular audit of
the financial statements of Holdings and its Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm obtained no knowledge of any Default or Event of Default
relating to accounting matters which has occurred and is continuing or, if
in the opinion of such accounting firm a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof, and (ii)
management's discussion and analyses of the material operational and
financial developments during such fiscal year. The accountant's opinion
referred to above shall not be qualified or limited because of a restricted
or limited examination by such accountant of any material portion of the
records of Holdings or any of its Subsidiaries;
(b) as soon as available, but not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of Holdings,
(i) a copy of the unaudited consolidated balance sheet of Holdings and its
Subsidiaries as of the end of such fiscal quarter and the related
consolidated statements of income or operations, shareholders' equity and
cash flows for the period commencing on the first day and ending on the
last day of such fiscal quarter and for the elapsed portion of the fiscal
year ended with the last day of such fiscal quarter, and certified by a
Responsible Officer of Holdings as being complete and correct and fairly
presenting in all material respects, in accordance with GAAP (subject to
normal year-end audit adjustments and the absence of footnote disclosure),
the financial position and the results of operations of Holdings and its
Subsidiaries, and (ii) management's discussion and analyses of the material
operational and financial developments during such fiscal quarter and for
the elapsed portion of the fiscal year ended with the last day of such
fiscal quarter;
(c) as soon as available, but not later than 45 days after the end of
each fiscal month of each fiscal year of Holdings (other than the last
fiscal month of any fiscal
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quarter), a copy of the unaudited consolidated balance sheet of Holdings
and its Subsidiaries as at the end of such fiscal month and the related
consolidated statements of income or operations and cash flows for such
fiscal month and for the elapsed portion of the fiscal year ended with the
last day of such fiscal month, in each case setting forth comparative
figures for the corresponding fiscal month in the prior fiscal year and
comparable budgeted figures for such fiscal month; and
(d) as soon as available, but not later than 30 days following the
first day of each fiscal year of Holdings, a budget (including budgeted
statements of income and sources and uses of cash and balance sheets)
prepared by Holdings for (i) each of the twelve months of such fiscal year
prepared in detail and (ii) such other budget information, if any, as
Holdings or the Borrower may prepare for its internal use or for any
Permitted Holder.
7.02 Certificates; Other Information. Holdings and the Borrower
shall furnish to the Administrative Agent and each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Sections 7.01(a) and (b), a compliance certificate in the
form of Exhibit K, with such changes thereto as are satisfactory to the
Administrative Agent (each, a "Compliance Certificate");
(b) to the extent not previously delivered with respect to any
Adjustment Date, concurrently with the delivery of the financial statements
referred to in Sections 7.01(a) and (b), a Leverage Ratio Certificate duly
executed by a Responsible Officer of Holdings;
(c) promptly after Holdings' or any of its Subsidiaries' receipt
thereof, a copy of any "management letter" received from its certified
public accountants and management's response thereto;
(d) promptly after the same are sent, copies of all financial
statements and reports which Holdings sends to its shareholders generally;
and promptly after the same are filed, copies of all financial statements
and regular, periodical or special reports which Holdings or any of its
Subsidiaries may make to, or file with, the Securities and Exchange
Commission; and
(e) promptly, such additional business, financial and other
information with respect to Holdings or any of its Subsidiaries as the
Administrative Agent or any Lender may from time to time reasonably
request.
7.03 Notices. Holdings and the Borrower shall, promptly upon (and in
any event within five Business Days after) any Responsible Officer of Holdings
or the Borrower obtaining knowledge thereof, give notice (accompanied by a
reasonably detailed explanation with respect thereto) to the Administrative
Agent, the Issuing Lender and each Lender of:
(a) the occurrence of any Default or Event of Default;
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(b) any litigation, arbitration or governmental investigation or
proceeding which has been instituted or, to the knowledge of a Responsible
Officer of Holdings or the Borrower, is threatened against Holdings or any
of its Subsidiaries or to which any of their respective properties is
subject (i) which could reasonably be expected to result in a Material
Adverse Effect or (ii) relates to this Agreement, any other Transaction
Document, the Transaction, any Holdings Senior Discount Note Document or
any of the transactions contemplated hereby or thereby; and
(c) one or more of the following environmental matters, unless such
environmental matters could not, individually or when aggregated with all
other such environmental matters, be reasonably expected to have a Material
Adverse Effect:
(i) any pending or threatened Environmental Claim against
Holdings or any of its Subsidiaries or any real property owned, leased
or operated by Holdings or any of its Subsidiaries;
(ii) any condition or occurrence on or arising from any real
property owned, leased or operated by Holdings or any of its
Subsidiaries that (a) results in noncompliance by Holdings or any of
its Subsidiaries with any applicable Environmental Law or (b) could be
expected to form the basis of an Environmental Claim against Holdings
or any of its Subsidiaries or any such real property;
(iii) any condition or occurrence on any real property owned,
leased or operated by Holdings or any of its Subsidiaries that could
be expected to cause such real property to be subject to any
restrictions on the ownership, occupancy, use or transferability by
Holdings or any of its Subsidiaries of such real property under any
Environmental Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
real property owned, leased or operated by Holdings or any of its
Subsidiaries as required by any Environmental Law or any governmental
or other administrative agency; provided, that in any event Holdings
shall deliver to the Administrative Agent and each Lender all notices
received by Holdings or any of its Subsidiaries from any government or
governmental agency under, or pursuant to, CERCLA which identify
Holdings or any of its Subsidiaries as potentially responsible parties
for remediation costs or which otherwise notify Holdings or any of its
Subsidiaries of potential liability under CERCLA.
(d) as soon as possible and, in any event, within ten (10) days after
any Responsible Officer of Holdings or the Borrower knows or has reason to
know of the occurrence of any of the following, Holdings will deliver to
the Administrative Agent a certificate of a Responsible Officer of Holdings
setting forth in reasonable detail information as to such occurrence and
the action, if any, that Holdings, such Subsidiary or such ERISA Affiliate
is required or proposes to take, together with any notices required or
pro-
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posed to be given to or filed with or by Holdings, the Subsidiary, the
ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator
with respect thereto: that a Reportable Event has occurred (except to the
extent that Holdings has previously delivered to the Lenders a certificate
and notices (if any) concerning such event pursuant to the next clause
hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of
ERISA) of a Plan subject to Title IV of ERISA is subject to the advance
reporting requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof), and an event described in subsection .62,
.63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is
reasonably expected to occur with respect to such Plan within the following
30 days; that an accumulated funding deficiency, within the meaning of
Section 412 of the Code or Section 302 of ERISA, has been incurred or an
application may reasonably be expected to be or has been made for a waiver
or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA with respect to a
Plan; that any contribution required to be made with respect to a Plan or a
Foreign Pension Plan has not been timely made; that a Plan has been or may
reasonably be expected to be terminated, reorganized, partitioned or
declared insolvent under Title IV of ERISA; that a Plan has an Unfunded
Current Liability which, when added to the amount of Unfunded Current
Liabilities with respect to all other Plans, equals or exceeds $2,500,000;
that proceedings may be reasonably expected to be or have been instituted
to terminate or appoint a trustee to administer a Plan which is subject to
Title IV of ERISA; that a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Plan; that
Holdings, any Subsidiary of Holdings or any ERISA Affiliate will or may
reasonably be expected to incur any material liability (including any
indirect, contingent, or secondary liability) to or on account of the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or
502(l) of ERISA or with respect to a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section
4980B of the Code; or that Holdings or any Subsidiary of Holdings may incur
any material liability pursuant to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) with respect to providing benefits to
retired employees or other former employees (other than as required by
Section 601 of ERISA or Section 4980B of the Code) or any Plan or any
Foreign Pension Plan in addition to the liability that existed under the
terms of such Plan or Plans on the Closing Date. Upon request of the
Administrative Agent or any Lender, Holdings will deliver to the
Administrative Agent (i) a complete copy of the annual report (on Internal
Revenue Service Form 5500-series) of each Plan (including, to the extent
required, the related financial and actuarial statements and opinions and
other supporting statements, certifications, schedules and information)
required to be filed with the Internal Revenue Service and (ii) copies of
any records, documents or other information that must be furnished to the
PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In
addition to any certificates or notices delivered to the Administrative
Agent pursuant to the first sentence hereof, upon request of the
Administrative Agent or any Lender, copies of annual reports and any
records, documents or other information required to be
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furnished to the PBGC, and any material notices received by Holdings, any
Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan or
any Foreign Pension Plan shall be delivered to the Administrative Agent no
later than ten (10) days after the date such annual report has been filed
with the Internal Revenue Service or such records, documents and/or
information has been furnished to the PBGC or such notice has been received
by Holdings, the Subsidiary or the ERISA Affiliate, as applicable.
7.04 Books, Records and Inspections. Holdings shall, and shall cause
each of its Subsidiaries to, keep proper books of record and accounts in which
full, true and correct entries in conformity with GAAP and all requirements of
law shall be made of all dealings and transactions in relation to its business
and activities. Holdings shall, and shall cause each of its Subsidiaries to,
permit officers and designated representatives of the Administrative Agent or
any Lender to visit and inspect, under guidance of officers of Holdings or such
Subsidiary, any of the properties of Holdings or such Subsidiary and, under
guidance of officers of Holdings or such Subsidiary, to examine the books of
account of Holdings or such Subsidiary and discuss the affairs, finances and
accounts of Holdings or such Subsidiary with, and be advised as to the same by,
its and their officers and independent accountants, all upon reasonable prior
notice and at such reasonable times and intervals and to such reasonable extent
as the Administrative Agent or such Lender may reasonably request.
7.05 Maintenance of Property; Insurance. (a) Holdings shall, and
shall cause each of its Subsidiaries to, (i) keep all property necessary to the
business of Holdings and its Subsidiaries in reasonably good working order and
condition, ordinary wear and tear and damage by casualty excepted, (ii) maintain
insurance on all such property in at least such amounts and against at least
such risks as is consistent and in accordance with industry practice for
companies similarly situated owning similar properties in the same general areas
in which Holdings or any of its Subsidiaries operates, and (iii) furnish to the
Administrative Agent, on each date on which financial statements are delivered
pursuant to Section 7.01(a), full information as to the insurance carried.
(b) Holdings shall, and shall cause each of its Subsidiaries to, at
all times keep its property insured in favor of the Collateral Agent, and all
policies or certificates from an acceptable insurance broker (or certified
copies thereof) with respect to such insurance (and any other insurance
maintained by Holdings and/or such Subsidiaries) (i) shall be endorsed to the
Collateral Agent's satisfaction for the benefit of the Collateral Agent
(including, without limitation, by naming the Collateral Agent as loss payee
and/or additional insured), (ii) shall state that such insurance policies shall
not be canceled without at least 30 days' prior written notice thereof (or 10
days' prior written notice in the case of nonpayment of premium) by the
respective insurer to the Collateral Agent (or such shorter period of time as a
particular insurance company policy generally provides) and (iii) shall be
deposited with the Collateral Agent.
(c) If Holdings or any of its Subsidiaries shall fail to insure its
property in accordance with this Section 7.05, or if Holdings or any of its
Subsidiaries shall fail to so endorse and deposit all policies or certificates
with respect thereto, the Collateral Agent shall have the right (but shall be
under no obligation) to procure such insurance and Holdings and the Borrower
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agree to reimburse the Collateral Agent for all reasonable costs and expenses of
procuring such insurance.
7.06 Franchises. Holdings shall, and shall cause each of its
Subsidiaries to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its material rights, franchises,
licenses and patents; provided, however, that nothing in this Section 7.06 shall
prevent (i) sales of assets and other transactions by Holdings or any of its
Subsidiaries in accordance with Section 8.02 or (ii) the withdrawal by Holdings
or any of its Subsidiaries of its qualification as a foreign corporation in any
jurisdiction where such withdrawal could not reasonably be expected to have a
Material Adverse Effect.
7.07 Compliance with Law. Holdings shall, and shall cause each of
its Subsidiaries to, comply with all Requirements of Law of any Governmental
Authority, except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.08 Payment of Taxes. Holdings shall pay and discharge, and shall
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for sums that have become due and payable which,
if unpaid, might become a Lien not otherwise permitted under Section 8.01(i);
provided, that neither Holdings nor any of its Subsidiaries shall be required to
pay any such tax, assessment, charge, levy or claim which is immaterial or is
being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
7.09 Contributions. Except for (i) equity contributions and proceeds
from the issuance of the Holdings' Junior Subordinated Notes in each case that
are either received on the Closing Date and used to effect the Recapitalization
or permitted to be used by Holdings as provided in Section 8.03(iv) or 8.11(v)
and (ii) proceeds from the issuance of the Holdings Senior Discount Notes that
are used by Holdings as provided in Section 8.11(vi), Holdings shall contribute
as a common equity contribution to the capital of the Borrower upon its receipt
thereof, any cash proceeds received by Holdings from any asset sale, any
incurrence of Indebtedness (other than Intercompany Loans made pursuant to
Section 8.05 (xv)), any Recovery Event, any sale or issuance of its equity, any
cash capital contributions received by Holdings or any tax refunds received by
Holdings.
7.10 End of Fiscal Years; Fiscal Quarters. Holdings shall, for
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
7.11 Cash Management System. Holdings shall maintain, and shall
cause each of its Subsidiaries to maintain, their cash management system on a
basis reasonably satisfactory to the Administrative Agent (although no daily
cash sweeps against outstanding Loans shall be required); provided, however, to
the extent that any Credit Party maintains any bank account
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(other than payroll accounts) with an institution other than the Administrative
Agent in which more than $1,000,000 is maintained at any time for three or more
consecutive Business Days, such Credit Party shall promptly notify the
Administrative Agent thereof, and to the extent requested by Bank of America (or
any successor Administrative Agent) or the Required Lenders, such Credit Party
shall cause such other institution to enter into lockbox arrangements with the
Collateral Agent on terms reasonably acceptable to Bank of America (or any
successor Administrative Agent).
7.12 Additional Security; Further Assurances. (a) Subject to Section
7.11, Holdings shall, and shall cause each of the other Credit Parties to,
grant to the Collateral Agent security interests and Mortgages in such assets
and properties of Holdings and the other Credit Parties as are not covered by
the original Security Documents, and as may be reasonably requested from time to
time by the Administrative Agent or the Required Lenders (collectively, the
"Additional Security Documents"); provided, however, that no such request for a
Mortgage on a parcel of Real Property may be made pursuant to this Section
7.12(a) unless such Real Property (or, in the case of a Leasehold, such Credit
Party's Leasehold interest) has a fair market value of at least $500,000. All
such security interests and Mortgages shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Administrative Agent and
shall constitute valid and enforceable perfected security interests and
Mortgages superior to and prior to the rights of all third Persons and subject
to no other Liens except for Permitted Liens. The Additional Security Documents
or instruments related thereto shall have been duly recorded or filed in such
manner and in such places as are required by law to establish, perfect, preserve
and protect the Liens in favor of the Collateral Agent required to be granted
pursuant to the Additional Security Documents and all taxes, fees and other
charges payable in connection therewith shall have been paid by Holdings and/or
its Subsidiaries in full.
(b) Holdings shall, and shall cause each of the other Credit Parties
to, at the expense of Holdings, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, Mortgage
Policies, reports and other assurances or instruments and take such further
steps relating to the Collateral covered by any of the Security Documents as the
Collateral Agent may reasonably require. Furthermore, Holdings will cause to be
delivered to the Collateral Agent such opinions of counsel, title insurance and
other related documents as may be reasonably requested by the Administrative
Agent to assure itself that this Section 7.12 has been complied with.
(c) Holdings agrees that each action required above by this Section
7.12 shall be completed as soon as possible, but in no event later than 90 days
after such action is either requested to be taken by the Administrative Agent or
the Required Lenders or required to be taken by Holdings and/or the other Credit
Parties pursuant to the terms of this Section 7.12; provided that, in no event
will Holdings or any of its Subsidiaries be required to take any action, other
than using its reasonable efforts, to obtain consents from third parties with
respect to its compliance with this Section 7.12.
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7.13 Foreign Subsidiaries Security. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Administrative Agent does not within 30
days after a request from the Administrative Agent or the Required Lenders
deliver evidence, in form and substance mutually satisfactory to the
Administrative Agent and the Borrower, with respect to any Foreign Subsidiary
which has not already had all of its stock pledged pursuant to the Pledge
Agreement that (i) a pledge of 65% or more of the total combined voting power of
all classes of capital stock of such Foreign Subsidiary entitled to vote, (ii)
the entering into by such Foreign Subsidiary of a security agreement in
substantially the form of the Security Agreement and (iii) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiary Guaranty, in any such case could reasonably be expected to cause the
undistributed earnings of such Foreign Subsidiary as determined for Federal
income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary's United States parent for Federal income tax purposes, then in the
case of a failure to deliver the evidence described in clause (i) above, that
portion of such Foreign Subsidiary's outstanding capital stock so issued by such
Foreign Subsidiary and not theretofore pledged pursuant to the Pledge Agreement
shall be pledged to the Collateral Agent for the benefit of the Lenders pursuant
to the Pledge Agreement (or another pledge agreement in substantially similar
form, if needed), and in the case of a failure to deliver the evidence described
in clause (ii) above, such Foreign Subsidiary shall execute and deliver the
Security Agreement (or another security agreement in substantially similar form,
if needed) and the Pledge Agreement (or another pledge in substantially similar
form, if needed), granting the Collateral Agent for the benefit of the Lenders a
security interest in all of such Foreign Subsidiary's assets and securing the
Obligations of the Borrower under the Loan Documents and, in the event the
Subsidiary Guaranty shall have been executed by such Foreign Subsidiary, the
obligations of such Foreign Subsidiary thereunder, and in the case of a failure
to deliver the evidence described in clause (iii) above, such Foreign Subsidiary
shall execute and deliver the Subsidiary Guaranty (or another guaranty in
substantially similar form, if needed), guaranteeing the Obligations of the
Borrower under the Loan Documents, in each case to the extent that the entering
into such Security Agreement or Subsidiary Guaranty is permitted by the laws of
the respective foreign jurisdiction and with all documents delivered pursuant to
this Section 7.13 to be in form and substance reasonably satisfactory to the
Administrative Agent.
7.14 Use of Proceeds; Margin Regulations. (a) All proceeds of the
Term Loans shall be used to consummate the Transaction and to pay fees and
expenses in connection therewith. All proceeds of the Revolving Loans shall be
used (i) in part, to consummate the Transaction and to pay fees and expenses in
connection therewith, in an aggregate amount not to exceed $8,500,000, and (ii)
for the working capital and general corporate purposes of the Borrower and its
Subsidiaries (including for Capital Expenditures and Permitted Acquisitions).
(b) The Borrower shall ensure that no part of any Loan or Letter of
Credit will be used to purchase or carry any Margin Stock or to extend credit
for the purpose of purchasing or carrying any Margin Stock or will violate or be
inconsistent with the provisions of Regulations T, U and X of the Federal
Reserve Board.
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7.15 Holdings Preferred Stock. Holdings shall pay all Dividends on
the Holdings Preferred Stock in additional shares of Holdings Preferred Stock
rather than in cash; provided that in lieu of issuing additional shares of
Holdings Preferred Stock as Dividends, Holdings may increase the liquidation
preference of the shares of the Holdings Preferred Stock in respect of which
such Dividends have accrued.
ARTICLE VIII.
NEGATIVE COVENANTS
------------------
Each of Holdings and the Borrower agrees with the Administrative Agent
and each Lender that, until all Commitments and Letters of Credit have
terminated and all Obligations (other than indemnities for which no request for
payment has been made) have been paid and performed in full:
8.01 Liens. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume, or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or
sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable with recourse to Holdings or any of its Subsidiaries), or
assign any right to receive income or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute; provided that the provisions of this Section 8.01
shall not prevent the creation, incurrence, assumption or existence of the
following (Liens described below are herein referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental charges
or levies not yet due or Liens for taxes, assessments or governmental
charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP or which are immaterial;
(ii) Liens in respect of property or assets of Holdings or any of
its Subsidiaries imposed by law, which were incurred in the ordinary course
of business and do not secure Indebtedness for borrowed money, such as
carriers', warehousemen's, materialmen's and mechanics' liens and other
similar Liens arising in the ordinary course of business, and (x) which do
not in the aggregate materially detract from the value of Holdings' or such
Subsidiary's property or assets or materially impair the use thereof in the
operation of the business of Holdings or such Subsidiary or (y) which are
being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or
assets subject to any such Lien;
(iii) Liens in existence on the Closing Date which are listed, and
the property subject thereto described, in Schedule 8.01, but only to the
respective date, if any, set forth in such Schedule 8.01 for the removal,
replacement and termination of any such
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Liens, plus renewals, replacements and extensions of such Liens to the
extent set forth on Schedule 8.01, provided that (x) the aggregate
principal amount of the Indebtedness, if any, secured by such Liens does
not increase from that amount outstanding at the time of any such renewal,
replacement or extension and (y) any such renewal, replacement or extension
does not encumber any additional assets or properties of Holdings or any of
its Subsidiaries;
(iv) Liens created pursuant to the Collateral Documents;
(v) licenses, sublicenses, leases or subleases granted to other
Persons not materially interfering with the conduct of the business of
Holdings or any of its Subsidiaries;
(vi) Liens upon assets of the Borrower or any of its Subsidiaries
subject to Capital Lease Obligations to the extent such Capital Lease
Obligations are permitted by Section 8.04(iv), provided that (x) such Liens
only serve to secure the payment of Indebtedness arising under such Capital
Lease Obligation and (y) the Lien encumbering the asset giving rise to the
Capital Lease Obligation does not encumber any other asset of Holdings or
any of its Subsidiaries;
(vii) Liens placed upon property acquired after the Closing Date and
used in the ordinary course of business of the Borrower or any of its
Subsidiaries at the time of the acquisition thereof by the Borrower or any
such Subsidiary or within 90 days thereafter to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof or to secure
Indebtedness incurred solely for the purpose of financing the acquisition
of any such property or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount, provided that (x) the aggregate
outstanding principal amount of all Indebtedness secured by Liens permitted
by this clause (vii) shall be permitted by Section 8.04(iv) and (y) in all
events, the Lien encumbering the equipment so acquired does not encumber
any other asset of Holdings or any of its Subsidiaries;
(viii) Permitted Encumbrances and other easements, rights-of-way,
restrictions, zoning rights, encroachments and other similar charges or
encumbrances, and minor title deficiencies, in each case not securing
Indebtedness and not materially interfering with the conduct of the
business of Holdings or any of its Subsidiaries;
(ix) Liens arising from precautionary UCC financing statement
filings regarding operating leases;
(x) Liens arising out of the existence of judgments or awards to
the extent not constituting an Event of Default under Section 9.01(i);
(xi) (i) statutory and common law landlords' liens under leases to
which Holdings or any of its Subsidiaries is a party and (ii) landlord
Liens in existence on the Closing Date arising under lease contracts and,
after the Closing Date, such other landlord Liens arising under new or
renewed lease contracts in the ordinary course of business, provided
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that the Borrower and its Subsidiaries shall use reasonable efforts to
ensure that no such lease contracts contain any such landlord Liens;
(xii) (x) Liens (other than Liens imposed under ERISA) incurred in
the ordinary course of business in connection with workers compensation
claims, unemployment insurance and social security benefits and (y) Liens
securing the performance of bids, tenders, leases and contracts in the
ordinary course of business, statutory obligations, surety bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money), provided that the aggregate outstanding amount
of obligations secured by Liens permitted by this clause (xii)(y) (and the
value of all cash and property encumbered by Liens permitted pursuant to
this clause (xii)(y)) shall not at any time exceed $1,000,000;
(xiii) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 8.04(viii) and (ii) such Liens
are not incurred in connection with or anticipation of such Permitted
Acquisition and do not attach to any other asset of Holdings or any of its
Subsidiaries;
(xiv) Liens securing reimbursement obligations in respect of
documentary letters of credit permitted to be issued under Section 8.04,
provided that such Liens attach only to the documents, the goods covered
thereby and the proceeds thereof;
(xv) Liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods;
(xvi) Liens consisting of rights of set-off of a customary nature or
bankers' liens on amounts on deposit, whether arising by contract or
operation of law, incurred in the ordinary course of business;
(xvii) Liens on property and assets of any Foreign Subsidiary of the
Borrower securing Indebtedness permitted to be incurred by such Foreign
Subsidiary pursuant to Section 8.04; and
(xviii) additional Liens incurred by the Borrower and its
Subsidiaries so long as (x) the value of the property subject to such
Liens, and the Indebtedness and other obligations secured thereby, do not
exceed $500,000 and (y) in the case of any consensual Liens, such Liens do
not attach to any Collateral existing immediately prior to the creation of
such Liens.
In connection with the granting of Liens of the type described in
clauses (vi), (vii), (xiii) and (xviii) (but, in the case of such clause
(xviii), only in the case of a consensual Lien) of this Section 8.01 by the
Borrower or any of its Subsidiaries, the Administrative Agent and the Collateral
Agent shall be authorized to take any actions deemed appropriate by it in
connection therewith (including, without limitation, by executing appropriate
lien releases or lien subordina-
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tion agreements in favor of the holder or holders of such Liens, in either case
solely with respect to the item or items of equipment or other assets subject to
such Liens).
8.02 Consolidation, Merger, Purchase or Sale of Assets, etc.
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of all or any part of
its property or assets, or enter into any sale-leaseback transactions, or
purchase or otherwise acquire (in one or a series of related transactions) any
part of the property or assets (other than purchases or other acquisitions of
inventory, materials and equipment in the ordinary course of business) of any
Person (or agree to do any of the foregoing at any future time), except that:
(i) Capital Expenditures by the Borrower and its Subsidiaries
shall be permitted to the extent not in violation of Section 8.07;
(ii) each of the Borrower and its Subsidiaries may make sales of
inventory in the ordinary course of business;
(iii) each of the Borrower and its Subsidiaries may sell obsolete or
worn-out equipment or materials;
(iv) each of the Borrower and its Subsidiaries may sell other
assets, provided that the aggregate sale proceeds from all assets subject
to such sales pursuant to this clause (iv) shall not exceed $150,000 in any
fiscal year of the Borrower;
(v) each of the Borrower and its Subsidiaries may sell assets
(other than the capital stock of any Subsidiary Guarantor or any Mortgaged
Property existing on the Closing Date), so long as (w) no Default or Event
of Default then exists or would result therefrom, (x) each such sale is in
an arm's-length transaction and the Borrower or the respective Subsidiary
receives at least fair market value (as determined in good faith by the
Borrower or such Subsidiary, as the case may be), (y) at least 75% of the
total consideration received by the Borrower or such Subsidiary is cash and
is paid at the time of the closing of such sale, and (z) the aggregate
amount of the proceeds received from all assets sold pursuant to this
clause (v) shall not exceed $2,000,000 in any fiscal year of the Borrower
and $10,000,000 in the aggregate during the term of this Agreement;
(vi) Investments may be made to the extent permitted by Section
8.05;
(vii) each of the Borrower and its Subsidiaries may lease (as
lessee) or license (as licensee) real or personal property (so long as any
such lease or license does not create a Capital Lease Obligation except to
the extent permitted by Section 8.04(iv));
(viii) each of the Borrower and its Subsidiaries may sell or
discount, in each case without recourse and in the ordinary course of
business, accounts receivable arising in the ordinary course of business,
but only in connection with the compromise or collection thereof and not as
part of any financing transaction;
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(ix) each of the Borrower and its Subsidiaries may grant licenses,
sublicenses, leases or subleases to other Persons in the ordinary course of
business and not materially interfering with the conduct of the business of
the Borrower or any of its Subsidiaries;
(x) on or after September 30, 1998, the Borrower and its Wholly-
Owned Subsidiaries may acquire all or substantially all of the assets of
any Person (or all or substantially all of the assets of a product line or
division of any Person) or 100% (or at least 80% to the extent provided
below) of the capital stock of any Person (any such acquisition permitted
by this clause (x), a "Permitted Acquisition"), so long as (i) no Default
or Event of Default then exists or would result therefrom, (ii) each of the
representations and warranties contained in Article VI shall be true and
correct in all material respects both before and after giving effect to
such Permitted Acquisition, (iii) any Liens or Indebtedness assumed or
issued in connection with such Permitted Acquisition are otherwise
permitted under Section 8.01 or 8.04, as the case may be, (iv) at least 10
Business Days prior to the consummation of any Permitted Acquisition,
Holdings shall deliver to the Administrative Agent and each of the Lenders
a certificate of Holdings' Chief Financial Officer certifying (and showing
the calculations therefor in reasonable detail) that Holdings would have
been in compliance with the financial covenants set forth in Sections 8.08,
8.09,and 8.10 for the Measurement Period then most recently ended prior to
the date of the consummation of such Permitted Acquisition, in each case
with such financial covenants to be determined on a pro forma basis as if
such Permitted Acquisition had been consummated on the first day of such
Measurement Period (and assuming that any Indebtedness incurred, issued,
assumed or repaid in connection therewith had been incurred, issued,
assumed or repaid on the first day of, and (except for Indebtedness being
repaid) had remained outstanding throughout, such Measurement Period,
provided that in the case of any Permitted Acquisition effected before
December 31, 1998, the pro forma Consolidated Leverage Ratio for such
Measurement Period shall be no greater than 6.50:1.00, (v) the only
consideration paid by the Borrower or any of its Wholly-Owned Subsidiaries
in connection with any such Permitted Acquisition consists solely of cash
(including as a result of any earnout, non-compete or deferred compensation
arrangements), Indebtedness assumed or issued to the extent permitted by
Section 8.04, Holdings Common Stock and/or Holdings Preferred Stock, (vi)
the aggregate consideration paid in connection with all such Permitted
Acquisitions effected after the Closing Date (including, without
limitation, any earnout, non-compete or deferred compensation arrangements,
the aggregate principal amount of any Indebtedness assumed or issued in
connection therewith and the fair market value of any Holdings Common Stock
or Holdings Preferred Stock issued in connection therewith (as determined
in good faith by Holdings)) does not exceed, when added to the aggregate
amount of all Capital Expenditures made to effect a Permitted Capital
Expansion, the sum of (I) $35,000,000 plus (II) the Retained Equity Amount
at such time, (vii) no more than the sum of (I) $10,000,000 plus (II) the
Retained Equity Amount at such time in the aggregate may be expended on
Permitted Acquisitions in which the Borrower or a Wholly-Owned Subsidiary
thereof acquires less than 100% of the capital stock of any Person and
(viii) and immediately after giving effect to any such Permitted
Acquisition, the aggregate unutilized Revolving Commitments shall be at
least $7,500,000;
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(xi) any Subsidiary of the Borrower may transfer any of its assets
to the Borrower and may be merged, consolidated or liquidated with or into
the Borrower so long as the Borrower is the surviving corporation of such
merger, consolidation or liquidation;
(xii) any Subsidiary of the Borrower may transfer any of its assets
to a Subsidiary Guarantor and may be merged, consolidated or liquidated
with or into any other Subsidiary of the Borrower so long as (i) in the
case of any such merger, consolidation or liquidation involving a
Subsidiary Guarantor, the Subsidiary Guarantor is the surviving corporation
of such merger, consolidation or liquidation, (ii) in the case of any such
merger, consolidation or liquidation involving a Wholly-Owned Subsidiary of
the Borrower, the Wholly-Owned Subsidiary is the surviving corporation of
such merger, consolidation or liquidation and (iii) no more than $500,000
of assets in any fiscal year of the Borrower are transferred from a
Subsidiary Guarantor that is a Wholly-Owned Subsidiary to a Subsidiary
Guarantor that is a non-Wholly-Owned Subsidiary;
(xiii) the Borrower and its Subsidiaries may sell or exchange
specific items of equipment, so long as the purpose of each sale or
exchange is to acquire (and results within 90 days of such sale or exchange
in the acquisition of) replacement items of equipment which are, in the
reasonable business judgment of the Borrower and its Subsidiaries, the
functional equivalent of the item of equipment so sold or exchanged;
(xiv) any Foreign Subsidiary of the Borrower may transfer any of
its assets to a Wholly-Owned Foreign Subsidiary of the Borrower or to a
Subsidiary Guarantor;
(xv) the Borrower and its Subsidiaries may sell inventory to their
respective Subsidiaries in the ordinary course of business and consistent
with past practices for resale by such Subsidiaries in the ordinary course
of their business;
(xvi) the Borrower and its Subsidiary Guarantors may sell or
otherwise transfer equipment to their Subsidiaries in the ordinary course
of business so long as no more than $500,000 of equipment is sold or
transferred in any fiscal year of the Borrower pursuant to this clause
(xvi); and
(xvii) the Recapitalization shall be permitted.
To the extent the Required Lenders waive the provisions of this Section 8.02
with respect to the sale of any Collateral, or any Collateral is sold as
permitted by this Section 8.02 (other than to Holdings or a Subsidiary thereof),
such Collateral shall be sold free and clear of the Liens created by the
Collateral Documents, and the Administrative Agent and the Collateral Agent
shall be authorized to take any actions deemed appropriate in order to effect
the foregoing.
8.03 Dividends. Holdings will not, and will not permit any of its
Subsidiaries to, authorize, declare or pay any Dividends with respect to
Holdings or any of its Subsidiaries, except that:
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(i) (x) any Subsidiary of the Borrower may pay cash Dividends to
the Borrower or to any Wholly-Owned Subsidiary of the Borrower and (y) so
long as no Default or Event of Default then exist or would result
therefrom, any non-Wholly-Owned Subsidiary of the Borrower may pay cash
Dividends to its shareholders generally so long as the Borrower or its
respective Subsidiary which owns the equity interest or interests in the
Subsidiary paying such Dividends receives at least its proportionate share
thereof (based upon its relative holdings of equity in interests in the
Subsidiary paying such Dividends and taking into account the relative
preferences, if any, of the various classes of equity interests in such
Subsidiary);
(ii) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), Holdings may
repurchase outstanding shares of its stock (or options to purchase such
stock) following the death, disability, retirement or termination of
employment of employees of Holdings or any of its Subsidiaries, provided
that (x) the only consideration paid by Holdings in respect of such
repurchases shall be cash, forgiveness of debt owed by such employee to
Holdings and/or Holdings Shareholder Subordinated Notes and (y) the sum of
(1) the aggregate amount of cash paid by Holdings in respect of all such
repurchases plus (2) the aggregate amount of all repurchases of all
Holdings Junior Subordinated Notes pursuant to Section 8.11(iii) plus (3)
the aggregate amount of all payments made on all Holdings Shareholder
Subordinated Notes pursuant to Section 8.11(iv) shall not exceed
$1,000,000 in any fiscal year of Holdings, provided that any unused amount
thereof may be carried forward and utilized for such purposes in the
immediately succeeding fiscal year of Holdings;
(iii) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower may pay cash Dividends to Holdings so long
as Holdings promptly uses such proceeds for the purposes described in
clause (ii) of this Section 8.03 or Section 8.11(iii);
(iv) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), Holdings may
repurchase outstanding shares of its stock (or options to purchase such
stock) held by officers or employees of Holdings or any of its Subsidiaries
with the net cash proceeds received by Holdings from the substantially
concurrent sale of Holdings Common Stock, Holdings Preferred Stock and/or
Holdings Junior Subordinated Notes in each case to the extent that such
proceeds utilize the Retained Equity Amount;
(v) the Borrower may pay cash Dividends to Holdings so long as the
proceeds thereof are promptly used by Holdings to pay operating expenses in
the ordinary course of business (including, without limitation, outside
directors and professional fees, expenses and indemnities) and other
similar corporate overhead costs and expenses, provided that the aggregate
amount of cash Dividends paid pursuant to this clause (v) shall not exceed
$1,000,000 in any fiscal year of Holdings;
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(vi) Holdings may pay regularly scheduled Dividends on the
Holdings Preferred Stock pursuant to the terms thereof solely through the
issuance of additional shares of Holdings Preferred Stock, provided that in
lieu of issuing additional shares of Holdings Preferred Stock as Dividends,
Holdings may increase the liquidation preference of the shares of the
Holdings Preferred Stock in respect of which such Dividends have accrued;
(vii) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), from and
after January 31, 2004 the Borrower may pay cash Dividends to Holdings at
the times, and in the amounts, necessary to enable Holdings to make
regularly scheduled cash interest payments that are due on the Holdings
Senior Discount Notes;
(viii) at the time of the issuance of the Holdings Senior Discount
Notes, the Borrower may pay a cash Dividend to Holdings in an amount not to
exceed $1,000,000 the proceeds of which are used by Holdings to pay fees
and expenses in connection with the issuance thereof or to repay any
Holdings Junior Subordinated Notes which are not repaid with the proceeds
from the Holdings Senior Discount Notes;
(ix) the Recapitalization shall be permitted and the Borrower may
pay a cash Dividend to Holdings to effectuate the same; and
(x) the Borrower may pay cash Dividends to Holdings in connection
with amounts owing by it under the Holdings Tax Sharing Agreement.
8.04 Indebtedness. Holdings will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Loan Documents;
(ii) existing Indebtedness (other than the Holdings Junior
Subordinated Notes and the Borrower Senior Subordinated Notes) outstanding
on the Closing Date and listed on Schedule 8.04, without giving effect to
any subsequent extension, renewal or refinancing thereof except to the
extent set forth on Schedule 8.04, provided that the aggregate principal
amount of the Indebtedness to be extended, renewed or refinanced does not
increase from that amount outstanding at the time of any such extension,
renewal or refinancing;
(iii) Indebtedness under Interest Rate Protection Agreements entered
into with respect to other Indebtedness permitted under this Section 8.04;
(iv) Indebtedness of the Borrower and its Subsidiaries evidenced by
Capital Lease Obligations to the extent permitted pursuant to Section 8.07
and Indebtedness subject to Liens permitted under Sections 8.01(vii),
provided that in no event shall the aggregate principal amount of all
Indebtedness permitted by this clause (iv) exceed $5,000,000 at any time
outstanding;
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(v) (x) intercompany Indebtedness among the Borrower and its
Subsidiaries to the extent permitted by Sections 8.05(xi) and 8.05(xii) and
(y) Indebtedness of Holdings to the Borrower to the extent permitted by
Section 8.05(xv);
(vi) Indebtedness of the Borrower and the Subsidiary Guarantors
incurred under the Borrower Senior Subordinated Note Documents in an
aggregate principal amount not to exceed $150,000,000 (as reduced by any
repayments of principal thereof);
(vii) Indebtedness consisting of guaranties by the Borrower and its
Subsidiaries of each other's Indebtedness and lease and other obligations
permitted under this Agreement;
(viii) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition or Indebtedness of the Borrower or a Subsidiary thereof assumed
at the time of a Permitted Acquisition of an asset securing such
Indebtedness, provided that (i) such Indebtedness was not incurred in
connection with or anticipation of such Permitted Acquisition, and (ii)
such Indebtedness does not constitute debt for borrowed money (other than
in connection with industrial revenue or industrial development bond
financing), it being understood and agreed that Capital Lease Obligations
and purchase money Indebtedness shall not constitute debt for borrowed
money for purposes of this clause (viii);
(ix) Indebtedness of Holdings under the Holdings Junior
Subordinated Notes, provided that issuances of Holdings Junior Subordinated
Notes after the Closing Date may not be made other than in connection with
a private sale of equity made by Holdings in an aggregate principal amount
not to exceed 150% of the cash price paid for such related equity and no
such additional Holdings Junior Subordinated Notes may be issued after the
earlier of (x) a registered public equity offering by Holdings and (y) the
issuance of the Holdings Senior Discount Notes, it being understood and
agreed that, in any event, at the time of the issuance of the Holdings
Senior Discount Notes all then outstanding Holdings Junior Subordinated
Notes shall be repaid with the Net Debt Proceeds from the issuance of the
Holdings Senior Discount Notes and with the Dividend permitted to be paid
under Section 8.03(viii);
(x) obligations of the Borrower or any of its Subsidiaries under
incentive, earn-out or other similar arrangements incurred by it in
connection with a Permitted Acquisition to the extent permitted under
Sections 8.02(x);
(xi) Indebtedness of Holdings under Holdings Shareholder
Subordinated Notes in an aggregate principal amount not to exceed
$5,000,000 at any time outstanding;
(xii) Indebtedness in respect of Other Hedging Agreements to the
extent permitted by Section 8.05(xiii);
(xiii) Indebtedness subject to Liens permitted under Section
8.01(xii);
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(xiv) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the issuance thereof), Indebtedness
of Holdings under the Holdings Senior Discount Notes in an aggregate face
amount not to exceed $50,000,000 (as reduced by any repayments of principal
thereof) so long as (i) the terms of the Holdings Senior Discount Note
Documents do not require (x) any cash interest payment before January 31,
2004 and (y) any amortization payment, maturity, sinking fund payment or
similar payment prior to August 1, 2009, (ii) the proceeds therefrom are
used to repay outstanding Holdings Junior Subordinated Notes, (iii) the
proceeds therefrom do not exceed approximately $25,000,000 and (iv) the
terms and conditions of the Holdings Senior Discount Note Documents (other
than the interest rate) are no more restrictive than those set forth in the
Borrower Senior Subordinated Note Documents and are otherwise reasonably
satisfactory to Bank of America; and
(xv) additional Indebtedness incurred by the Borrower or any of its
Subsidiaries in an aggregate principal amount not to exceed $20,000,000 at
any one time outstanding, of which no more than $500,000 at any time may be
secured by a Lien permitted under Section 8.01(xviii) and with the
remainder of such Indebtedness being unsecured.
8.05 Advances, Investments and Loans. Holdings will not, and will
not permit any of its Subsidiaries to, directly or indirectly, lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents (each of the foregoing an "Investment" and,
collectively, "Investments"), except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
accounts receivables owing to any of them, if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms of the Borrower or such Subsidiary;
(ii) the Borrower and its Subsidiaries may acquire and hold cash
and Cash Equivalents, provided that during any time that Revolving Loans or
Swingline Loans are outstanding the aggregate amount of cash and Cash
Equivalents permitted to be held by the Borrower and its Subsidiaries shall
not exceed $5,000,000 for any period of fifteen consecutive Business Days,
it being understood and agreed, however, that so long as no Event of
Default shall exist, the Borrower shall not be required to repay any
Eurodollar Loan in the middle of an Interest Period as a result of
complying with this clause (ii) and the failure to make such a payment will
not give rise to an Event of Default;
(iii) the Borrower and its Subsidiaries may hold the Investments
held by them on the Closing Date and described on Schedule 8.05, provided
that any additional Investments made with respect thereto shall be
permitted only if independently justified under the other provisions of
this Section 8.05;
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(iv) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in good faith
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(v) the Borrower and its Subsidiaries may make loans and advances
in the ordinary course of business to their respective employees so long as
the aggregate principal amount thereof at any time outstanding (determined
without regard to any write-downs or write-offs of such loans and advances)
shall not exceed $500,000;
(vi) Holdings may acquire and hold obligations of one or more
officers or other employees of Holdings or any of its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
capital stock of Holdings and/or Holdings Junior Subordinated Notes so long
as no cash is paid by Holdings or any of its Subsidiaries to such officers
or employees in connection with the acquisition of any such obligations;
(vii) the Borrower and its Subsidiaries may acquire and hold
promissory notes issued by the purchaser of assets in connection with a
sale of such assets to the extent permitted by Section 8.02;
(viii) the Borrower and its Wholly-Owned Subsidiaries may make
Permitted Acquisitions to the extent permitted by Section 8.02(x);
(ix) the Borrower and its Subsidiaries may enter into Interest
Rate Protection Agreements to the extent permitted by Section 8.04(iii);
(x) Holdings may make cash and other property contributions
(other than capital stock of the Borrower) to the capital of the Borrower
and the Borrower and the Subsidiary Guarantors may make cash contributions
to the capital of their respective Subsidiaries which are Subsidiary
Guarantors, provided that no more than $500,000 of cash capital
contributions in any fiscal year of the Borrower may be made to Subsidiary
Guarantors which are not Wholly-Owned Subsidiaries;
(xi) the Borrower and the Subsidiary Guarantors may make
intercompany loans and advances between or among one another (collectively,
"Intercompany Loans"), so long as each Intercompany Loan shall be evidenced
by an Intercompany Note that is pledged to the Collateral Agent pursuant to
the Pledge Agreement;
(xii) the Borrower and the Subsidiary Guarantors may make
additional loans and cash contributions to their respective Subsidiaries
which are not Subsidiary Guarantors in an aggregate amount not to exceed
$2,000,000 at any time outstanding (determined without regard to any write-
downs or write-offs thereof);
(xiii) the Borrower and its Subsidiaries may enter into Other
Hedging Agreements providing protection against fluctuations in currency
values in connection with the Borrower's or any of its Subsidiaries'
operations so long as management of the Borrower or
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such Subsidiary, as the case may be, has determined that the entering
into of such Other Hedging Agreements are bona fide hedging activities and
are not for speculative purposes;
(xiv) Holdings and its Subsidiaries may hold additional
investments in their respective Subsidiaries to the extent that such
investments reflect an increase in the value of such Subsidiaries;
(xv) to the extent that the Borrower may pay cash Dividends to
Holdings pursuant to Sections 8.03(iii), (v), (vii), (viii) and (x) the
Borrower may, in lieu of paying such cash Dividends, make an Intercompany
Loan to Holdings for the purposes, and subject to the limitations, set
forth in such Sections 8.03(iii), (v), (vii), (viii) and (x), in each case
so long as each Intercompany Loan shall be evidenced by an Intercompany
Note that is pledged to the Collateral Agent pursuant to the Pledge
Agreement;
(xvi) Holdings may effect the Asset Contribution;
(xvii) the Borrower and its Subsidiaries may make transfers of
assets to their respective Subsidiaries in accordance with Sections
8.02(xii), (xiv), (xv) and (xvi); and
(xviii) the Borrower and its Subsidiaries may make additional
Investments in an aggregate amount not to exceed the sum of (I) $1,000,000
in any fiscal year of the Borrower plus (II) the Retained Equity Amount at
such time (in each case determined without regard to any write-downs or
write-offs thereof).
8.06 Transactions with Affiliates. Holdings will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of Holdings or any of its Subsidiaries, other than in the ordinary
course of business and on terms and conditions substantially as favorable to
Holdings or such Subsidiary as would reasonably be obtained by Holdings or such
Subsidiary at that time in a comparable arm's-length transaction with a Person
other than an Affiliate, except that the following in any event shall be
permitted:
(i) Dividends may be paid to the extent provided in Section 8.03;
(ii) loans may be made and other transactions may be entered into
by Holdings and its Subsidiaries to the extent permitted by Sections 8.02,
8.04 and 8.05;
(iii) customary fees may be paid to non-officer directors of
Holdings and its Subsidiaries;
(iv) so long as no Default under Section 7.01, 7.02(a), 9.01(a),
9.01(f) or 9.01(g) shall exist and no Event of Default shall exist, the
Borrower may pay management fees to CHS Management and its Affiliates
monthly in arrears pursuant to, and in accordance with, the terms of the
CHS Management Agreement (as in effect on the Closing Date) in an aggregate
amount for all such Persons taken together not to exceed $83,334 per month
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plus the reasonable out-of-pocket expenses incurred by CHS Management and
its Affiliates in performing management services for the Borrower pursuant
to the CHS Management Agreement (it being understood and agreed that the
reimbursement of such reasonable out-of-pocket expenses may be made whether
or not any Default or Event of Default exists);
(v) the Borrower may pay a one time transaction fee to CHS and
its Affiliates on the Closing Date in the aggregate amount of $3,000,000
for all such Persons taken together plus the reasonable out-of-pocket
expenses incurred by CHS and its Affiliates in connection with the
Transaction and the Exchange Offer;
(vi) the Borrower may pay, in connection with any Permitted
Acquisition, a transaction fee to CHS Management and its Affiliates in an
aggregate amount for all such Persons taken together not to exceed 1% of
the aggregate value of any such Permitted Acquisition;
(vii) Holdings and its Subsidiaries may enter into and perform
their obligations under the Holdings Tax Sharing Agreement;
(viii) transactions entered into between or among the Borrower and
its Subsidiaries to the extent otherwise expressly permitted by this
Agreement;
(ix) Holdings and its Subsidiaries may enter into employment
arrangements (including benefit compensation, bonuses and stock option and
plans) with respect to the procurement of services with their respective
officers and employees in the ordinary course of business; and
(x) Holdings may issue and sell shares of its capital stock to
its stockholders to the extent otherwise permitted by this Agreement.
8.07 Capital Expenditures. (a) Holdings will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
(i) during the period from the Closing Date through and including December 31,
1998, the Borrower and its Subsidiaries may make Capital Expenditures so long as
the aggregate amount of all such Capital Expenditures does not exceed $4,000,000
and (ii) during any fiscal year of the Borrower set forth below (taken as one
accounting period), the Borrower and its Subsidiaries may make Capital
Expenditures so long as the aggregate amount of all such Capital Expenditures
does not exceed in any fiscal year of the Borrower set forth below the amount
set forth opposite such fiscal year below:
Fiscal Year Ending Amount
------------------ ------
December 31, 1999 $7,000,000
December 31, 2000 $7,000,000
December 31, 2001 $7,000,000
December 31, 2002 $7,000,000
December 31, 2003 $7,000,000
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December 31, 2004 $7,000,000
December 31, 2005 $7,000,000
December 31, 2006 $7,000,000
(b) In addition to the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any fiscal year of the Borrower (before giving
effect to any increase in such permitted Capital Expenditure amount pursuant to
this clause (b)) is greater than the amount of Capital Expenditures actually
made by the Borrower and its Subsidiaries during such fiscal year, such excess
(the "Rollover Amount") may be carried forward and utilized to make Capital
Expenditures in the immediately succeeding fiscal year, provided that no amounts
once carried forward pursuant to this Section 8.07(b) may be carried forward to
any fiscal year thereafter and such amounts may only be utilized after the
Borrower and its Subsidiaries have utilized in full the permitted Capital
Expenditure amount for such fiscal year as set forth in the table in clause (a)
above (without giving effect to any increase in such amount by operation of this
clause (b)).
(c) In addition to the foregoing, the Borrower and it Subsidiaries
may make Capital Expenditures with the amount of Net Sale Proceeds received by
the Borrower or any of its Subsidiaries from any Asset Sale so long as such Net
Sale Proceeds are reinvested in assets used or to be used in the Borrower's or
any of its Subsidiaries' business within 270 days following the date of such
Asset Sale to the extent such Net Sale Proceeds are not otherwise required to be
applied to reduce the Commitments pursuant to Section 2.07(c).
(d) In addition to the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures with the amount of Net Insurance Proceeds received
by the Borrower or any of its Subsidiaries from any Recovery Event so long as
such Net Insurance Proceeds are used to replace or restore any properties or
assets in respect of which such Net Insurance Proceeds were paid within 365 days
following the date of receipt of such Net Insurance Proceeds from such Recovery
Event to the extent such Net Insurance Proceeds are not otherwise required to be
applied to reduce the Commitments pursuant to Section 2.07(d).
(e) In addition to the foregoing, the Borrower and its Wholly-Owned
Subsidiaries may consummate Permitted Acquisitions in accordance with Section
8.02(x).
(f) In addition to the foregoing, the Borrower may make up to
$7,000,000 of Capital Expenditures in the aggregate to complete the current
expansion of its Tuscaloosa, Alabama facility so long as such Capital
Expenditures are made on or before December 31, 1999.
(g) In addition to the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures in connection with a Permitted Capital Expansion,
provided that (i) the aggregate amount of all such Capital Expenditures, when
added to the aggregate amount of all Permitted Acquisitions made pursuant to
Section 8.02(x), does not exceed $35,000,000, and (ii) prior to commencing any
Permitted Capital Expansion, the Borrower shall give the Administrative Agent
and the Lenders notice thereof (which notice shall include the proposed amount
and time projected to complete such Permitted Capital Expansion).
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(h) In addition to the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (including for a Permitted Capital Expansion)
utilizing the Retained Equity Amount at such time.
8.08 Consolidated Interest Coverage Ratio. Holdings and the Borrower
will not permit the Consolidated Interest Coverage Ratio for any Measurement
Period ending on the last day of a fiscal quarter of Holdings set forth below to
be less than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 1998 1.50:1.00
December 31, 1998 1.50:1.00
March 31, 1999 1.55:1.00
June 30, 1999 1.60:1.00
September 30, 1999 1.65:1.00
December 31, 1999 1.75:1.00
March 31, 2000 1.75:1.00
June 30, 2000 1.75:1.00
September 30, 2000 1.75:1.00
December 31, 2000 2.00:1.00
March 31, 2001 2.00:1.00
June 30, 2001 2.00:1.00
September 30, 2001 2.00:1.00
December 31, 2001 2.25:1.00
March 31, 2002 2.25:1.00
June 30, 2002 2.25:1.00
September 30, 2002 2.25:1.00
December 31, 2002
and the last day of each fiscal quarter
thereafter 2.50:1.00
8.09 Consolidated Fixed Charge Coverage Ratio. Holdings and the
Borrower will not permit the Consolidated Fixed Charge Coverage Ratio for any
Measurement Period ending on or after December 31, 1999 to be less than
1.10:1.00:
8.10 Maximum Leverage Ratio. Holdings and the Borrower will not
permit the Consolidated Leverage Ratio at any time during a period set forth
below to be greater than the ratio set forth opposite such period below:
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Period Ratio
------ -----
December 31, 1998 through and including June 29,
1999 6.50:1.00
June 30, 1999 through and including September
29, 1999 6.25:1.00
September 30, 1999 through and including
December 30, 1999 5.75:1.00
December 31, 1999 through and including
September 29, 2000 5.25:1.00
September 30, 2000 through and including
December 30, 2000 5.00:1.00
December 31, 2000 through and including December
30, 2001 4.75:1.00
December 31, 2001 through and including December
30, 2002 4.50:1.00
December 31, 2002 through and including June 29,
2003 4.25:1.00
June 30, 2003 through and including December 30,
2003 4.00:1.00
December 31, 2003 through and including December
30, 2004 3.75:1.00
Thereafter 3.50:1.00
8.11 Limitation on Voluntary Payments and Modification of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc. (a) Holdings will not, and will not permit any of its
Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or optional
payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto or any other Person money or securities before due for the
purpose of paying when due) any Borrower Senior Subordinated Notes (other
than in connection with the Borrower Senior Subordinated Note Exchange
Offer) or any Holdings Senior Discount Notes (other than in connection with
the Holdings Senior Discount Note Exchange Offer);
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(ii) make (or give any notice in respect of) any prepayment or
redemption of any Borrower Senior Subordinated Notes or any Holdings Senior
Discount Notes as a result of any asset sale, change of control or similar
event (including, without limitation, by way of depositing with the trustee
with respect thereto or any other Person money or securities before due for
the purpose of paying when due any Borrower Senior Subordinated Notes or
any Holdings Senior Discount Notes );
(iii) make (or give any notice in respect of) any payment,
prepayment, redemption or acquisition for value of (including, without
limitation, by way of depositing with the trustee with respect thereto or
any other Person money or securities before due for the purpose of paying
when due) any Holdings Junior Subordinated Notes (whether in respect of
principal, interest or otherwise), provided that so long as no Default or
Event of Default then exists or would result therefrom, Holdings may
purchase or redeem Holdings Junior Subordinated Notes held by employees of
Holdings or any of its Subsidiaries following their death, disability,
retirement or termination of employment so long as the aggregate amount
expended pursuant to this clause (iii), when added to the sum of the
aggregate amount of all Dividends paid or made pursuant to Section 8.03(ii)
and the aggregate amount of all payments made in respect of all Holdings
Shareholder Subordinated Notes pursuant to Section 8.11(iv), shall not
exceed $1,000,000 in any fiscal year of Holdings, provided that any unused
amount thereof may be carried forward and utilized for such purposes in the
immediately succeeding fiscal year of Holdings;
(iv) make (or give any notice in respect of) any payment,
prepayment, redemption or acquisition for value of (including, without
limitation, by way of depositing with the trustee with respect thereto or
any other Person money or securities before due for the purpose of paying
when due) any Holdings Shareholder Subordinated Notes (whether in respect
of principal, interest or otherwise), provided that so long as no Default
or Event of Default then exists or would result therefrom, Holdings may
make payments on Holdings Shareholder Subordinated Notes to the extent
permitted by Section 8.03(ii);
(v) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), Holdings may
redeem or repurchase outstanding Holdings Junior Subordinated Notes held by
officers or employees of Holdings or any of its Subsidiaries with the net
cash proceeds received by Holdings from the substantially concurrent sale
of Holdings Common Stock, Holdings Preferred Stock and/or new Holdings
Junior Subordinated Notes in each case to the extent that such proceeds
utilize the Retained Equity Amount;
(vi) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), Holdings may
redeem or repurchase outstanding Holdings Junior Subordinated Notes with
the proceeds from the issuance of the Holdings Senior Discount Notes and
with the Dividend paid pursuant to Section 8.03(viii);
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(vii) amend or modify, or permit the amendment or modification of,
any provision of any Borrower Senior Subordinated Note Document, any
Holdings Senior Discount Note Document, any Holdings Junior Subordinated
Notes or any Holdings Shareholder Subordinated Notes;
(viii) amend, modify or change its certificate of incorporation
(including, without limitation, by the filing or modification of any
certificate of designation (other than to authorize the issuance of any
Holdings Preferred Stock)) or by-laws (or the equivalent organizational
documents) or any agreement entered into by it with respect to its capital
stock, or enter into any new agreement with respect to its capital stock,
unless such amendment, modification, change or other action contemplated by
this clause (viii); could not reasonably be adverse to the interests of the
Lenders in any material respect; or
(ix) amend, modify or change any provision of the CHS Management
Agreement or the Holdings Tax Sharing Agreement in a manner which is
adverse to the Lenders.
(b) Neither Holdings nor any of its Subsidiaries shall designate
any Indebtedness, other than the Obligations, as "Designated Senior Debt"
for purposes of the Borrower Senior Subordinated Note Documents.
(c) Holdings will not make, nor shall it be required to make, any
cash interest payment on the Holdings Senior Discount Notes prior to
January 31, 2004.
8.12 Limitation on Certain Restrictions on Subsidiaries. Holdings
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Holdings or any Subsidiary of
Holdings, or pay any Indebtedness owed to Holdings or any Subsidiary of
Holdings, (b) make loans or advances to Holdings or any Subsidiary of Holdings
or (c) transfer any of its properties or assets to Holdings or any Subsidiary of
Holdings, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Loan Documents,
(iii) the Borrower Senior Subordinated Note Documents and the Holdings Senior
Discount Note Documents, (iv) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of Holdings or any
Subsidiary of Holdings, (v) customary provisions restricting assignment of any
licensing agreement entered into by Holdings or any Subsidiary of Holdings in
the ordinary course of business, (vi) restrictions on the transfer of any asset
subject to a Lien permitted by Sections 8.01(vi), (vii), (xiii), (xiv), (xvii)
and (xviii), (vii) restrictions which are imposed on any Subsidiary of the
Borrower acquired pursuant to a Permitted Acquisition to the extent such
restrictions are set forth in any Indebtedness assumed in connection with such
Permitted Acquisition so long as such restrictions are not applicable to any
Subsidiary of the Borrower other than the Subsidiary being acquired and such
restrictions were not created or imposed in connection with or in contemplation
of such Permitted Acquisition, (viii) restrictions on the transfer of any asset
pending the close of the sale of such asset, (ix) restrictions which are imposed
on any Foreign Subsidiary of the Borrower to the extent such
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restrictions are set forth in any Indebtedness incurred by such Foreign
Subsidiary pursuant to Section 8.04(xiv) so long as such restrictions are not
applicable to any Subsidiary of the Borrower other than the Foreign Subsidiary
that has incurred such Indebtedness and (x) customary restrictions set forth in
any joint venture agreement entered in connection with an Investment made
pursuant to Section 8.05(xviii).
8.13 Limitation on Issuance of Capital Stock. (a) Holdings will
not, and will not permit any of its Subsidiaries to, issue (i) any preferred
stock other than Holdings Preferred Stock issued by Holdings (as constituted on
the Closing Date or upon such other terms as may be reasonably acceptable to
Bank of America (or any successor Administrative Agent) or (ii) any redeemable
common stock (other than common stock that is redeemable at the sole option of
Holdings or such Subsidiary).
(b) Holdings will not permit any of its Subsidiaries to issue any
capital stock (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, capital stock, except (i)
for transfers and replacements of then outstanding shares of capital stock, (ii)
for stock splits, stock dividends and issuances which do not decrease the
percentage ownership of Holdings or any of its Subsidiaries in any class of the
capital stock of such Subsidiary, (iii) to qualify directors to the extent
required by applicable law or (iv) for issuances by newly created or acquired
Subsidiaries in accordance with the terms of this Agreement.
8.14 Business. (a) Holdings and its Subsidiaries will not engage in
any business other than the businesses engaged in by the Borrower and its
Subsidiaries as of the Closing Date and reasonable extensions thereof and
activities incidental thereto.
(b) Notwithstanding the foregoing, Holdings will not engage in any
business and, after giving effect to the Transaction, will not own any
significant assets or have any material liabilities other than its ownership of
the capital stock of the Borrower and the capital stock of Globe Elastic Thread,
Ltd. (which is in the process of being dissolved) and those Investments
permitted to be held by it pursuant to Section 8.05(vi) and having those
liabilities which it is responsible for under this Agreement and the other
Transaction Documents to which it is a party and other liabilities permitted to
be incurred by it under this Agreement, provided that Holdings may engage in
those activities that are incidental to (x) the maintenance of its corporate
existence in compliance with applicable law, (y) legal, tax and accounting
matters in connection with any of the foregoing activities and (z) the entering
into, and performing its obligations under, this Agreement, the other
Transaction Documents to which it is a party and the Holdings Senior Discount
Note Documents.
8.15 Limitation on Creation of Subsidiaries. Notwithstanding
anything to the contrary contained in this Agreement, Holdings will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Closing Date any Subsidiary, provided that the Borrower and its Wholly-Owned
Subsidiaries shall be permitted to establish and create Wholly-Owned
Subsidiaries and, to the extent permitted by Sections 8.02(x) and 8.05(xviii),
acquire non-Wholly-Owned Subsidiaries, so long as (i) the capital stock of each
such new
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Subsidiary is pledged pursuant to, and to the extent required by, the Pledge
Agreement and the certificates representing such stock, together with stock
powers duly executed in blank, are delivered to the Collateral Agent for the
benefit of the Lenders, and (ii) each such new Domestic Subsidiary, and to the
extent required by Section 7.13, each such new Foreign Subsidiary, executes
a Guarantor Supplement. In addition, each new Domestic Subsidiary, and to the
extent required by Section 7.13, each such new Foreign Subsidiary, shall execute
and deliver, or cause to be executed and delivered, all other relevant
documentation of the type described in Article V as requested by the
Administrative Agent and as such new Subsidiary would have had to deliver if
such new Subsidiary were a Credit Party on the Closing Date.
ARTICLE IX.
EVENTS OF DEFAULT
-----------------
9.01 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Borrower fails to pay, (i) when and as required
to be paid herein, any amount of principal of any Loan or any amount of any
Letter of Credit Obligation, or (ii) within three Business Days after the
same shall become due, any interest, fee or any other amount payable
hereunder or pursuant to any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by
Holdings or any of its Subsidiaries made or deemed made herein or in any
other Loan Document, or which is contained in any certificate, document or
financial or other statement furnished by Holdings or any of its
Subsidiaries at any time under this Agreement or under any other Loan
Document, shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or
(c) Specific Defaults. Holdings or any of its Subsidiaries fails to
perform or observe any term, covenant or agreement contained in Section
7.03(a), 7.10, 7.14 or Article VIII; or
(d) Other Defaults. Holdings or any of its Subsidiaries fails to
perform or observe any other term or covenant contained in this Agreement
or in any other Loan Document, and such default shall continue unremedied
for a period of 30 days after the date upon which written notice thereof is
given to the Borrower by the Administrative Agent or any Lender; or
(e) Cross-Default. Holdings or any of its Subsidiaries (i) fails to
make any payment in respect of any Indebtedness having an aggregate
principal amount of $3,000,000 or more when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure continues after the applicable grace or notice period, if any,
specified in the document relating thereto on the date of such
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failure; or (ii) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness, and such failure
continues after the applicable grace or notice period, if any, specified in
the document relating thereto on the date of such failure if the effect of
such failure, event or condition is to cause, or to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to
be due and payable prior to its stated maturity; or
(f) Insolvency; Voluntary Proceedings. Holdings or any of its
Subsidiaries (i) generally fails to pay its debts as they become due; (ii)
commences any Insolvency Proceeding with respect to itself; or (iii) takes
any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against Holdings or any of its
Subsidiaries, or any writ, judgment, warrant of attachment, execution or
similar process, is issued or levied against a substantial part of
Holdings' or any of its Subsidiaries' properties, and any such proceeding
or petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii)
Holdings or any of its Subsidiaries admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief
(or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) Holdings or any of its Subsidiaries acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for
itself or a substantial portion of its property or business; or
(h) ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension
of any amortization period is sought or granted under Section 412 of the
Code or Section 303 or 304 of ERISA, a Reportable Event shall have
occurred, a contributing sponsor (as defined in Section 4001(a)(13) of
ERISA) of a Plan subject to Title IV of ERISA shall be subject to the
advance reporting requirement of PBGC Regulation Section 4043.61 (without
regard to subparagraph (b)(i) thereof) and an event described in subsection
.62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall
be reasonably expected to occur with respect to such Plan within the
following 30 days, any Plan shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan is, shall have been or is
likely to be terminated or the subject of termination proceedings under
ERISA, any Plan shall have an Unfunded Current Liability, a contribution
required to be made to a Plan or a Foreign Pension Plan has not been timely
made, Holdings or any Subsidiary of Holdings or any ERISA Affiliate has
incurred or is likely to incur a liability to or on account of a Plan under
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 401(a)(29), 4971, or 4975 of the Code, or on
account of a group health plan (as defined in Section 607(i) of ERISA or
Section 4980B(g)(2) of the Code) under
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Section 4980B of the Code, or Holdings or any Subsidiary of Holdings has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) with respect to
providing benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA or Section 4980B of the Code) or
employee pension benefit plans (as defined in Section 3(2) of ERISA) or
Plans or Foreign Pension Plans; (b) there shall result from any such event
or events the imposition of a lien, the granting of a security interest, or
a liability or a material risk of incurring a liability; and (c) which
lien, security interest or liability, individually, and/or in the
aggregate, which arises from such event or events could reasonably be
expected to have a Material Adverse Effect; or
(i) Judgments. One or more judgments or decrees shall be entered
against Holdings or any of its Subsidiaries involving a liability (not paid
or not covered by a reputable and solvent insurance company) of $3,000,000
or more for all such judgments and decrees and all such judgments or
decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within 30 days from the entry thereof; or
(j) Change of Control. Any Change of Control shall occur; or
(k) Collateral; Guaranties.
(i) Except in each case to the extent resulting from the failure
of the Collateral Agent to retain possession of the applicable Pledged
Securities, any Collateral Document (other than the Guaranties) shall
cease to be in full force and effect (except in accordance with its
express terms), or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby in favor
of the Collateral Agent; or
(ii) any Guaranty or any provision thereof shall cease to be in
full force and effect (except in accordance with its express terms),
or any Guarantor or any Person acting by or on behalf of such
Guarantor shall deny or disaffirm such Guarantor's obligations under
its Guaranty.
9.02 Remedies. If any Event of Default occurs and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of, the
Required Lenders,
(a) declare the Commitments of each Lender and any obligation of the
Issuing Lenders to issue Letters of Credit to be terminated, whereupon such
Commitments and obligation shall forthwith be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower and Holdings;
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(c) demand that the Borrower Cash Collateralize Letter of Credit
Obligations to the extent of outstanding and wholly or partially undrawn
Letters of Credit, whereupon the Borrower shall so Cash Collateralize;
(d) exercise on behalf of itself, the Issuing Lenders and the
Lenders all rights and remedies available to it and the Lenders under the
Loan Documents or applicable law; and
(e) apply any cash collateral as provided in Section 3.07 to the
payment of outstanding Obligations;
provided, however, that upon the occurrence of any event specified above in
paragraph (f) or (g) of Section 9.01 with respect to the Borrower, any
Significant Subsidiary of the Borrower or any group of Subsidiaries of the
Borrower that, taken together, would constitute a Significant Subsidiary of the
Borrower, the obligation of each Lender to make Loans and any obligation of the
Issuing Lenders to issue Letters of Credit shall automatically terminate, and
all reimbursement obligations under Letters of Credit and the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act or notice by the
Administrative Agent, any Issuing Lender or any Lender, which are hereby
expressly waived by the Borrower and Holdings.
9.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X.
THE GUARANTY
------------
10.01 Guaranty from Holdings. (a) In order to induce the Lenders to
make Loans to the Borrower under this Agreement and to induce the Issuing
Lenders to issue Letters of Credit and to induce the Guaranteed Creditors to
enter into the Interest Rate Protection Agreements and Other Hedging Agreements,
Holdings hereby unconditionally and irrevocably guarantees the prompt payment
and performance in full by the Borrower when due (whether at stated maturity, by
acceleration or otherwise) of all Guaranteed Obligations of the Borrower. The
obligations of Holdings hereunder are those of a primary obligor, and not merely
a surety, and are independent of the Guaranteed Obligations of the Borrower. A
separate action or actions may be brought against Holdings whether or not an
action is brought against the Borrower, any other guarantor or other obligor in
respect of the Guaranteed Obligations or whether the Borrower, any other
guarantor or any other obligor in respect of the Guaranteed Obligations is
joined in any such action or actions. Holdings waives, to the fullest extent
permitted by applicable law, the benefit of any statute of limitation affecting
its liability hereunder and agrees that its liability hereunder shall not be
subject to any right of set-off, counterclaim or recoupment (each of which
rights is hereby waived to the fullest extent permitted by applicable law).
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(b) Holdings guarantees that the obligations guaranteed by it hereby
will be paid and performed strictly in accordance with the terms of this
Agreement, the other Loan Documents and the applicable Interest Rate Protection
Agreements and Other Hedging Agreements regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Administrative Agent, the Collateral Agent, the Issuing
Lenders, the Lenders or the other Guaranteed Creditors with respect thereto.
The liability of Holdings under this guaranty shall be absolute and
unconditional irrespective of, and Holdings hereby irrevocably waives (to the
fullest extent permitted by applicable law) any defenses it may now or hereafter
have in any way relating to, any and all of the following:
(i) any lack of genuineness, validity, legality or enforceability
against the Borrower or any other guarantor of this Agreement, any other
Loan Document, any Interest Rate Protection Agreement or Other Hedging
Agreement or any document, agreement or instrument relating hereto or any
assignment or transfer of this Agreement, any other Loan Document or any
Interest Rate Protection Agreement or Other Hedging Agreement or any
defense that the Borrower may have with respect to its liability hereunder
or thereunder;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any waiver,
indulgence, compromise, renewal, extension, amendment, modification of, or
addition, consent, supplement to, or consent to departure from, or any
other action or inaction under or in respect of, this Agreement, any other
Loan Document, any Interest Rate Protection Agreement or Other Hedging
Agreement or any document, instrument or agreement relating to the
Guaranteed Obligations or any other instrument or agreement referred to
herein or any assignment or transfer of this Agreement or any Interest Rate
Protection Agreement or Other Hedging Agreement;
(iii) any release or partial release of any other guarantor or other
obligor in respect of the Guaranteed Obligations;
(iv) any exchange, impairment, release or non-perfection of any
collateral for all or any of the Guaranteed Obligations, or any release, or
amendment or waiver of, or consent to departure from, any guaranty or
security, for any or all of the Guaranteed Obligations;
(v) any furnishing of any additional security for any of the
Guaranteed Obligations;
(vi) the liquidation, bankruptcy, insolvency or reorganization of the
Borrower, any other guarantor or other obligor in respect of the Guaranteed
Obligations or any action taken with respect to this guaranty or otherwise
by any trustee or receiver, or by any court, in any such proceeding;
(vii) any modification or termination of any intercreditor or
subordination agreement pursuant to which the claims of other creditors of
the Borrower or any guarantor are
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subordinated to those of the Lenders, the Issuing Lenders, the
Administrative Agent, the Collateral Agent or the other Guaranteed
Creditors; or
(viii) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Borrower or
Holdings.
(c) This guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time payment or performance of the Guaranteed
Obligations, or any part thereof, is, upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise pursuant to applicable law,
rescinded or reduced in amount or must otherwise be restored or returned by any
of the Administrative Agent, any Issuing Lender, any Lender, the Collateral
Agent or the other Guaranteed Creditors, all as though such payment or
performance had not been made.
(d) If an event permitting the acceleration of any of the Guaranteed
Obligations shall at any time have occurred and be continuing and such
acceleration shall at such time be prevented by reason of the pendency against
the Borrower of a case or proceeding under any bankruptcy or insolvency law,
Holdings agrees that, for purposes of this guaranty and its obligations
hereunder, the Guaranteed Obligations shall be deemed to have been accelerated
and Holdings shall forthwith pay such Guaranteed Obligations (including interest
which but for the filing of a petition in bankruptcy with respect to the
Borrower would accrue on such Guaranteed Obligations, whether or not interest is
an allowed claim under applicable law), and the other obligations hereunder,
forthwith upon demand.
(e) Holdings hereby waives (i) promptness, diligence, presentment,
notice of nonperformance, protest or dishonor, notice of acceptance and any and
all other notices with respect to any of the Guaranteed Obligations or this
Agreement, any other Loan Document or any Interest Rate Protection Agreement or
Other Hedging Agreement, and (ii) to the extent permitted by applicable law, any
right to require that the Administrative Agent, the Collateral Agent, any
Issuing Lender, any Lender or any other Guaranteed Creditor protect, secure,
perfect or insure any Lien in or any Lien on any property subject thereto or
exhaust any right or pursue any remedy or take any action against the Borrower,
any other guarantor or any other Person or any collateral or security or to any
balance of any deposit accounts or credit on the books of the Administrative
Agent, the Collateral Agent, any Issuing Lender, any Lender or any other
Guaranteed Creditor in favor of the Borrower.
(f) Holdings expressly waives until the Guaranteed Obligations are
irrevocably paid in full in cash any and all rights of subrogation,
reimbursement, contribution and indemnity (contractual, statutory or otherwise),
including any claim or right of subrogation under the Bankruptcy Code or any
successor statute, arising from the existence or performance of this guaranty
and Holdings irrevocably waives until the Guaranteed Obligations are irrevocably
paid in full in cash any right to enforce any remedy which the Administrative
Agent, the Collateral Agent, the Issuing Lenders, the Lenders or the other
Guaranteed Creditors now have or may hereafter have against the Borrower, and
waives, to the fullest extent permitted by law, until the Guaranteed Obligations
are irrevocably paid in full in cash any benefit of, and any right to
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participate in, any security now or hereafter held by the Administrative Agent,
the Collateral Agent, any Issuing Lender, any Lender or any other Guaranteed
Creditor.
(g) If, in the exercise of any of its rights and remedies, the
Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender or
any other Guaranteed Creditor shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against the Borrower or any
other Person, whether because of any applicable laws pertaining to "election of
remedies" or the like, Holdings hereby consents to such action and waives any
claim based upon such action (to the extent permitted by applicable law). Any
election of remedies which results in the denial or impairment of the right of
the Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender
or any other Guaranteed Creditor to seek a deficiency judgment against any
Credit Party shall not impair Holdings' obligation to pay the full amount of the
Guaranteed Obligations.
(h) This guaranty is a continuing guaranty and shall (i) remain in
full force and effect until payment in full of the Guaranteed Obligations and
all other amounts payable under this guaranty and the termination of the
Aggregate Commitment; (ii) be binding upon Holdings, its successors and assigns;
and (iii) inure, together with the rights and remedies hereunder, to the benefit
of the Guaranteed Creditors and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), any
Guaranteed Creditor may, subject to the terms of this Agreement or the
applicable Interest Rate Protection Agreement or Other Hedging Agreement, assign
or otherwise transfer its rights and obligations under this Agreement to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect hereof granted to such Lender pursuant to this guaranty or
otherwise, all as provided in, and to the extent set forth in, this Agreement.
(i) Any obligations of the Borrower to Holdings, now or hereafter
existing, are hereby subordinated to the Guaranteed Obligations. Such
obligations of the Borrower to Holdings, if the Administrative Agent or the
Required Lenders so request, shall be enforced and amounts recovered shall be
received by Holdings as trustee for the Guaranteed Creditors and the proceeds
thereof shall be paid over to the Lenders on account of the Guaranteed
Obligations, but without reducing or affecting in any manner the liability of
Holdings under the provisions of this guaranty.
(j) Upon failure of the Borrower to pay any Guaranteed Obligation when
and as the same shall become due, whether at maturity, by acceleration or
otherwise, Holdings hereby agrees immediately on demand by any of the Guaranteed
Creditors to pay or cause to be paid in accordance with the terms hereof an
amount equal to the full unpaid amount of the Guaranteed Obligations then due in
Dollars.
(k) All payments by Holdings hereunder shall be made free and clear
of, and without deduction or withholding for or on account of, any Taxes, unless
such deduction or withholding is required by law. If Holdings shall be required
by law to make any such deduction or withholding, then Holdings shall pay such
additional amounts as may be necessary in order that the net amount received by
the applicable Lender, the applicable Issuing Lender or the Adminis-
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trative Agent, as the case may be, after all deductions and withholdings, shall
be equal to the full amount that such Person would have received, after all
deductions and withholdings, had the Borrower discharged its obligations
(including its tax gross-up obligations) pursuant to Section 4.01.
Any amounts deducted or withheld by Holdings for or on account of
Taxes shall be paid over to the government or taxing authority imposing such
Taxes on a timely basis, and Holdings shall provide the applicable Lender, the
applicable Issuing Lender or the Administrative Agent, as the case may be, as
soon as practicable with such tax receipts or other official documentation (and
such other certificates, receipts and other documents as may reasonably be
requested by such Person) with respect to the payment of such Taxes as may be
available.
ARTICLE XI.
THE ADMINISTRATIVE AGENT, THE COLLATERAL
AGENT, THE ISSUING LENDERS, THE ARRANGER AND THE SYNDICATION AGENT
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11.01 Appointment and Authorization. (a) Each of the Lenders, each of
the Issuing Lenders and the Swingline Lender hereby irrevocably appoints,
designates and authorizes Bank of America as Administrative Agent and as
Collateral Agent (for purposes of this Article XI and Article XII, the term
"Agent" shall mean Bank of America in its capacity as Administrative Agent and
as Collateral Agent) to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Lender, any Issuing Lender or the Swingline Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Agent.
(b) Each Issuing Lender shall have all of the benefits and immunities
(i) provided to the Agent in this Article XI with respect to any acts taken or
omissions suffered by such Issuing Lender in connection with Letters of Credit
issued by it or proposed to be issued by it and the Letter of Credit
Applications pertaining to the Letters of Credit as fully as if the term
"Agent", as used in this Article XI, included such Issuing Lender with respect
to such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to such Issuing Lender.
11.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The
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Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
11.03 Liability of Agent. None of the Agent, its Affiliates or any
of their officers, directors, employees, agents or attorneys-in-fact
(collectively, the "Agent-Related Persons") shall (a) be liable for any action
taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document (except for their own gross negligence or
willful misconduct), or (b) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by Holdings, the
Borrower or any Subsidiary or Affiliate thereof, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of the Borrower, Holdings or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower, Holdings or any of their respective Subsidiaries or
Affiliates.
11.04 Reliance by Agent. (a) The Lenders agree that the Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Borrower, Holdings or any Subsidiary
Guarantor), independent accountants and other experts selected by the Agent. The
Lenders agree that the Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders or, as required
by Section 12.01, all the Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
Required Lenders or, as required by Section 12.01 all the Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01 as it relates to the initial Borrowing and issuances
of Letters of Credit on the Closing Date, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter either sent by the Agent to such
Lender for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to such Lender,
unless an officer of the Agent responsible for the transactions contemplated by
the Loan Documents shall have received notice from such Lender prior to the
initial Borrowing and issuances of Letters of Credit
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on the Closing Date specifying in reasonable detail its objection thereto and
either such objection shall not have been withdrawn by notice to the Agent to
that effect or such Lender shall not have made available to the Agent such
Lender's ratable portion of such Borrowing.
11.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Lenders or the Issuing Lender,
unless the Agent shall have received written notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Agent receives such a notice, the Agent shall give notice thereof to
the Lenders and the Issuing Lenders. The Agent shall take such action with
respect to such Default or Event of Default as shall be requested by the
Required Lenders in accordance with Article IX; provided, however, that unless
and until the Agent shall have received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable or
in the best interest of the Lenders.
11.06 Credit Decision. Each Lender expressly acknowledges that none
of the Agent-Related Persons has made any representation or warranty to it and
that no act by the Agent hereinafter taken, including any review of the affairs
of Holdings and its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Holdings and its
Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated thereby, and made its own decision to enter into this
Agreement and extend credit to the Borrower hereunder. Each Lender also
represents that it will, independently and without reliance upon the Agent and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Holdings and its Subsidiaries. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Borrower, Holdings and their Subsidiaries which may come into the possession of
any of the Agent-Related Persons.
11.07 Indemnification. Whether or not the transactions contemplated
hereby shall be consummated, the Lenders shall indemnify, upon demand, each of
the Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), ratably
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including at any time following the
expiration of the
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Letters of Credit and the repayment of the Loans and the termination or
resignation of the Agent) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement, any other
Loan Document or any document contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by any such Person under or in connection with any of the foregoing;
provided, however, that no Lender shall be liable for the payment to any of the
Agent-Related Persons of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender shall reimburse the Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including
Attorney Costs) incurred by the Agent in connection with the administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower. Without limiting
the generality of the foregoing, if the Internal Revenue Service or any other
Governmental Authority of the United States or other jurisdiction asserts a
claim that the Agent did not properly withhold tax from amounts paid to or for
the account of any Lender (because the appropriate form was not delivered, was
not properly executed, or because such Lender failed to notify the Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender shall
indemnify the Agent fully for all amounts paid as a result thereof, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section 11.07, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders in this Section 11.07
shall survive the payment of all Obligations hereunder.
11.08 Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire and/or hold equity interests in and generally engage in
any kind of banking, trust, financial advisory or other business with Holdings
and its Subsidiaries and Affiliates as though Bank of America were not the Agent
or an Issuing Lender hereunder and without notice to or consent of the Lenders.
With respect to its Loans and participation in Letters of Credit, Bank of
America shall have the same rights and powers under this Agreement and the other
Loan Documents as any other Lender and may exercise the same as though it were
not the Agent or an Issuing Lender, and the terms "Lender" and "Lenders" shall
include Bank of America in its individual capacity.
11.09 Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Lenders and the Borrower. If the Agent shall resign as Agent
under this Agreement, the Required Lenders shall appoint from among the Lenders
a successor agent for the Lenders which successor agent shall be subject to the
approval of the Borrower if no Event of Default has occurred and is continuing,
such approval not to be unreasonably withheld or delayed. If no successor agent
is appointed prior to the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Lenders and subject to the approval
of the Borrower if no Event of Default has occurred and is continuing, such
approval not to be unreasonably withheld
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or delayed, a successor agent from among the Lenders or any Lender Affiliate.
Any successor Agent appointed under this Section 11.09 shall be a commercial
bank organized under the laws of the United States or any State thereof, and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article XI and
Sections 12.04 and 12.05 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above.
11.10 The Arranger and Syndication Agent. Neither the Arranger nor
the Syndication Agent, in their capacity as such, shall have any duties or
responsibilities, and shall incur no obligations or liabilities, under this
Agreement. Each Lender acknowledges that it has not relied, and will not rely,
on the Arranger or the Syndication Agent in deciding to enter into this
Agreement.
ARTICLE XII.
MISCELLANEOUS
-------------
12.01 Amendments and Waivers. (a) No amendment or waiver of any
provision of this Agreement or any other Loan Document and no consent with
respect to any departure by the Borrower, Holdings or any Subsidiary Guarantor
therefrom, shall be effective unless the same shall be in writing and signed by
Holdings, the Borrower and the Required Lenders and acknowledged by the Agent,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment or consent shall, unless in writing and
signed by all the Lenders affected thereby and acknowledged by the Agent, do any
of the following:
(i) increase or extend any Commitment of such Lender (or reinstate
any Commitment terminated pursuant to Section 9.02(a)) (except as provided
in Section 12.07);
(ii) postpone or delay any date for any payment of interest or fees
due to the Lenders (or any of them) hereunder or under any other Loan
Document or extend the Revolving Termination Date or the final scheduled
maturity date of any Term Loan;
(iii) reduce the amount of any Scheduled Repayment or extend the date
of payment of any Scheduled Repayment;
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(iv) reduce the principal of, or the rate of interest specified
herein on, any Loan or Letter of Credit Borrowing (other than with respect
to post-default rates), or of any fees or other amounts payable hereunder
or under any other Loan Document or reduce the Applicable Margin provided
for herein (it being understood that any amendment or modification to the
financial definitions in this Agreement shall not constitute a reduction in
the rate of interest or fees for the purposes of this clause (iv) so long
as the primary purpose of the respective amendment or modification to the
financial definitions is not to reduce the interest rate or any fees
payable hereunder);
(v) reduce the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which shall be required for the
Lenders or any of them to take any action hereunder;
(vi) amend this Section 12.01 to the extent that any such amendment,
modification or waiver would alter any of the voting provisions set forth
in the other provisions of this Section 12.01, or reduce the percentage set
forth in the definition of "Required Lenders" or any provision of this
Agreement expressly requiring the consent of all the Lenders in order to
take or refrain from taking any action; or
(vii) release the guaranty of Holdings under its guaranty pursuant
to Article X or discharge any Subsidiary Guarantor from its obligations
under any Subsidiary Guaranty, or release all or substantially all of the
Collateral except, in all such cases, in accordance with the express
provisions hereof or thereof;
and, provided further, that (A) in addition to the consent of the Administrative
Agent and the Required Lenders, without the consent of the Majority Lenders of
each Tranche which is being allocated a lesser prepayment, repayment or
commitment reduction as a result of the actions described below (or without the
consent of the Majority Lenders of each Tranche in the case of an amendment to
the definition of Majority Lenders), amend the definition of Majority Lenders or
alter the required application of any prepayments or repayments (or commitment
reduction), as between the various Tranches, pursuant to Section 2.06 or Section
2.07(i) (although the Required Lenders may waive, in whole or in part, any such
prepayment, repayment or commitment reduction, so long as the application, as
amongst the various Tranches, of any such prepayment, repayment or commitment
reduction which is still required to be made is not altered), (B) no amendment,
waiver or consent shall, unless in writing and signed by the Issuing Lenders in
addition to the Required Lenders or all the Lenders, as the case may be, affect
the rights or duties of the Issuing Lenders under this Agreement or any Letter
of Credit Related Document, (C) no amendment, waiver or consent shall, unless in
writing and signed by the Swingline Lender in addition to the Required Lenders
or all the Lenders, as the case may be, affect the rights and duties of the
Swingline Lender under this Agreement and (D) no amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent in addition to
the Required Lenders or all the Lenders, as the case may be, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan
Document.
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(b) If, in connection with any proposed change, waiver, discharge or
any termination to any of the provisions of this Agreement as contemplated by
clauses (ii) through (vii), inclusive, of the first proviso to Section 12.01(a),
the consent of the Required Lenders is obtained but the consent of one or more
other Lenders whose consent is required is not obtained, then the Borrower shall
have the right, so long as all non-consenting Lenders whose individual consent
is required are treated the same, to replace each such non-consenting Lender or
Lenders with one or more Replacement Lenders pursuant to Section 4.08(b) so long
as at such time of such replacement, each such Replacement Lender consents to
the proposed change, waiver, discharge or termination.
12.02 Notices. (a) All notices, requests and other communications
provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, facsimile transmission) and mailed, transmitted by
facsimile or delivered, (A) if to the Borrower, Holdings, the Agent, the Issuing
Lender or the Swingline Lender, to the address or facsimile number specified for
notices on the applicable signature page hereof; (B) if to any Lender, to the
notice address of such Lender set forth on Schedule 1.01(a); or (C) as directed
to the Borrower or the Agent, to such other address as shall be designated by
such party in a written notice to the other parties, and as directed to each
other party, at such other address as shall be designated by such party in a
written notice to the Borrower and the Agent.
(b) All such notices, requests and communications shall be effective
when delivered or transmitted by facsimile machine, respectively, provided that
any matter transmitted by the Borrower by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on the
applicable signature page hereof or on Schedule 1.01(a), and (ii) shall be
followed promptly by a hard copy original thereof; except that notices to the
Agent shall not be effective until actually received by the Agent, notices to
the Swingline Lender pursuant to Section 2.03(f) shall not be effective until
received by the Swingline Lender, and notices pursuant to Article III to any
Issuing Lender shall not be effective until actually received by such Issuing
Lender.
(c) The Borrower acknowledges and agrees that any agreement of the
Agent, the Issuing Lenders, the Swingline Lender and the Lenders in Articles II
and III herein to receive certain notices by telephone and facsimile is solely
for the convenience and at the request of the Borrower. The Agent, the Issuing
Lenders, the Swingline Lender and the Lenders shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Borrower to
give such notice and the Agent, the Issuing Lenders, the Swingline Lender and
the Lenders shall not have any liability to such Borrower or any other Person on
account of any action taken or not taken by the Agent, the Issuing Lenders, the
Swingline Lender or the Lenders in reliance upon such telephonic or facsimile
notice. The obligation of the Borrower to repay the Loans and drawings under
Letters of Credit shall not be affected in any way or to any extent by any
failure by the Agent, the Issuing Lenders, the Swingline Lender and the Lenders
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent, the Issuing Lenders, the Swingline Lender and the Lenders
of a confirmation which is at variance with the terms understood by the Agent,
the Issuing Lenders, the Swingline Lender or the Lenders to be contained in the
telephonic or facsimile notice.
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12.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent, any Issuing Lender, the Swingline
Lender or any Lender, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
12.04 Costs and Expenses. The Borrower shall, whether or not the
transactions contemplated hereby shall be consummated:
(a) pay or reimburse on demand for all reasonable costs and expenses
incurred by the Agent, the Arranger and the Syndication Agent, in
connection with the development, preparation, delivery, administration,
syndication of the Commitments and Loans under and execution of, and, in
the case of the Agent and the Arranger, any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this
Agreement, any other Loan Document and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including the Attorney Costs incurred by
the Agent and the Arranger with respect thereto;
(b) pay or reimburse each Lender, each Issuing Lender and the Agent on
demand for all reasonable costs and expenses incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights
or remedies (including in connection with any "workout" or restructuring
regarding the Loans, and including in any Insolvency Proceeding) under this
Agreement (including the guaranty contained in Article X), any other Loan
Document, and any such other documents, including Attorney Costs incurred
by the Agent, each Issuing Lender and any Lender and any reasonable cost of
any consultants retained by the Agent in connection therewith; and
(c) pay or reimburse the Agent and each Issuing Lender on demand for
all appraisal (including, without duplication, the allocated cost of
internal appraisal services), audit, environmental inspection and review
(but, in the case of any such environmental inspection or review, only to
the extent that a notice has been delivered pursuant to Section 7.03(c) or
Holdings or any of its Subsidiaries shall be in violation of Section 7.07
to the extent that such violation relates to any Environmental Law or
Environmental Claim) (including, without duplication, the allocated cost of
such internal services), search and filing costs, fees and expenses,
incurred or sustained by the Agent in connection with the matters referred
to under paragraph (b) of this Section 12.04.
12.05 Indemnity. Whether or not the transactions contemplated hereby
shall be consummated, the Borrower shall pay, indemnify, and hold each Lender,
each Issuing Lender, the Swingline Lender, the Agent, the Arranger, the
Syndication Agent and each of their respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including Attorney Costs) of any kind or nature whatsoever with respect to (a)
any investigation, litigation
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or proceeding (including any Insolvency Proceeding) related to this Agreement or
the Loan Documents or the Loans or the Letters of Credit, or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto and
(b) the actual or alleged presence of Hazardous Materials in the air, surface
water or groundwater or on the surface or subsurface of any property owned,
leased or at any time operated by Holdings or any of its Subsidiaries, the
generation, storage, transportation, handling or disposal of Hazardous Materials
at any location by Holdings or any of its Subsidiaries, whether or not owned,
leased or operated by Holdings or any of its Subsidiaries, the noncompliance of
any property owned, leased or operated by Holdings or any of its Subsidiaries
with Environmental Laws (including applicable permits thereunder) applicable to
any such property, or any Environmental Claim asserted against Holdings, any of
its Subsidiaries or any property owned, leased or at any time operated by
Holdings or any of its Subsidiaries (all the foregoing described in (a) and (b)
above, collectively, the "Indemnified Liabilities"); provided, however, that the
Borrower shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnified Person as the same is determined by a final
judgment of a court of competent jurisdiction. The obligations in this Section
12.05 shall survive payment of all other Obligations.
12.06 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that neither the Borrower nor Holdings
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Agent and each Lender.
12.07 Assignments, Participations, etc. (a) Any Lender may, with
the written consent of the Borrower, the Agent, the Swingline Lender and Bank of
America as Issuing Lender, which consents shall not be unreasonably withheld or
delayed, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of (x) the Borrower shall be required either
in connection with any assignment and delegation by a Lender to an Eligible
Assignee that is a Lender or a Lender Affiliate of such Lender or at any time
that an Event of Default shall exist and (y) the Swingline Lender in its
capacity as such and Bank of America in its capacity as an Issuing Lender shall
be required in connection with an assignment of outstanding Term Loans) (each an
"Assignee") all, or any ratable part of all, of the Loans, Commitments and the
other rights and obligations of such Lender hereunder (although such assignments
do not have to be pro rata among the respective Tranches); provided, however,
that any such assignment to an Eligible Assignee which is not a Lender or a
Lender Affiliate shall be in a minimum amount equal to the lesser of $5,000,000
or the full amount of the assignor Lender's outstanding Loans and Commitments;
and provided, still further, that the Borrower, the Issuing Lenders, the
Swingline Lender and the Agent may continue to deal solely and directly with
such Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
the Borrower and the Agent by such Lender and the Assignee; (ii) such Lender and
its Assignee shall have delivered to the Borrower and the Agent an Assignment
and Acceptance in the form of Exhibit L ("Assignment and Acceptance"); (iii)
such assignment is recorded by the Agent in the Register pursuant to Section
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2.02 and (iv) in the case of any assignment to an Assignee which is not already
a Lender, the assignor Lender or Assignee has paid to the Agent a processing fee
in the amount of $3,500; and provided, still further, that any assignment
hereunder of the Revolving Commitment and Revolving Loans must include an equal
percentage of the assignor Lender's Revolving Commitment and Revolving Loans.
At the time of each assignment pursuant to this Section 12.07(a) to a Person
which is not already a Lender hereunder and which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) for Federal income
taxes purposes, the respective assignee Lender shall provide to the Borrower and
the Administrative Agent the appropriate Internal Revenue Service Form (and, if
applicable a Section 4.01(f) Certificate) described in Section 4.01(f).
(b) From and after the date that the Agent notifies the assignor
Lender that the requirements of paragraph (a) above are satisfied, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents. Anything herein to the
contrary notwithstanding, any Lender assigning all of its Loans, Commitments and
other rights and obligations hereunder to an Assignee shall continue to have the
benefit of all indemnities hereunder following such assignment.
(c) Immediately upon each Assignee's making its payment under the
Assignment and Acceptance and the recordation of same by the Agent in the
Register pursuant to Section 2.02, this Agreement, shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Aggregate Commitment and the
outstanding Loans arising therefrom.
(d) Any Lender may at any time sell to one or more banks or other
Persons (a "Participant") participating interests in any Loans, the Commitments
of such Lender and the other interests of such Lender (the "Originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Borrower, the Issuing Lenders and the Agent shall
continue to deal solely and directly with the Originating Lender in connection
with the Originating Lender's rights and obligations under this Agreement and
the other Loan Documents, and (iv) no Lender shall transfer or grant any
participating interest under which the Participant shall have rights to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, provided that such Participant shall have the right to
approve any amendment, consent or waiver described in clauses (ii) and (iv) of
the first proviso to Section 12.01. In the case of any such participation, the
Participant shall be entitled to the benefit of Sections 4.01, 4.03, 4.06 and
12.05, subject to the same limitations, as though it were also a Lender
hereunder, subject to clause (f) below, and if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the extent
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permitted under applicable law, be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.
(e) Notwithstanding any other provision contained in this Agreement
or any other Loan Document to the contrary, (i) any Lender may assign all or any
portion of the Loans held by it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Federal Reserve
Board and any Operating Circular issued by such Federal Reserve Bank, provided
that any payment in respect of such assigned Loans made by the Borrower to or
for the account of the assigning or pledging Lender in accordance with the terms
of this Agreement shall satisfy the Borrower's obligations hereunder in respect
to such assigned Loans to the extent of such payment and (ii) with the consent
of the Agent, any Lender which is a fund may pledge all or any portion of its
Loans to its trustee in support of its obligations to its trustee. No such
assignment shall release the assigning Lender from its obligations hereunder.
(f) No Participant shall be entitled to receive any greater payment
under Sections 4.01, 4.03 or 4.06 than such Originating Lender would have been
entitled to receive with respect to the rights transferred unless such transfer
is made with the Borrower's prior written consent.
12.08 Confidentiality. Each Lender agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information provided to it by Holdings, the Borrower or any Subsidiary of
Holdings, or by the Agent on Holdings', the Borrower's or such Subsidiary's
behalf, in connection with this Agreement or any other Loan Document, and
neither it nor any of its Affiliates shall use any such information for any
purpose or in any manner other than pursuant to the terms contemplated by this
Agreement; except to the extent such information (a) was or becomes generally
available to the public other than as a result of a disclosure by the Lender, or
(b) was or becomes available on a non-confidential basis from a source other
than the Borrower or Holdings, provided that such source is not bound by a
confidentiality agreement with the Borrower or Holdings, known to the Lender;
provided further, however, that any Lender may disclose such information (i) at
the request or pursuant to any requirement of any Governmental Authority to
which the Lender is subject or in connection with an examination of such Lender
by any such authority; (ii) pursuant to subpoena or other court process; (iii)
when required to do so in accordance with the provisions of any applicable
Requirement of Law; (iv) to the extent reasonably required in connection with
any litigation or proceeding to which the Agent, such Lender or their respective
Affiliates may be party; (v) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; and
(vi) to such Lender's independent auditors, other professional advisors and
employees of such Lender's Lender Affiliates (or any Affiliate of such Lender
engaged in capital market transactions generally) retained by such Lender in
connection with this Agreement so long as such Persons agree to maintain the
confidentiality of all such information disclosed to them. Notwithstanding the
foregoing, the Borrower authorizes each Lender to disclose to any Participant or
Assignee (each, a "Transferee") and to any prospective Transferee, such
financial and other information in such Lender's possession concerning the
Borrower or its Subsidiaries or Holdings which has been delivered to Agent or
the Lenders pursuant to this Agreement or which has been delivered to the Agent
or the Lenders by the Borrower or Holdings in connection with
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the Lenders' credit evaluation of the Borrower prior to entering into this
Agreement; provided that, unless otherwise agreed by the Borrower or Holdings,
such Transferee agrees in writing to such Lender to keep such information
confidential to the same extent required of the Lenders hereunder.
12.09 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default occurs and is continuing, each Lender is
authorized at any time and from time to time, without prior notice to the
Borrower or Holdings, any such notice being waived by the Borrower and Holdings
to the fullest extent permitted by law, to set off and apply, to the extent
permitted by applicable law, any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at any
time owing to, such Lender to or for the credit or the account of the Borrower
or Holdings against any and all Obligations owing to such Lender, now or
hereafter existing, irrespective of whether or not the Agent or such Lender
shall have made demand under this Agreement or any other Loan Document and
although such Obligations may be contingent or unmatured. Each Lender agrees
promptly to notify the Borrower or Holdings and the Agent after any such set-off
and application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this Section 12.09 are in addition to the other
rights and remedies (including other rights of set-off) which such Lender may
have.
12.10 Notification of Addresses, Lending Offices, etc. Each Lender
shall notify the Agent in writing of any changes in the address to which notices
to such Lender should be directed, of addresses of its Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
12.11 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Agent.
12.12 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
12.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the parties hereto and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.
None of the Agent, the Issuing Lender, the Swingline Lender or any Lender shall
have any obligation to any Person not a party to this Agreement or any other
Loan Document.
-125-
<PAGE>
12.14 Governing Law and Jurisdiction. (a) THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND
ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE PARTIES HERETO EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
12.15 Waiver of Jury Trial. THE PARTIES HERETO EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION 12.15 AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
12.16 Domicile of Loans. Each Lender may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or Affiliate of such
Lender. Notwithstanding anything to the contrary contained herein, to the
extent that a transfer of Loans pursuant to this Section 12.16 would, at the
time of such transfer, result in increased costs under Sections 4.01, 4.03 or
4.06 from those being charged by the respective Lender prior to such transfer,
then the Borrower shall not be obligated to pay such increased costs (although
the Borrower shall be
-126-
<PAGE>
obligated to pay any other increased costs of the type described above resulting
from changes after the date of the respective transfer).
* * *
-127-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
GLOBE HOLDINGS, INC.
By /s/ T.A. Rodgers, III
----------------------------------
Title: President and Chief Executive
Officer
Address for notices:
456 Bedford Street
Fall River, MA 02720
Attn: Lawrence R. Walsh
Tel: 508-674-3585
Facsimile: 508-674-3580
with a copy to:
Code Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
Tel: 312-876-9589
Facsimile 312-876-3854
<PAGE>
GLOBE MANUFACTURING CORP.
By /s/ Lawrence R. Walsh
-------------------------------
Title: Vice President
Address for notices:
456 Bedford Street
Fall River, MA 02720
Attn: Lawrence R. Walsh
Tel: 508-674-3585
Facsimile: 508-674-3580
with a copy to:
Code Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
Tel: 312-876-9589
Facsimile 312-876-3854
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By /s/ Dietmar Schiel
-----------------------------------------------
Title: Vice President
Address for notices of borrowing, prepayments and
other administrative matters:
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attn.: Agency Administrative
Services #5596
Josephine T. Flores,
Vice President
Facsimile: 925-675-8500
Tel: 925-675-8374
Address for all other notices (including with
respect to amendments and waivers):
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn.: Agency Management
#10831
Dietmar Schiel, Vice President
Facsimile: 415-436-3425
Tel: 415-436-2769
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Issuing Lender
By /s/ Elizabeth R. Borow
----------------------------------------
Title: Managing Director
Address for notices:
Bank of America National Trust and Savings
Association
CBG Letters of Credit (#32054)
200 W. Jackson Blvd., 17th Floor
Chicago, IL 60606
Attn.: Gail S. Miller
Facsimile: 312-987-6828
Tel: 312-923-5924
with a copy to:
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attn.: Agency Administrative Services
#5596
Josephine T. Flores,
Assistant Vice President
Facsimile: 510-675-8500
Tel: 510-675-8374
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Swingline Lender
By /s/ Elizabeth R. Borow
---------------------------
Title: Managing Director
231 South LaSalle Street
Chicago, IL 60697
Attn: Renee Waller
Facsimile: (312) 974-9626
Telephone: (312) 828-3874
with a copy to:
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attn: Agency Administrative Services #5596
Josephine T. Flores
Facsimile: (510) 675-8500
Telephone: (510) 675-8374
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Lender
By /s/ Elizabeth R. Borow
-----------------------------
Title: Managing Director
Address for notices:
231 South LaSalle Street
Chicago, IL 60697
Attn.: Renee Waller
Facsimile: 312-974-9626
Tel: 312-828-3874
With a copy to:
335 Madison Avenue, 6th Floor
New York, NY 10017
Attn.: Leveraged Finance #9618
Elizabeth Borow
Facsimile: 212-503-7502
Tel: 212-503-8236
<PAGE>
MERRILL LYNCH CAPITAL CORPORATION, as a Lender
By /s/ Brian O'Callahan
----------------------------
Name: Brian O'Callahan
Title: Vice President
Address for notices:
World Financial Center
North Tower - 7th Floor
New York, New York 10281-1307
<PAGE>
Cypress Tree Investment Fund, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Manager
By: /s/ Catherine C. McDermott
---------------------------------
Title: Principal
Tim Barns
Cypress Tree Investment Management
125 High Street, 14th Floor
Oliver Tower
Boston, MA 02110
617-946-5670 Phone
617-946-5681 Fax
<PAGE>
Cypress Tree Institutional Fund, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Manager
By: /s/ Catherine C. McDermott
---------------------------------
Title: Principal
Tim Barns
Cypress Tree Investment Management
125 High Street, 14th Floor
Oliver Tower
Boston, MA 02110
617-946-5670 Phone
617-946-5681 Fax
<PAGE>
Morgan Stanley Dean Witter Prime Income Trust
By: c/o Morgan Stanley Dean Witter Advisors,
Inc.
By: /s/ Sheila Finnery
--------------------------
Title: Vice President
Kevin Egan
c/o Morgan Stanley Dean Witter Advisors, Inc.
Two World Trade Center, 72nd Floor
New York, New York 10048
212-392-5845 Phone
212-392-5345 Fax
<PAGE>
National City Bank
By: /s/ Diego Tobon
--------------------------
Title: Vice President
Frank Pagura
National City Bank
20 North Wacker Drive, Suite 3012
Chicago, Illinois 60606
312-240-0301 Phone
312-240-0356 Fax
<PAGE>
BHF-Bank Aktiengesellschaft
By: /s/ Linda Pace
---------------------------
Title: Vice President
By: /s/ Thomas Scifo
---------------------------
Title: Assistant Vice President
Linda Pace
BHF-Bank AG
590 Madison Avenue, 30th Floor
New York, New York 10022
212-756-5915 Phone
212-756-5536 Fax
<PAGE>
State Street Bank and Trust Company
By: /s/ Thomas M. O'Reilly
------------------------------
Title: Vice President
Tom O'Reilly
State Street Bank
225 Franklin Street
Boston, MA 02110
617-654-3833 Phone
617-664-4176 Fax
<PAGE>
First Source Financial LLP
By: First Source Financial, Inc. its
Agent/Manager
By: /s/ James W. Wilson
-----------------------------
Title: Senior Vice President
Jason Gelberd
First Source Financial, Inc.
2850 West Golf Road, 5th Floor
Rolling Meadows, IL 60008
847-734-2045 Phone
847-734-7910 Fax
<PAGE>
Fleet National Bank
/s/ Oliver Bennett
By:____________________________________
Title: Vice President
Oliver Bennett
Fleet National Bank
111 Westminster Street
MS: RI-MO-235
Providence, RI 02903
401-278-5289 Phone
401-278-5276 Fax
<PAGE>
Heller Financial, Inc.
/s/ Kathi J. Inorio
By:____________________________________
Title: Vice President
Kathi J. Inorio
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
312-441-7775 Phone
312-441-7357 Fax
<PAGE>
The Mitsubishi Trust and Banking Corporation
/s/ Noboo Tominaga
By:_____________________________________
Title: Chief Manager
John Pastore
Mitsubishi Trust
311 South Wacker Drive, Suite 6300
Chicago, IL 60606-6622
312-408-6051 Phone
312-663-0863 Fax
<PAGE>
Union Bank of California, N.A.
By: /s/ Peter W. Clark
--------------------------------
Title: Vice President
Peter Clark
Union Bank of California
350 California Street, 6th Floor
San Francisco, CA 94104
415-705-7307 Phone
415-705-7567 Fax
<PAGE>
SunTrust Bank
/s/ Bradley J. Staples
By:__________________________________
Title: Vice President
/s/ Brenda Zino
By:__________________________________
Title: Banking Officer
Brad Staples
Brenda Zino
SunTrust Bank
303 Peachtree Road
Atlanta, GA 30305
404-230-5099 Phone
404-575-2594 Fax
<PAGE>
Allstate Insurance Company
By: /s/ Patricia W. Wilson
---------------------------
Title: Authorized Signatory
By: /s/ Jerry D. Zinkula
---------------------------
Title: Authorized Signatory
Chris Goergen
Allstate Insurance Company
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
847-402-3095 Phone
847-402-3092 Fax
<PAGE>
Allstate Life Insurance Company
By: /s/ Patricia W. Wilson
----------------------------
Title: Authorized Signatory
By: /s/ Jerry D. Zinkula
---------------------------
Title: Authorized Signatory
Chris Goergen
Allstate Insurance Company
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
847-402-3095 Phone
847-402-3092 Fax
<PAGE>
KZH - CypressTree-1 Corporation
By: /s/ James Westonhaus
---------------------------
Title: Authorized Agent
Virginia Conway
KZH - CypressTree-1 Corporation
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
212-946-7575 Phone
212-946-7776 Fax
Lee Ann Duffy
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
212-351-3809 Phone
212-351-4035 Fax
<PAGE>
CypressTree Investment Management Company, Inc.
As: Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance Company as
Portfolio Manager
By: /s/ Catherine C. McDermott
-------------------------------
Title: Principal
Tim Barns
Cypress Tree Investment Management
125 High Street, 14th Floor
Oliver Tower
Boston, MA 02110
617-946-5670 Phone
617-946-5681 Fax
<PAGE>
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manger
By: /s/ Jane M. Nelson
------------------------------------
Title: Senior Vice President
ING HIGH INCOME PRINCIPAL PRESERVATION FUND
HOLDINGS, LDC
By: ING Capital Advisors, Inc., as Investment
Advisor
By: /s/ Jane M. Nelson
------------------------------------
Title: Senior Vice President
Jane Nelson
ING Capital Advisors
233 South Wacker Drive, Suite 5200
Chicago, IL 60606
312-496-7606 Phone
312-496-7611 Fax
<PAGE>
SCHEDULE 1.01(A)
----------------
LENDING OFFICES
---------------
Bank of America National Trust
& Savings Association
231 South LaSalle Street
Chicago, IL 60697
Attn.: Renee Waller
Facsimile: 312-974-9626
Tel: 312-828-3874
Merrill Lynch Capital Corporation
World Financial Center
North Tower - 7th Floor
New York, NY 10281
Attn: Brian O'Callahan
Facsimile: (212) 449-8230
Tel: (212) 449-3097
Cypress Tree Investment Fund, LLC
125 High Street, 14th Floor
Oliver Tower
Boston, MA 02110
Attn: Tim Barns
Facsimile: 617-946-5681
Tel: 617-946-5670
Cypress Tree Institutional Fund, LLC
125 High Street, 14th Floor
Oliver Tower
Boston, MA 02110
Attn: Tim Barns
Facsimile: 617-946-5681
Tel: 617-946-5670
Morgan Stanley Dean Witter Prime Income Trust
c/o Morgan Stanley Dean Witter Advisors, Inc.
Two World Trade Center, 72nd Floor
New York, New York 10048
Attn: Kevin Egan
Facsimile: 212-392-5345
Tel: 212-392-5845
National City Bank
20 North Wacker Drive, Suite 3012
<PAGE>
Schedule 1.01(a)
Page 2
Chicago, Illinois 60606
Attn:
Facsimile: 312-240-0356
Tel: 312-240-0301
BHF-Bank Aktiengesellschaft
590 Madison Avenue, 30th Floor
New York, New York 10022
Attn: Linda Pace
Facsimile: 212-756-5536
Tel: 212-756-5915
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Tom O'Reilly
Facsimile: 617-664-4176
Tel: 617-654-3833
First Source Financial LLP
2850 West Golf Road, 5th Floor
Rolling Meadows, IL 60008
Attn: Jason Gelberd
Facsimile: 847-734-7910
Tel: 847-734-2045
Fleet National Bank
111 Westminster Street
MS: RI-MO-235
Providence, RI 02903
Attn: Oliver Bennett
Facsimile: 401-278-5276
Tel: 401-278-5289
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Kathi J. Inorio
Facsimile: 312-441-7357
Tel: 312-441-7775
The Mitsubishi Trust and Banking Corporation
311 South Wacker Drive, Suite 6300
Chicago, IL 60606-6622
Attn: John Pastore
<PAGE>
Schedule 1.01(a)
Page 3
Facsimile: 312-663-0863
Tel: 312-408-6051
Union Bank of California, N.A.
350 California Street, 6th Floor
San Francisco, CA 94104
Attn: Peter Clark
Facsimile: 415-705-7567
Tel: 415-705-7307
SunTrust Bank
303 Peachtree Road
Atlanta, GA 30305
Attn: Brad Staples
Facsimile: 404-575-2594
Tel: 404-230-5099
Allstate Insurance Company
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
Attn: Chris Goergen
Facsimile: 847-402-3092
Tel: 847-402-3095
Allstate Life Insurance Company
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
Attn: Chris Goergen
Facsimile: 847-402-3092
Tel: 847-402-3095
KZH - CypressTree-1 Corporation
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
Facsimile: 212-946-7776
Tel: 212-946-7575
and
Lee Ann Duffy
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
<PAGE>
Schedule 1.01(a)
Page 4
Facsimile: 212-351-4035
Tel: 212-351-3809
CypressTree Investment Management Company, Inc.
125 High Street, 14th Floor
Oliver Tower
Boston, MA 02110
Attn: Tim Barns
Facsimile: 617-946-5681
Tel: 617-946-5670
ING Capital Advisors
233 South Wacker Drive, Suite 5200
Chicago, IL 60606
Attn: Jane Nelson
Facsimile: 312-496-7611
Tel: 312-496-7606
<PAGE>
Schedule 1.01(b)
COMMITMENTS
-----------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Tranche A Tranche B
Term Loan Term Loan Revolving
Lender Commitment Commitment Commitment
- ------ ---------- ---------- ----------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank of America National Trust & Savings
Association $ 7,909,090.90 $ 22,000,000 $ 6,590,909.09
Merrill Lynch Capital Corporation $ 6,818,181.82 $ 0 $ 5,681,818.18
Fleet National Bank $ 6,000,000.00 $ 0 $ 5,000,000.00
BHF-Bank Aktiengesellschaft $ 4,909,090.91 $ 0 $ 4,090,909.09
First Source Financial LLP $ 4,909,090.91 $ 0 $ 4,090,909.09
Heller Financial, Inc. $ 4,909,090.91 $ 0 $ 4,090,909.09
Mitsubishi Trust and Banking Corporation $ 4,909,090.91 $ 0 $ 4,090,909.09
National City Bank $ 4,909,090.91 $ 0 $ 4,090,909.09
State Street Bank and Trust Company $ 4,909,090.91 $ 0 $ 4,090,909.09
Sun Trust Bank $ 4,909,090.91 $ 0 $ 4,090,909.09
Union Bank of California, N.A. $ 4,909,090.91 $ 0 $ 4,090,909.09
Allstate Insurance Company $ 0 $ 2,666,666.67 $ 0
Allstate Life Insurance Company $ 0 $ 5,333,333.33 $ 0
Morgan Stanley Dean Witter Prime Income Trust $ 8,000,000.00 $ 0
$ 0
KZH-Cypress Tree-1 Corporation $ 0 $ 5,500,000.00 $ 0
Cypress Tree Investment Management Company, $ 0
Inc. $ 0 $ 1,000,000.00
Cypress Tree Investment Funds, LLC $ 0 $ 1,000,000.00 $ 0
Cypress Tree Institutional Fund, LLC $ 0 $ 1,000,000.00 $ 0
Archimedes Funding, L.L.C. $ 0 $ 5,000,000.00 $ 0
ING High Income Principal Preservation Fund $ 0 $ 3,500,000.00 $ 0
Holdings, LDC
Total $60,000,000.00 $55,000,000.00 $50,000,000.00
============== ============== ==============
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 1.01(c)
Subsidiary Guarantors
None
SCHEDULE 1.01(d)
Indebtedness to be Refinanced
Term and Revolving Credit $69,065,231.51
Facility with a syndicate of lenders and
Fleet National Bank, as agent
SCHEDULE 6.09
Real Property
Schedule 6.09 lists Globe Manufacturing Corp's owned and leased real property.
SCHEDULE 6.15
Subsidiaries
Schedule 6.15 lists the subsidiaries of Globe Holdings, Inc. and Globe
Manufacturing Corp.
SCHEDULE 6.24
Insurance
Schedule 6.24 lists the insurance coverage for Globe Holdings, Inc. and its
subsidiaries.
SCHEDULE 8.01
Existing Liens
Schedule 8.01 lists the existing liens of Globe Holdings, Inc. and Globe
Manufacturing Corp.
SCHEDULE 8.04
Existing Indebtedness
Schedule 8.04 lists certain existing indebtedness of Globe Holdings, Inc. and
Globe Manufacturing Corp.
SCHEDULE 8.05
Existing Investments
Schedule 8.05 lists certain investments held by Globe Holdings, Inc. and Globe
Manufacturing Corp.
Exhibit A
Form of Notice of Borrowing
Exhibit B
Form of Notice of Conversion/Continuation
Exhibit C
Form of Pledge Agreement
Exhibit D
Form of Subsidiary Guaranty
Exhibit E
Form of Guarantor Supplement
Exhibit F
Form of Security Agreement
Exhibit G
Form of Leverage Ratio Certificate
Exhibit H-1
Form of Kirkland & Ellis Opinion
Exhibit H-2
Form of Palmer & Dodge Opinion
Exhibit H-3
Form of Maynard & Cooper Opinion
Exhibit H-4
Form of Moore & Van Allen Opinion
Exhibit I
Form of White & Case LLP Opinion
Exhibit J
Form of Holdings Shareholder Subordinated Note
Exhibit K
Form of Compliance Certificate
Exhibit L
Form of Assignment and Acceptance
Exhibit M
Form of Intercompany Note
Exhibit N
Form of Section 4.01(f) Certificate
<PAGE>
EXHIBIT 10.10
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT, dated as of July 31, 1998 (as amended, modified or
supplemented from time to time, this "Agreement"), made by each of the
undersigned pledgors (each, a "Pledgor" and, together with any other entity that
becomes a party hereto pursuant to Section 22 hereof, the "Pledgors"), in favor
of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent
(the "Pledgee"), for the benefit of the Secured Creditors (as defined below).
Except as otherwise defined herein, terms used herein and defined in the Credit
Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Globe Holdings, Inc. ("Holdings"), Globe Manufacturing Corp.
(the "Borrower"), the several financial institutions from time to time party
thereto (the "Lenders"), Merrill Lynch, Pierce, Fenner & Smith, Inc., as
Syndication Agent, Bank of America National Trust and Savings Association, as
Administrative Agent (together with any successor agent, the "Administrative
Agent"), and BancAmerica Robertson Stephens, as Arranger (and together with the
Pledgee, the Lenders and the Syndication Agent, the "Lender Creditors"), have
entered into a Credit Agreement, dated as of July 31, 1998 (as amended, modified
or supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans to the Borrower and the issuance of, and participation in,
Letters of Credit for the account of the Borrower, all as contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or more
Interest Rate Protection Agreements or Other Hedging Agreements with one or more
Lenders or with an affiliate of a Lender (each such Lender or affiliate, even if
the respective Lender subsequently ceases to be a Lender under the Credit
Agreement for any reason, together with such Lender's or affiliate's successors
and assigns, collectively, the "Other Creditors," and together with Lender
Creditors, the "Secured Creditors");
WHEREAS, pursuant to Article X of the Credit Agreement, Holdings has
guaranteed to the Secured Creditors the payment when due of all obligations and
liabilities of the Borrower under or with respect to the Loan Documents and the
Interest Rate Protection Agreements and Other Hedging Agreements;
WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than
Holdings and the Borrower) has jointly and severally guaranteed to the Secured
Creditors the payment when due of all obligations and liabilities of the
Borrower under or with respect to the Loan Documents and the Interest Rate
Protection Agreements and Other Hedging Agreements;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower and the issuance of Letters of Credit for the account of the Borrower
under the Credit Agreement that each Pledgor shall have executed and delivered
to the Pledgee this Agreement; and
<PAGE>
Page 2
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) of such Pledgor, whether
now existing or hereafter incurred under, arising out of or in connection
with any Loan Document to which such Pledgor is a party and the due
performance and compliance by such Pledgor with the terms of each such Loan
Document (all such obligations and liabilities under this clause (i),
except to the extent consisting of obligations or indebtedness with respect
to Interest Rate Protection Agreements or Other Hedging Agreements, being
herein collectively called the "Loan Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor, whether
now existing or hereafter incurred under, arising out of or in connection
with any Interest Rate Protection Agreement or Other Hedging Agreement
including, in the case of the Pledgors other than the Borrower, all
obligations of such Pledgor under Article X of the Credit Agreement or the
Subsidiary Guaranty, as the case may be, in respect of Interest Rate
Protection Agreements or Other Hedging Agreements (all such obligations and
liabilities under this clause (ii) being herein collectively called the
"Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities referred to in clauses
(i), (ii) and (iii) above, after an Event of Default (such term, as used in
this Agreement, shall mean any Event of Default under, and as defined in,
the Credit Agreement, or any payment default by the Borrower under any
Interest Rate Protection Agreement or Other Hedging Agreement and shall in
any event include, without limitation, any payment default (after the
expiration of any applicable grace period) on any of the Obligations (as
hereinafter defined)) shall have occurred and be continuing, the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or
otherwise disposing or realizing on the
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Page 3
Collateral, or of any exercise by the Pledgee of its rights hereunder,
together with reasonable attorneys' fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such Secured
Creditor has the right to reimbursement under Section 11 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations."
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i)
the term "Stock" shall mean (x) with respect to corporations incorporated under
the laws of the United States or any State or territory thereof (each, a
"Domestic Corporation"), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and (y) with
respect to corporations not Domestic Corporations (each, a "Foreign
Corporation"), all of the issued and outstanding shares of capital stock at any
time directly owned by any Pledgor of any Foreign Corporation (except for the
stock of Globe Elastic Thread, Ltd., which is in the process of being
dissolved), provided that, except as provided in the last sentence of this
Section 2, such Pledgor shall not be required to pledge hereunder more than 65%
of the total combined voting power of all classes of capital stock of any
Foreign Corporation entitled to vote; (ii) the term "Notes" shall mean (x) all
Intercompany Notes at any time issued to each Pledgor and (y) all other
promissory notes from time to time issued to, or held by, each Pledgor;
provided, that, except as provided in the last sentence of this Section 2, no
Pledgor shall be required to pledge hereunder any promissory notes (including
Intercompany Notes) issued to such Pledgor by any Subsidiary of such Pledgor
which is a Foreign Corporation and (iii) the term "Securities" shall mean all of
the Stock and Notes. Each Pledgor represents and warrants that on the date
hereof (i) the Stock held by such Pledgor consists of the number and type of
shares of the stock of the corporations as described in Annex A hereto; (ii)
such Stock constitutes that percentage of the issued and outstanding capital
stock of the issuing corporation as is set forth in Annex A hereto; (iii) the
Notes held by such Pledgor consist of the promissory notes described in Annex B
hereto where such Pledgor is listed as the lender; and (iv) on the date hereof,
such Pledgor owns no other Securities. In the circumstances and to the extent
provided in Section 7.13 of the Credit Agreement, the 65% limitation set forth
in clause (i)(y) and the limitation in the proviso of clause (ii) in each case
of the first sentence, the first sentence of this Section 2 and in Section 3.2
hereof shall no longer be applicable and such Pledgor shall duly pledge and
deliver to the Pledgee such of the Securities not theretofore required to be
pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes set
forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral owned by such Pledgor; (ii) pledges
and deposits as security with the Pledgee the Securities owned by such Pledgor
on the date hereof, and delivers to the Pledgee certificates or instruments
therefor, duly endorsed in blank in the case of Notes and accompanied by undated
stock powers duly executed in blank by such Pledgor in the case of Stock, or
such other instruments of transfer as are acceptable to the Pledgee; provided
that, Globe Manufacturing Corp., shall not be required
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Page 4
to pledge the stock of Globe Manufacturing FSC Ltd. until it has received
approval for the transfer of such stock from the appropriate governmental
entity; and (iii) assigns, transfers, hypothecates, mortgages, charges and sets
over to the Pledgee all of such Pledgor's right, title and interest in and to
such Securities (and in and to all certificates or instruments evidencing such
Securities), to be held by the Pledgee, upon the terms and conditions set forth
in this Agreement.
3.2. Subsequently Acquired Securities. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will forthwith pledge
and deposit such Securities (or certificates or instruments representing such
Securities) as security with the Pledgee and deliver to the Pledgee certificates
therefor or instruments thereof, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank in the case of Stock,
or such other instruments of transfer as are acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by any
Responsible Officer of such Pledgor describing such Securities and certifying
that the same have been duly pledged with the Pledgee hereunder. Subject to the
last sentence of Section 2 hereof, no Pledgor shall be required at any time to
pledge hereunder (x) any Stock which is more than 65% of the total combined
voting power of all classes of capital stock of any Foreign Corporation entitled
to vote or (y) any promissory notes (including Intercompany Notes) issued to
such Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation.
3.3. Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the respective
Pledgor shall promptly notify the Pledgee in writing thereof, and, if after such
notification, the Pledgee so requests, such Pledgor shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under the applicable provisions of the
New York UCC). Each Pledgor further agrees to take such actions as the Pledgee
deems reasonably necessary or desirable to effect the foregoing and to permit
the Pledgee to exercise any of its rights and remedies hereunder, and agrees to
provide an opinion of counsel reasonably satisfactory to the Pledgee with
respect to any such pledge of uncertificated Securities promptly upon request of
the Pledgee.
3.4. Definition of Pledged Stock, Pledged Notes, Pledged Securities
and Collateral. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock," all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes," all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities," which together with all dividends and interest
thereon, as the case may be, and all proceeds thereof, including any securities
and moneys received and at the time held by the Pledgee hereunder, is
hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee
<PAGE>
Page 5
or nominees of the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee
agrees to promptly notify the relevant Pledgor after the appointment of any sub-
agent; provided, however, that the failure to give such notice shall not affect
the validity of such appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until (i) an
Event of Default shall have occurred and be continuing and (ii) written notice
thereof shall have been given by the Pledgee to the relevant Pledgor (provided,
that if an Event of Default specified in Section 9.01(f) or (g) of the Credit
Agreement shall occur, no such notice shall be required), each Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities and to give all consents, waivers or ratifications in
respect thereof; provided, that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate or be inconsistent
with any of the terms of this Agreement, any other Loan Document or any Interest
Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured
Debt Agreements"), or which would have the effect of impairing the position or
interests of the Pledgee or any other Secured Creditor, except to the extent
such violation, inconsistency or impairment shall be waived in accordance with
the terms of Section 20 hereof. All such rights of such Pledgor to vote and to
give consents, waivers and ratifications shall cease in case an Event of Default
shall occur and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the respective Pledgor; provided, that all cash dividends payable in respect
of the Pledged Stock which are determined by the Pledgee to represent in whole
or in part an extraordinary, liquidating or other distribution in return of
capital shall be paid, to the extent so determined to represent an
extraordinary, liquidating or other distribution in return of capital, to the
Pledgee and retained by it as part of the Collateral. Subject to the last
sentence of Section 3.2 hereof, the Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock;
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock by way
of stock-split, spin-off, split-up, reclassification, combination of shares
or similar rearrangement; and
(iii) all other or additional stock or other securities or property
(including cash) which may be paid in respect of the Collateral by reason
of any consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization.
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or by any other Secured Debt Agreement or by law) for the protection and
enforcement of its rights in respect of the
<PAGE>
Page 6
Collateral, and the Pledgee shall be entitled, without limitation, to exercise
the following rights, which each Pledgor hereby agrees to be commercially
reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees (the Pledgee agrees
to promptly notify the relevant Pledgor after such transfer; provided,
however, that the failure to give such notice shall not affect the validity
of such transfer);
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for payment
thereon);
(iv) subject to the giving of written notice to the relevant Pledgor
in accordance with clause (ii) of Section 5 hereof (to the extent such
notice is required by such Section 5), to vote all or any part of the
Pledged Stock (whether or not transferred into the name of the Pledgee) and
give all consents, waivers and ratifications in respect of the Collateral
and otherwise act with respect thereto as though it were the outright owner
thereof (each Pledgor hereby irrevocably constituting and appointing the
Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of
substitution to do so); and
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine; provided, that at least 10 days' written
notice of the time and place of any such sale shall be given to such
Pledgor. Each Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any,
of marshalling the Collateral and any other security for the Obligations or
otherwise. At any such sale, unless prohibited by applicable law, the
Pledgee on behalf of the Secured Creditors may bid for and purchase all or
any part of the Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any other Secured Creditor shall be
liable for failure to collect or realize upon any or all of the Collateral
or for any delay in so doing nor shall any of them be under any obligation
to take any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or in any other Secured Debt Agreement or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by the Pledgee or any other
Secured Creditor of any one or more of the rights, powers or
<PAGE>
Page 7
remedies provided for in this Agreement or in any other Secured Debt Agreement
or now or hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by the Pledgee or any
other Secured Creditor of all such other rights, powers or remedies, and no
failure or delay on the part of the Pledgee or any other Secured Creditor to
exercise any such right, power or remedy shall operate as a waiver thereof. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Administrative Agent or the Pledgee, in each case acting upon the
instructions of the Required Lenders (or, after the date on which all Loan
Document Obligations have been paid in full, the holders of at least the
majority of the outstanding Other Obligations) and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent or the Pledgee or the holders of at least a majority of the
outstanding Other Obligations, as the case may be, for the benefit of the
Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied in the manner provided in the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor from and against any and all claims, demands, losses, judgments and
liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee and
each other Secured Creditor for all costs and expenses, including reasonable
attorneys' fees, growing out of or resulting from this Agreement or the exercise
by the Pledgee of any right or remedy granted to it hereunder or under any other
Secured Debt Agreement except, with respect to clauses (i) and (ii) above, for
those arising from the Pledgee's or such other Secured Creditor's gross
negligence or willful misconduct. In no event shall the Pledgee be liable, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of the Pledgors under this Section 11 are
unenforceable for any reason, each Pledgor hereby agrees to
<PAGE>
Page 8
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with
the Pledgee in executing and, at such Pledgor's own expense, file and refile
under the applicable UCC or appropriate local equivalent, such financing
statements, continuation statements and other documents in such offices as the
Pledgee may deem reasonably necessary or appropriate and wherever required or
permitted by law in order to perfect and preserve the Pledgee's security
interest in the Collateral and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Article XI of the Credit Agreement.
14. TRANSFER BY PLEDGORS. Except for sales or dispositions of
Collateral permitted pursuant to the Credit Agreement, no Pledgor will sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except in
accordance with the terms of this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each
Pledgor represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement and liens permitted under
clause (i) of Section 8.01 of the Credit Agreement; (ii) it has full power,
authority and legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding obligation
of such Pledgor enforceable in accordance with its terms, except to the extent
that the enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by equitable principles (regardless of whether
enforcement is sought in equity or at law); (iv) no consent of any other party
(including, without limitation, any stockholder or creditor of such Pledgor or
any of its Subsidiaries) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained by such
Pledgor in connection with the execution, delivery or performance of this
Agreement, or in connection with
<PAGE>
Page 9
the exercise of its rights and remedies pursuant to this Agreement, except as
may be required in connection with the disposition of the Securities by laws
affecting the offering and sale of securities generally and the legal transfer
of the stock of Globe Manufacturing FSC Ltd.; (v) the execution, delivery and
performance of this Agreement by such Pledgor does not violate any provision of
any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or foreign,
or of the certificate of incorporation or by-laws of such Pledgor or of any
securities issued by such Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, deed of trust, loan agreement, credit agreement or any
other material agreement or material instrument to which such Pledgor or any of
its Subsidiaries is a party or which purports to be binding upon such Pledgor or
any of its Subsidiaries or upon any of their respective assets and will not
result in the creation or imposition of any lien or encumbrance on any of the
assets of such Pledgor or any of its Subsidiaries except as contemplated by this
Agreement; (vi) all the shares of Stock of Subsidiaries of Holdings have been
duly and validly issued, are fully paid and nonassessable; (vii) each of the
Pledged Notes constituting Intercompany Notes, when executed by the obligor
thereof, will be the legal, valid and binding obligation of such obligor,
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by equitable principles (regardless of whether enforcement is
sought in equity or at law); and (viii) the pledge and assignment of the
Securities pursuant to this Agreement, together with the delivery of the
Securities pursuant to this Agreement (which delivery has been made), creates a
valid and perfected first security interest in such Securities and the proceeds
thereof, subject to no prior lien or encumbrance or to any agreement purporting
to grant to any third party a lien or encumbrance on the property or assets of
such Pledgor which would include the Securities other than liens permitted under
clause (i) of Section 8.01 of the Credit Agreement. Each Pledgor covenants and
agrees that it will defend the Pledgee's right, title and security interest in
and to the Securities and the proceeds thereof against the claims and demands of
all persons whomsoever; and such Pledgor covenants and agrees that it will have
like title to and right to pledge any other property at any time hereafter
pledged to the Pledgee as Collateral hereunder and will likewise defend the
right thereto and security interest therein of the Pledgee and the other Secured
Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to
<PAGE>
Page 10
such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect
to this Agreement by any trustee or receiver, or by any court, in any such
proceeding, whether or not such Pledgor shall have notice or knowledge of any of
the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the Pledgee
a written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, such Pledgor
as soon as practicable and at its expense will use its reasonable efforts to
cause such registration to be effected (and be kept effective) and will use its
reasonable efforts to cause such qualification and compliance to be effected
(and be kept effective) as may be so requested and as would permit or facilitate
the sale and distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933 as then in effect (or any similar
statute then in effect), appropriate qualifications under applicable blue sky or
other state securities laws and appropriate compliance with any other government
requirements; provided, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised
in writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee, each other Secured Creditor and all others participating in the
distribution of the Pledged Stock against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged untrue statement) of a
material fact contained therein (or in any related registration statement,
notification or the like) or by any omission (or alleged omission) to state
therein (or in any related registration statement, notification or the like) a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing to such
Pledgor by the Pledgee or such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration; provided, that
at least 10 days' notice of the time and place of any such sale shall be given
to such Pledgor. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion: (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Pledged Securities or part thereof shall have been filed
under such Securities Act; (ii) may approach and negotiate with a single
possible purchaser to effect such sale; and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged
<PAGE>
Page 11
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 11 hereof shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly release from the security interest created hereby and
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Pledgee and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement. As used in this Agreement, "Termination
Date" shall mean the date upon which the Aggregate Commitment and all Interest
Rate Protection Agreements and Other Hedging Agreements have been terminated, no
promissory note or Letter of Credit under the Credit Agreement is outstanding
(other than Letters of Credit, together with all fees that have accrued and will
accrue thereon through the stated termination date of such Letters of Credit,
which have been supported in a manner satisfactory to the Issuing Lender in its
sole and absolute discretion) and all other Obligations (other than indemnities
described in Section 11 hereof and in Section 12.05 of the Credit Agreement
which are not then due and payable) have been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Lenders (or all the Lenders if required by Section 12.01 of the Credit
Agreement), the Pledgee, at the request and expense of such Pledgor will duly
release from the security interest created hereby and assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in possession of the Pledgee and has not theretofore been
released pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be released as
provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee
a certificate signed by an Responsible Officer of such Pledgor stating that the
release of the respective Collateral is permitted pursuant to Section 18(a) or
(b).
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to any Pledgor, at;
c/o Globe Manufacturing Corp.
456 Bedford Street
Fall River, MA 02720
<PAGE>
Page 12
Attention: Lawrence Walsh
Telephone No.: (508) 674-3585
Telecopier No.: (508) 679-9458
(b) if to the Pledgee, at:
Bank of America National Trust
and Savings Association
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management #10831
Dietmar Schiel, Vice President
Telephone No.: (415) 436-2769
Telecopier No.: (415) 436-3425
(c) if to any Lender (other than the Pledgee), at such address as
such Lender shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of either (x) the Required Lenders (or all the
Lenders if required by Section 12.01 of the Credit Agreement) at all times prior
to the time on which all Loan Document Obligations have been paid in full or (y)
the holders of at least a majority of the outstanding Other Obligations at all
times after the time on which all Loan Document Obligations have been paid in
full); provided, that any change, waiver, modification or variance affecting the
rights and benefits of a single Class (as defined below) of Secured Creditors
(and not all Secured Creditors in a like or similar manner) shall require the
written consent of the Requisite Creditors (as defined below) of such Class.
For the purpose of this Agreement, the term "Class" shall mean each class of
Secured Creditors, i.e., whether (i) the Lender Creditors as holders of the Loan
Document Obligations or (ii) the Other Creditors as holders of the Other
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (i) with respect to the Loan Document
Obligations, the Required Lenders and (ii) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements and Other
Hedging Agreements.
21. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns; provided that no
Pledgor may transfer or assign any or all of its rights and obligations
hereunder without the prior written consent of the Pledgee. THIS
<PAGE>
Page 13
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
22. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Sections 7.12 and/or 8.15 of the
Credit Agreement shall automatically become a Pledgor hereunder by executing a
counterpart hereof and delivering the same to the Pledgee.
* * *
<PAGE>
Page 14
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
GLOBE HOLDINGS, INC.,
as a Pledgor
By: /s/ Lawrence R. Walsh
-----------------------------
Title: Vice President
GLOBE MANUFACTURING CORP.,
as a Pledgor
By: /s/ Lawrence R. Walsh
-----------------------------
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Pledgee, Collateral Agent
By: /s/ Dietmar Schiel
---------------------------
Title: Vice President
<PAGE>
ANNEX A
TO
PLEDGE AGREEMENT
----------------
LIST OF STOCK
-------------
ISSUER TYPE CERT NO. NO. OF SHARES
Globe Manufacturing Corp. Voting Common 1 1,000
<PAGE>
ANNEX B
TO
PLEDGE AGREEMENT
----------------
LIST OF NOTES
-------------
None.
<PAGE>
EXHIBIT 10.11
================================================================================
SECURITY AGREEMENT
among
GLOBE HOLDINGS, INC.,
GLOBE MANUFACTURING CORP.,
CERTAIN SUBSIDIARIES
OF GLOBE MANUFACTURING CORP.
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Collateral Agent
Dated as of July 31, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I
SECURITY INTERESTS....................................................... 2
1.1. Grant of Security Interests................................. 2
1.2. Power of Attorney........................................... 2
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS........................ 3
2.1. Necessary Filings........................................... 3
2.2. No Liens.................................................... 3
2.3. Other Financing Statements.................................. 3
2.4. Chief Executive Office; Records............................. 4
2.5. Location of Inventory and Equipment......................... 4
2.6. Recourse.................................................... 5
2.7. Trade Names; Change of Name................................. 5
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS................................ 5
3.1. Additional Representations and Warranties................... 5
3.2. Maintenance of Records...................................... 5
3.3. Direction to Account Debtors; Contracting Parties; etc...... 6
3.4. Modification of Terms; etc.................................. 6
3.5. Collection.................................................. 6
3.6. Instruments................................................. 7
3.7. Further Actions............................................. 7
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS................................. 7
4.1. Additional Representations and Warranties................... 7
4.2. Licenses and Assignments.................................... 8
4.3. Infringements............................................... 8
4.4. Preservation of Marks....................................... 8
4.5. Maintenance of Registration................................. 8
4.6. Future Registered Marks..................................... 8
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C>
4.7. Remedies.................................................... 9
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS.................................... 9
5.1. Additional Representations and Warranties................... 9
5.2. Licenses and Assignments.................................... 10
5.3. Infringements............................................... 10
5.4. Maintenance of Patents...................................... 10
5.5. Prosecution of Patent Application........................... 10
5.6. Other Patents and Copyrights................................ 10
5.7. Remedies.................................................... 11
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL..................................... 11
6.1. Protection of Collateral Agents Security.................... 11
6.2. Warehouse Receipts Non-Negotiable........................... 12
6.3. Further Actions............................................. 12
6.4. Financing Statements........................................ 12
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT............................. 13
7.1. Remedies; Obtaining the Collateral Upon Default............. 13
7.2. Remedies; Disposition of the Collateral..................... 14
7.3. Waiver of Claims............................................ 15
7.4. Application of Proceeds..................................... 15
7.5. Remedies Cumulative......................................... 16
7.6. Discontinuance of Proceedings............................... 17
ARTICLE VIII
INDEMNITY................................................................ 17
8.1. Indemnity................................................... 17
8.2. Indemnity Obligations Secured by Collateral; Survival....... 18
ARTICLE IX
DEFINITIONS.............................................................. 18
ARTICLE X
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C>
MISCELLANEOUS.................................................................... 23
10.1. Notices............................................................. 23
10.2. Waiver; Amendment................................................... 23
10.3. Obligations Absolute................................................ 24
10.4. Successors and Assigns.............................................. 24
10.5. Headings Descriptive................................................ 24
10.6. Governing Law....................................................... 24
10.7. Assignors Duties.................................................... 25
10.8. Termination; Release................................................ 25
10.9. Counterparts........................................................ 25
10.10. The Collateral Agent................................................ 26
10.11. Additional Assignors................................................ 26
ANNEX A Schedule of Chief Executive Offices and other Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Trade and Fictitious Names
ANNEX D List of Marks
ANNEX E List of Patents and Applications
ANNEX F List of Copyrights and Applications
ANNEX G Grant of Security Interest in United States Trademarks and Patents
ANNEX H Grant of Security Interest in United States Copyrights
</TABLE>
(iii)
<PAGE>
SECURITY AGREEMENT
------------------
SECURITY AGREEMENT, dated as of July 31, 1998, among each of the
undersigned assignors (each, an "Assignor" and, together with any other entity
that becomes a party hereto pursuant to Section 10.11 hereof, the "Assignors")
and Bank of America National Trust and Savings Association, as Collateral Agent
(the "Collateral Agent"), for the benefit of the Secured Creditors (as defined
below). Except as otherwise defined herein, terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Globe Holdings, Inc. ("Holdings"), Globe Manufacturing Corp.
(the "Borrower"), the several financial institutions from time to time party
thereto (the "Lenders"), Merrill Lynch, Pierce, Fenner & Smith, Inc., as
Syndication Agent, Bank of America National Trust and Savings Association, as
Administrative Agent (together with any successor agent the "Administrative
Agent"), and BancAmerica Securities, Inc., as Arranger (and together with the
Collateral Agent, the Lenders and the Syndication Agent, the "Lender
Creditors"), have entered into a Credit Agreement, dated as of July 31, 1998 (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
providing for the making of Loans to the Borrower and the issuance of, and
participation in, Letters of Credit for the account of the Borrower, all as
contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or more
Interest Rate Protection Agreements or Other Hedging Agreements with one or more
Lenders or an affiliate of a Lender (each such Lender or affiliate, even if the
respective Lender subsequently ceases to be a Lender under the Credit Agreement
for any reason, together with such Lender's or affiliate's successors and
assigns, collectively, the "Other Creditors", and together with the Lender
Creditors, the "Secured Creditors");
WHEREAS, pursuant to Article X of the Credit Agreement, Holdings has
guaranteed to the Secured Creditors the payment when due of all obligations and
liabilities of the Borrower under or with respect to the Loan Documents and the
Interest Rate Protection Agreements and Other Hedging Agreements;
WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other
than Holdings and the Borrower) has jointly and severally guaranteed to the
Secured Creditors the payment when due of all obligations and liabilities of the
Borrower under or with respect to the Loan Documents and the Interest Rate
Protection Agreements and Other Hedging Agreements;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower and the issuance of Letters of Credit for the account of the Borrower
under the Credit Agreement that the Assignors shall have executed and delivered
to the Collateral Agent this Agreement; and
<PAGE>
Page 2
WHEREAS, each Assignor desires to execute this Agreement to satisfy
the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt
and complete payment and performance when due of all of its Obligations, each
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge and grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority in, all of the
right, title and interest of such Assignor in, to and under all of the
following, whether now existing or hereafter from time to time acquired: (i)
each and every Receivable, (ii) all Contracts, together with all Contract Rights
arising thereunder (other than Contracts which by their terms cannot be pledged
(although the right to receive payments of money due or to become due thereunder
shall not be excluded from the security interest created hereunder)), (iii) all
Inventory, (iv) all Equipment, (v) all Marks, together with the registrations
and right to all renewals thereof, and the goodwill of the business of such
Assignor symbolized by the Marks, (vi) all Patents and Copyrights, (vii) all
computer programs of such Assignor and all intellectual property rights therein
(other than such programs and rights which by their terms cannot be pledged) and
all other proprietary information of such Assignor, including, but not limited
to, trade secrets, (viii) all other Goods, General Intangibles, Chattel Paper,
Documents, Permits, Investment Property (other than Pledged Securities),
Instruments and other assets (including cash), (ix) the Cash Collateral Account
and all monies, securities and instruments deposited or required to be deposited
in such Cash Collateral Account, (x) all other bank, demand, time savings,
passbook, certificates of deposit and similar accounts maintained by such
Assignor and all monies, securities, instruments and other investments deposited
or required to be deposited in any of the foregoing accounts, and (xi) all
Proceeds and products of any and all of the foregoing (all of the above,
collectively, the "Collateral"). Notwithstanding anything to the contrary
contained in the immediately preceding sentence, (x) the term Collateral shall
not include any direct Contract between any United States Government Authority
and any Assignor and (y) no Assignor shall be required to take any action to
perfect any security interest in motor vehicles.
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
1.2. Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such Assignor or otherwise) to act, require, demand,
receive, compound and give acquittance for any and all monies and claims
<PAGE>
Page 3
for monies due or to become due to such Assignor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem to be reasonably necessary or advisable to
protect the interests of the Secured Creditors, which appointment as attorney is
coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve and perfect the security interest
granted by such Assignor to the Collateral Agent hereby in respect of the
Collateral have been accomplished (or will have been accomplished on the
Business Day immediately following the Effective Date) and the security interest
granted to the Collateral Agent pursuant to this Agreement in and to the
Collateral creates a perfected security interest therein prior to the rights of
all other Persons therein and subject to no other Liens (other than Permitted
Liens) and is entitled to all the rights, priorities and benefits afforded by
the Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests, in each case to the extent that
the Collateral consists of the type of property in which a security interest may
be perfected by filing a financing statement under the Uniform Commercial Code
as enacted in any relevant jurisdiction or in the United States Patent and
Trademark Office or United States Copyright Office or, to the extent provided in
Section 6.3(b) hereof, in any foreign equivalent office of the United States
Patent and Trademark or United States Copyright Office.
2.2. No Liens. Such Assignor is, and as to Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of, or
has rights in, all Collateral free from any Lien, security interest, encumbrance
or other right, title or interest of any Person (other than Permitted Liens),
and such Assignor shall defend the Collateral to the extent of its rights
therein against all claims and demands of all Persons at any time claiming the
same or any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as the Aggregate Commitment has not been
terminated or any promissory note issued under the Credit Agreement remains
unpaid or any of the Obligations remain unpaid or any Interest Rate Protection
Agreement or Other Hedging Agreement or Letter of Credit remains in effect
(other than Letters of Credit, together with all fees that have accrued and will
accrue thereon through the stated termination date of such Letters of Credit,
which have been supported in a manner satisfactory to the Issuing Lender in its
sole and absolute discretion) or any Obligations are owed with respect thereto,
such Assignor will not execute or authorize to be filed in any public office any
financing statement (or
<PAGE>
Page 4
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except (a) financing
statements filed or to be filed in respect of and covering the security
interests granted hereby by such Assignor or as permitted by the Credit
Agreement and (b) financing statements with respect to Permitted Liens.
2.4. Chief Executive Office; Records. The chief executive office of
such Assignor is located at the address or addresses indicated on Annex A hereto
for such Assignor. Such Assignor will not move its chief executive office
except to such new location as such Assignor may establish in accordance with
the last sentence of this Section 2.4. The originals of all documents
evidencing all Receivables and Contract Rights of such Assignor and the only
original books of account and records of such Assignor relating thereto are, and
will continue to be, kept at such chief executive office, at one or more of the
locations set forth on Annex A hereto or at such new locations as such Assignor
may establish in accordance with the last sentence of this Section 2.4. All
Receivables and Contract Rights of such Assignor are, and will continue to be,
maintained at, and controlled and directed (including, without limitation, for
general accounting purposes) from, the office locations described above or such
new location established in accordance with the last sentence of this Section
2.4. No Assignor shall establish new locations for such offices until it shall
have given to the Collateral Agent notice of its intention to do so unless (i)
such Assignor shall give to the Collateral Agent written notice of any such
relocation of its chief executive office within 20 days following such
relocation, clearly describing such new location and providing such other
information in connection therewith as the Collateral Agent may reasonably
request and (ii) with respect to such new location, it shall take all action,
reasonably satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto for such Assignor (other than (i) immaterial
portions of Inventory sold on consignment or held on display for demonstration
purposes (ii) Inventory transferred to another location in connection with a
sale of such Inventory in the ordinary course of business, so long as such sale
occurs within 90 days from the date of such transfer and (iii) various spare
parts held for maintenance or repair of Equipment). Each Assignor agrees that
all Inventory and Equipment now held or subsequently acquired by it shall be
kept at (or shall be in transport to) any one of the locations shown on Annex B
hereto, or such new location as such Assignor may establish in accordance with
the last sentence of this Section 2.5 (other than (i) immaterial portions of
Inventory sold on consignment or held on display for demonstration purposes
(iii) Inventory transferred to another location in connection with a sale of
such Inventory in the ordinary course of business, so long as such sale occurs
within 90 days from the date of such transfer and (ii) various spare parts held
for maintenance or repair of Equipment). Any Assignor may establish a new
location for Inventory and Equipment only if (i) it shall have given to the
Collateral Agent written notice within 20 days following any such relocation
clearly describing such new location and providing such other information in
connection therewith as the Collateral Agent may request and (ii) with respect
to such new location, it shall have taken all action reasonably satisfactory to
the Collateral Agent to
<PAGE>
Page 5
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
2.6. Recourse. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein, in the other Loan
Documents, in the Interest Rate Protection Agreements and Other Hedging
Agreements and otherwise in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. No Assignor has or operates in any
jurisdiction under, or in the preceding 12 months has had or has operated in any
jurisdiction under, any trade names, fictitious names or other names except its
legal name and such other trade or fictitious names as are listed on Annex C
hereto. No Assignor shall change its legal name or assume or operate in any
jurisdiction under any trade, fictitious or other name except those names listed
on Annex C hereto and new names established in accordance with the last sentence
of this Section 2.7. No Assignor shall assume or operate in any jurisdiction
under any new trade, fictitious or other name unless (i) it shall have given to
the Collateral Agent written notice within 20 days following any assumption of,
or operation under, such new name clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may reasonably
request and (ii) with respect to such new name, it shall have taken all action
requested by the Collateral Agent, to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are what they purport to be, and that all
papers and documents (if any) relating thereto will be the only original
writings evidencing and embodying such obligation of the account debtor named
therein (other than copies created for general accounting purposes).
3.2. Maintenance of Records. Each Assignor will keep and maintain at
its own cost and expense accurate records of its Receivables and Contracts,
records of all payments received, all credits granted thereon, all merchandise
returned and all other dealings therewith, and such Assignor will make the same
available on such Assignor's premises to the Collateral Agent for inspection, at
such Assignor's own cost and expense, at any and all reasonable times upon prior
notice to a Responsible Officer of such Assignor. Upon the occurrence and during
the continuance of an Event of Default and at the request of the Collateral
Agent, such Assignor shall, at its own cost and expense, deliver all tangible
evidence of its Receivables and Contract Rights (including, without limitation,
all documents evidencing the Receivables and all Contracts) and such books and
records to the Collateral Agent or to its representatives (copies of
<PAGE>
Page 6
which evidence and books and records may be retained by such Assignor). Upon the
occurrence and during the continuance of an Event of Default and if the
Collateral Agent so directs, such Assignor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, the Receivables and the
Contracts, as well as books, records and documents (if any) of such Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Collateral Agent and that the Collateral Agent has a security interest
therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon
the occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in the preceding
clause (x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent as such Assignor.
Without notice to or assent by any Assignor, the Collateral Agent may apply any
or all amounts then in, or thereafter deposited in, the Cash Collateral Account
which application shall be effected in the manner provided in Section 7.4 of
this Agreement. The costs and expenses (including reasonable attorneys' fees)
of collection, whether incurred by the relevant Assignor or the Collateral
Agent, shall be borne by the relevant Assignor. The Collateral Agent shall
deliver a copy of each notice referred to in the preceding clause (y) to the
relevant Assignor; provided, that the failure by the Collateral Agent to so
notify such Assignor shall not affect the effectiveness of such notice or the
other rights of the Collateral Agent created by this Section 3.3.
3.4. Modification of Terms; etc. No Assignor shall rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify in
any material respect any term thereof or make any material adjustment with
respect thereto, or extend or renew the same, or compromise or settle any
material dispute, claim, suit or legal proceeding relating thereto, or sell any
Receivable or Contract, or interest therein, without the prior written consent
of the Collateral Agent, which consent shall not be unreasonably withheld,
except as permitted by Section 3.5 hereof or in the Credit Agreement. Each
Assignor will duly fulfill all obligations on its part to be fulfilled under or
in connection with the Receivables and Contracts and will do nothing to impair
the rights of the Collateral Agent in the Receivables or Contracts.
3.5. Collection. Each Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract, except that,
in the absence of the occurrence and continuance of an Event of Default, any
Assignor may allow in the ordinary course of business as adjustments to amounts
owing under its Receivables and
<PAGE>
Page 7
Contracts (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which such Assignor finds
appropriate in accordance with reasonable business judgment and (ii) a refund or
credit due as a result of returned or damaged merchandise or improperly
performed services or for other reasons which such Assignor finds appropriate in
accordance with reasonable business judgment. The reasonable costs and expenses
(including, without limitation, attorneys' fees) of collection, whether incurred
by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor.
3.6. Instruments. If any Assignor owns or acquires any Instrument
constituting Collateral, such Assignor will within 10 Business Days notify the
Collateral Agent thereof, and upon request by the Collateral Agent will promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to the
order of the Collateral Agent as further security hereunder.
3.7. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use the registered Marks listed in Annex D hereto for such Assignor
and that said listed Marks constitute all the marks and applications for marks
registered in the United States Patent and Trademark Office or the equivalent
thereof in any foreign country that such Assignor presently owns or uses in
connection with its business. Each Assignor represents and warrants that it
owns, is licensed to use or otherwise has the right to use all Marks that it
uses. Each Assignor further warrants that it has no knowledge of any third
party claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any trademark, service mark or trade name.
Each Assignor represents and warrants that it is the true and lawful owner of or
otherwise has the right to use all trademark registrations and applications
listed in Annex D hereto and that said registrations are valid, subsisting, have
not been cancelled and that such Assignor is not aware of any third-party claim
that any of said registrations is invalid or unenforceable, or is not aware that
there is any reason that any of said registrations is invalid or unenforceable,
or is not aware that there is any reason that any of said applications will not
pass to registration. Each Assignor represents and warrants that upon the
recordation of a Grant of Security Interest in United States Trademarks and
Patents in the form of Annex G hereto in the United States Patent and Trademark
Office, together with filings on Form UCC-1 pursuant to this Agreement, all
filings, registrations and recordings necessary or appropriate to perfect the
security interest granted to the Collateral Agent in the United States Marks
covered by this Agreement under
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federal law will have been accomplished. Each Assignor agrees to execute such a
Grant of Security Interest in United States Trademark and Patents covering all
right, title and interest in each United States Mark, and the associated
goodwill, of such Assignor, and to record the same. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the continuance of an Event of Default, any document which
may be required by the United States Patent and Trademark Office or the
equivalent thereof in any foreign country in order to effect an absolute
assignment of the Assignor's right, title and interest in each Mark, and record
the same.
4.2. Licenses and Assignments. Except as otherwise permitted by the
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any material right under any Mark absent prior written approval of the
Collateral Agent.
4.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who such Assignor believes is infringing or diluting or otherwise
violating in any material respect any of such Assignor's rights in and to any
Mark, or with respect to any party claiming that such Assignor's use of any Mark
violates in any material respect any property right of that party. Each Assignor
further agrees, unless otherwise agreed by the Collateral Agent, to prosecute
any Person infringing any Mark in accordance with commercially reasonable
business practices.
4.4. Preservation of Marks. Each Assignor agrees to use its Marks in
interstate commerce (or the equivalent thereof in any foreign jurisdiction)
during the time in which this Agreement is in effect, sufficiently to preserve
such Marks as trademarks or service marks under the laws of the United States or
under the laws of the applicable foreign country, as the case may be; provided,
that, to the extent permitted by the Credit Agreement, no Assignor shall be
obligated to preserve any Mark in the event such Assignor determines, in its
reasonable business judgment, that the preservation of such Mark is no longer
desirable in the conduct of its business.
4.5. Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. (S)(S) 1051 et seq. (or the equivalent thereof in any foreign
jurisdiction) to maintain trademark registrations, including but not limited to
affidavits of use and applications for renewals of registration in the United
States Patent and Trademark Office (or the equivalent thereof in any foreign
jurisdiction) for all of its registered Marks pursuant to 15 U.S.C. (S)(S)
1058(a), 1059 and 1065 (or the equivalent thereof in any foreign jurisdiction),
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Collateral Agent; provided, that no Assignor shall
be obligated to maintain registration of any Mark in the event that such
Assignor determines, in its reasonable business judgment, that such maintenance
of such Mark is no longer necessary or desirable in the conduct of its business.
Each Assignor agrees to notify the Collateral Agent three (3) months prior to
the dates on which the affidavits of use or the applications for renewal
registration are due with respect to any
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registered Mark that the affidavits of use or the renewal is being processed or
being abandoned, as the case may be.
4.6. Future Registered Marks. If any registration for a Mark issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office (or the equivalent
thereof in any foreign jurisdiction), within 30 days of receipt of such
certificate, such Assignor shall deliver to the Collateral Agent a copy of such
certificate, and a grant of security in such Mark, to the Collateral Agent and
at the expense of such Assignor, confirming the grant of security in such Mark
to the Collateral Agent hereunder, the form of such security to be substantially
the same as the form hereof or in such other form as may be reasonably
satisfactory to the Collateral Agent.
4.7. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such rights,
title and interest shall immediately vest, in the Collateral Agent for the
benefit of the Secured Creditors, and the Collateral Agent shall be entitled to
exercise the power of attorney referred to in Section 4.1 hereof to execute,
cause to be acknowledged and notarized and record said absolute assignment with
the applicable agency; (ii) take and use or sell the Marks and the goodwill of
such Assignor's business symbolized by the Marks and the right to carry on the
business and use the assets of such Assignor in connection with which the Marks
have been used; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from using the Marks in any manner whatsoever, directly
or indirectly, and, if requested by the Collateral Agent, change such Assignor's
corporate name to eliminate therefrom any use of any Mark and execute such other
and further documents that the Collateral Agent may request to further confirm
this and to transfer ownership of the Marks and registrations and any pending
trademark application in the United States Patent and Trademark Office (or the
equivalent thereof in any foreign jurisdiction) to the Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use (i) all material United States and foreign trade secrets and
proprietary information necessary to operate the business of the Assignor (the
"Trade Secret Rights"), (ii) the Patents listed in Annex E hereto for such
Assignor and that said Patents constitute all the patents and applications for
patents that such Assignor now owns or uses and (iii) the Copyrights listed in
Annex F hereto for such Assignor and that said Copyrights constitutes all
registrations of copyrights and applications for copyright registrations that
such Assignor now owns or uses. Each Assignor further warrants that it has no
knowledge of any third party claim that any aspect of such Assignor's present or
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contemplated business operations infringes or will infringe any patent or any
copyright or such Assignor has misappropriated any trade secret or proprietary
information, except those claims which in the aggregate could not be reasonably
expected to have a Material Adverse Effect. Each Assignor represents and
warrants that upon the recordation of a Grant of Security Interest in United
States Trademarks and Patents in the form of Annex G hereto in the United States
Patent and Trademark Office and the recordation of a Grant of Security Interest
in United States Copyrights in the form of Annex H hereto in the United States
Copyright Office, together with filings on Form UCC-1 pursuant to this
Agreement, all filings, registrations and recordings necessary or appropriate to
perfect the security interest granted to the Collateral Agent in the United
States Patents and United States Copyrights covered by this Agreement under
federal law will have been accomplished. Each Assignor agrees to execute such a
Grant of Security Interest in United States Trademarks and Patents covering all
right, title and interest in each United States Patent of such Assignor and to
record the same, and to execute such a Grant of Security Interest in United
States Copyrights covering all right, title and interest in each United States
Copyright of such Assignor and to record the same. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the continuance of any Event of Default, any document
which may be required by the United States Patent and Trademark Office (or the
equivalent thereof in any foreign jurisdiction) or the United States Copyright
Office (or the equivalent thereof in any foreign jurisdiction) in order to
effect an absolute assignment of all right, title and interest in each Patent
and Copyright, and to record the same.
5.2. Licenses and Assignments. Except as otherwise permitted by the
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any material right under any Patent or Copyright absent prior written
approval of the Collateral Agent.
5.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe any of such
Assignor's rights in and to in any Patent or Copyright or to any claim that such
Assignor's practice of any Patent or use of any Copyright violates any property
right of a third party, or with respect to any misappropriation of any Trade
Secret Right or any claim that such Assignor's practice of any Trade Secret
Right violates any property right of a third party. Each Assignor further
agrees, absent direction of the Collateral Agent to the contrary, diligently to
prosecute any Person infringing any Patent or Copyright or any Person
misappropriating any Trade Secret Right in accordance with commercially
reasonable business practices.
5.4. Maintenance of Patents. At its own expense, each Assignor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C. (S)
41 (or the equivalent thereof in any foreign jurisdiction) to maintain in force
rights under each Patent, absent prior written consent of the Collateral Agent;
provided, that, to the extent permitted by the Credit Agreement, no Assignor
shall be obligated to maintain any Patent in the event such Assignor determines,
in its reasonable business judgment, that the maintenance of such Patent is no
longer necessary or desirable in the conduct of its business.
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5.5. Prosecution of Patent Application. At its own expense, each
Assignor shall diligently prosecute all applications for Patents listed in Annex
E hereto for such Assignor and shall not abandon any such application prior to
exhaustion of all administrative and judicial remedies, absent written consent
of the Collateral Agent; provided, that, to the extent permitted by the Credit
Agreement, no Assignor shall be obligated to prosecute any application in the
event such Assignor determines, in its reasonable business judgment, that the
prosecuting of such application is no longer necessary or desirable in the
conduct of its business.
5.6. Other Patents and Copyrights. Within 30 days of the acquisition
or issuance of a Patent, registration of a Copyright, or acquisition of a
registered Copyright, or of filing of an application for a Patent or
registration of Copyright, the relevant Assignor shall deliver to the Collateral
Agent a copy of said Copyright or certificate or registration of, or application
therefor, said Patents, as the case may be, with an assignment for security as
to such Patent or Copyright, as the case may be, to the Collateral Agent and at
the expense of such Assignor, confirming the assignment for security, the form
of such assignment for security to be substantially the same as the form hereof
or in such other form as may be reasonably satisfactory to the Collateral Agent.
5.7. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such right,
title, and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 hereof to
execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents and Copyrights; and (iii) direct such Assignor to refrain, in which
event such Assignor shall refrain, from practicing the Patents and using the
Copyrights directly or indirectly, and such Assignor shall execute such other
and further documents as the Collateral Agent may request further to confirm
this and to transfer ownership of the Patents and Copyrights to the Collateral
Agent for the benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Each Assignor will
do nothing to impair the rights of the Collateral Agent in the Collateral except
to the extent such impairment shall be waived in accordance with the terms of
Section 10.2 hereof. Each Assignor will at all times keep its Inventory and
Equipment insured in favor of the Collateral Agent, at such Assignor's own
expense to the extent and in the manner provided in the Credit Agreement; all
policies or certificates with respect to such insurance (and any other insurance
maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's
reasonable satisfaction for the benefit of the Collateral Agent (including,
without limitation, by naming the Collateral Agent as additional insured and
loss payee) and (ii) shall state that such insurance policies shall not be
cancelled or revised without 30 days' prior written notice thereof (or 10 days
prior written notice
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in the case of nonpayment of premium) by the insurer to the Collateral Agent;
and certified copies of such policies or certificates shall be deposited with
the Collateral Agent. If any Assignor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if any Assignor shall
fail to so endorse and deposit all policies or certificates with respect
thereto, the Collateral Agent shall have the right (but shall be under no
obligation) to procure such insurance and such Assignor agrees to promptly
reimburse the Collateral Agent for all costs and expenses of procuring such
insurance. Except as otherwise permitted to be retained by the relevant Assignor
pursuant to the Credit Agreement, the Collateral Agent shall, at the time such
proceeds of such insurance are distributed to the Secured Creditors, apply such
proceeds in accordance with Section 7.4 hereof. Each Assignor assumes all
liability and responsibility in connection with the Collateral acquired by it
and the liability of such Assignor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to such
Assignor.
6.2. Warehouse Receipts Non-Negotiable. Each Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law) or, if any warehouse receipt or any receipt in the
nature of a warehouse receipt is "negotiable" (as such term is used in Section
7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law) then the respective Assignor shall promptly take
all action as may be required under the relevant jurisdiction to grant a
perfected security interest in such Collateral to the Collateral Agent for the
benefit of the Secured Creditors.
6.3. Further Actions. (a) Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
(b) Each Assignor hereby agrees that it will from time to time, at its
own expense and at the request of the Collateral Agent or the Required Lenders,
take all actions (including making all appropriate filings) as may be necessary
or in the reasonable opinion of the Collateral Agent desirable to perfect (and
maintain the perfection of) any security interest in any material foreign Mark,
Patent and/or Copyright, and in connection therewith shall deliver one or more
opinions of foreign counsel confirming the validity and perfection of such
foreign Marks, Patents and/or Copyrights.
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6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form reasonably
acceptable to the Collateral Agent, as the Collateral Agent may from time to
time reasonably request or as are necessary or desirable in the opinion of the
Collateral Agent to establish and maintain a valid, enforceable, first priority
perfected security interest in the Collateral as provided herein and the other
rights and security contemplated hereby all in accordance with the Uniform
Commercial Code as enacted in any and all relevant jurisdictions or any other
relevant law. Each Assignor will pay any applicable filing fees, recordation
taxes and related expenses relating to its Collateral. Each Assignor hereby
authorizes the Collateral Agent to file any such financing statements without
the signature of such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent;
(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the Collateral
or any part thereof in accordance with Section 7.2 hereof, or direct the
relevant Assignor to sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof, and, in each case, take possession of the
proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral Agent,
in which event such Assignor shall at its own expense:
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(x) forthwith cause the same to be moved to the place or places
so designated by the Collateral Agent and there delivered to the
Collateral Agent;
(y) store and keep any Collateral so delivered to the Collateral
Agent at such place or places pending further action by the Collateral
Agent as provided in Section 7.2 hereof; and
(z) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be reasonably necessary
to protect the same and to preserve and maintain them in good
condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for such
term and on such conditions and in such manner as the Collateral Agent
shall in its sole judgment determine (taking into account such provisions
as may be necessary to protect and preserve such Marks, Patents or
Copyrights);
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Administrative Agent or the Collateral Agent, in each case acting upon
the instructions of the Required Lenders (or, after the date on which all Loan
Document Obligations have been paid in full, the holders of at least the
majority of the outstanding Other Obligations) and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent or the Collateral Agent or the holders of at least a
majority of the outstanding Other Obligations, as the case may be, for the
benefit of the Secured Creditors upon the terms of this Agreement.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other
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consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days' written
notice to the relevant Assignor specifying the time and place of such sale and,
in the absence of applicable requirements of law, shall be by public auction
(which may, at the Collateral Agent's option, be subject to reserve), after
publication of notice of such auction not less than 10 days prior thereto in two
newspapers in general circulation in the City of New York. To the extent
permitted by any such requirement of law, the Collateral Agent may bid for and
become the purchaser of the Collateral or any item thereof, offered for sale in
accordance with this Section without accountability to the relevant Assignor.
If, under mandatory requirements of applicable law, the Collateral Agent shall
be required to make disposition of the Collateral within a period of time which
does not permit the giving of notice to the relevant Assignor as hereinabove
specified, the Collateral Agent need give such Assignor only such notice of
disposition as shall be reasonably practicable in view of such mandatory
requirements of applicable law.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and each Assignor hereby further waives, to the extent
permitted by law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement, any Mortgage or any
Additional Security Document
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requires proceeds of collateral under such Collateral Documents to be applied in
accordance with the provisions of this Agreement, the Pledgee or Mortgage under
such other Collateral Document) upon any sale or other disposition of the
Collateral, together with all other moneys received by the Collateral Agent
hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (iii) and (iv) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors as provided in Section
7.4(c) hereof with each Secured Creditor receiving an amount equal to its
outstanding Obligations or, if the proceeds are insufficient to pay in full
all such Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Agreement pursuant to Section 10.8 hereof, to the
relevant Assignor or, to the extent directed by such Assignor or a court of
competent jurisdiction, to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement, "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Obligations and the
denominator of which is the then outstanding amount of all Obligations.
(c) All payments required to be made to the Lender Creditors
hereunder shall be made to the Administrative Agent under the Credit Agreement
for the account of the Lender Creditors and all payments required to be made to
the Other Creditors hereunder shall be made directly to the respective Other
Creditor.
(d) For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Other Creditors for
a determination (which the Administrative Agent, each Other Creditor and the
Secured Creditors agree (or shall agree) to provide upon request of the
Collateral Agent) of the outstanding Obligations owed to the Lender Creditors or
the Other Creditors, as the case may be. Unless it has actual knowledge
(including by way of written notice from a Lender Creditor or an Other Creditor)
to the contrary, the Administrative Agent under the Credit Agreement, in
furnishing information pursuant to the preceding sentence, and the Collateral
Agent, in acting hereunder, shall be entitled to assume that (x) no Loan
Document Obligations other than principal, interest and regularly accruing fees
are owing to any Lender Creditor and (y) no Interest Rate Protection Agreement
or Other Hedging Agreement, or Other Obligations in respect thereof, are in
existence.
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(e) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the aggregate amount of the sums referred to in
clause (a) of this Section 7.4 with respect to the relevant Assignor.
7.5. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or Other Hedging Agreements, the other Loan
Documents or now or hereafter existing at law, in equity or by statute and each
and every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Collateral Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on any Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 8.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the
<PAGE>
Page 18
Indemnitees in any way relating to or arising out of this Agreement, any
Interest Rate Protection Agreement or Other Hedging Agreement, any other Loan
Document or any other document executed in connection herewith or therewith or
in any other way connected with the administration of the transactions
contemplated hereby or thereby or the enforcement of any of the terms of, or the
preservation of any rights under any thereof, or in any way relating to or
arising out of the manufacture, ownership, ordering, purchase, delivery,
control, acceptance, lease, financing, possession, operation, condition, sale,
return or other disposition, or use of the Collateral (including, without
limitation, latent or other defects, whether or not discoverable), the violation
of the laws of any country, state or other governmental body or unit, any tort
(including, without limitation, claims arising or imposed under the doctrine of
strict liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or property damage), or contract claim; provided
that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for
losses, damages or liabilities to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. Each Assignor agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation,
damage, injury, penalty, claim, demand, action, suit or judgment, the relevant
Assignor shall assume full responsibility for the defense thereof. Each
Indemnitee agrees to use its best efforts to promptly notify the relevant
Assignor of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, any Interest Rate
Protection Agreement or Other Hedging Agreement, any other Loan Document or in
any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement, any Interest Rate Protection Agreement or Other Hedging
Agreement or any other Loan Document.
(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
<PAGE>
Page 19
8.2. Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
promissory notes issued under the Credit Agreement, the termination of all
Interest Rate Protection Agreements or Other Hedging Agreements and the payment
of all other Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Administrative Agent" shall have the meaning provided in the recitals
to this Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower" shall have the meaning provided in the recitals to this
Agreement.
"Cash Collateral Account" shall mean a cash collateral account
maintained with, and in the sole dominion and control of, the Collateral Agent
for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, any Interest Rate
Protection Agreements or Other Hedging Agreements and any partnership
agreements, joint venture agreements or limited liability agreements).
<PAGE>
Page 20
"Copyrights" shall mean any United States or foreign copyright owned
by any Assignor, including any registrations of any Copyrights, in the United
States Copyright Office or the equivalent thereof in any foreign country, as
well as any application for a United States or foreign copyright registration
now or hereafter made with the United States Copyright Office or the equivalent
thereof in any foreign country by any Assignor, other than those countries
outside the United States where the grant of a security interest would
invalidate such Copyrights.
"Credit Agreement" shall have the meaning provided in the recitals to
this Agreement.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, fixtures and
vehicles now or hereafter owned by any Assignor and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York (and
shall, in any event, include all partnership interests, limited liability
company interests and membership interests).
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Holdings" shall have the meaning provided in the recitals to this
Agreement.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in
<PAGE>
Page 21
manufacturing, processing, packaging or shipping same; in all stages of
production -- from raw materials through work-in-process to finished goods --
and all products and proceeds of whatever sort and wherever located and any
portion thereof which may be returned, rejected, reclaimed or repossessed by the
Collateral Agent from any Assignor's customers, and shall specifically include
all "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of New York, now or hereafter owned by
any Assignor.
"Investment Property" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Lender Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Lenders" shall have the meaning provided in the recitals to this
Agreement.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Loan Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Marks" shall mean all right, title and interest in and to any United
States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any Assignor, including any registration of any trademarks
and service marks in the United States Patent and Trademark Office, or the
equivalent thereof in any foreign country, other than those countries outside
the United States, where the grant of a security interest would invalidate such
trademarks, service marks and trade names, and any trade dress including logos
and/or designs used by any Assignor in the United States or any foreign country.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, whether now existing or hereafter incurred under, arising out of or in
connection with any Loan Document to which such Assignor is a party and the due
performance and compliance by each Assignor with the terms of each such Loan
Document (all such obligations and liabilities under this clause (i), except to
the extent consisting of obligations or indebtedness with respect to Interest
Rate Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Loan Document Obligations"); (ii) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
of each Assignor now existing or hereafter incurred under, arising out of or in
connection with any Interest Rate Protection Agreement or Other Hedging
Agreement including, in the case of the Assignors other than the Borrower, all
obligations of such Assignor under Article X of the Credit Agreement or under
the Subsidiary Guaranty, as the case may be, in respect of Interest Rate
Protection Agreements or Other
<PAGE>
Page 22
Hedging Agreements (all such obligations and liabilities under this clause (ii)
being herein collectively called the "Other Obligations"); (iii) any and all
sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities of each Assignor referred to in clauses (i) and (ii), after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs; and (v) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Section 8.1 of this
Agreement.
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent to which any
Assignor now or hereafter has title and any divisions or continuations thereof,
as well as any application for a United States or foreign patent now or
hereafter made by any Assignor, except those patents or patent applications in
those countries outside the United States where the granting of a security
interest in such patents is not permissible under the laws of that country.
"Permits" shall mean, to the extent permitted to be assigned by the
terms thereof or by applicable law, all licenses, permits, rights, orders,
variances, franchises or authorizations of or from any governmental authority or
agency.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other
<PAGE>
Page 23
evidence of indebtedness or security, together with (a) all security pledged,
assigned, hypothecated or granted to or held by such Assignor to secure the
foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Requisite Creditors" shall have the meaning provided in Section 10.2
of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8 of
this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
(a) if to any Assignor, at:
c/o Globe Manufacturing Corp.
456 Bedford Street
Fall River, MA 02720
Attention: Lawrence Walsh
Telephone No.: (508) 674-3588
Telecopier No.: (508) 679-9458
(b) if to the Collateral Agent, at:
<PAGE>
Page 24
Bank of America National Trust and Savings Association
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Agency Management #10831
Dietmar Schiel, Vice President
Telephone No.: (415) 436-2769
Facsimile No.: (415) 436-3425;
(c) if to any Lender Creditor (other than the Collateral Agent), at
such address as such Lender Creditor shall have specified in the Credit
Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly affected thereby and the
Collateral Agent (with the consent of (x) either the Required Lenders (or, to
the extent required by Section 12.01 of the Credit Agreement, all of the
Lenders) at all times prior to the time on which all Loan Document Obligations
have been paid in full or (y) the holders of at least a majority of the
outstanding Other Obligations at all times after the time on which all Loan
Document Obligations have been paid in full); provided, that any change, waiver,
modification or variance affecting the rights and benefits of a single Class of
Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors of such Class of
Secured Creditors. For the purpose of this Agreement the term "Class" shall
mean each class of Secured Creditors, i.e., whether (x) the Lender Creditors as
holders of the Loan Document Obligations or (y) the Other Creditors as the
holders of the Other Obligations. For the purpose of this Agreement, the term
"Requisite Creditors" of any Class shall mean each of (x) with respect to the
Loan Document Obligations, the Required Lenders and (y) with respect to the
Other Obligations, the holders of at least a majority of all obligations
outstanding from time to time under the Interest Rate Protection Agreements or
Other Hedging Agreements.
10.3. Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Loan Document or any
Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any
amendment to or modification of any Loan Document or any Interest Rate
Protection Agreement or Other Hedging Agreement or any security for any of the
Obligations; whether or not any Assignor shall have notice or knowledge of any
of the foregoing.
<PAGE>
Page 25
10.4. Successors and Assigns. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and its successors and assigns; provided, that no Assignor
may transfer or assign any or all of its rights or obligations hereunder without
the prior written consent of the Collateral Agent. All agreements, statements,
representations and warranties made by each Assignor herein or in any
certificate or other instrument delivered by such Assignor or on its behalf
under this Agreement shall be considered to have been relied upon by the Secured
Creditors and shall survive the execution and delivery of this Agreement, the
other Loan Documents and the Interest Rate Protection Agreements and Other
Hedging Agreements regardless of any investigation made by the Secured Creditors
or on their behalf.
10.5. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
10.7. Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of each Assignor under or with
respect to any Collateral.
10.8. Termination; Release. (a) After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Aggregate
Commitment and all Interest Rate Protection Agreements and Other Hedging
Agreements have been terminated, no promissory note or Letter of Credit under
the Credit Agreement is outstanding (other than Letters of Credit, together with
all fees that have accrued and will accrue thereon through the stated
termination date of such Letters of Credit, which have been supported in a
manner satisfactory to the Issuing Lender in its sole and absolute discretion)
and all other Obligations (other than any indemnities described in Section 8.1
hereof and in Section 12.05 of the Credit Agreement which are not then due and
payable) have been paid in full.
<PAGE>
Page 26
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Lenders (or all the Lenders if required by Section 12.01 of the Credit
Agreement), the Collateral Agent, at the request and expense of such Assignor,
will duly release from the security interest created hereby and assign, transfer
and deliver to such Assignor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in the possession of the Collateral Agent and has not
theretofore been released pursuant to this Agreement.
(c) At any time that the respective Assignor desires that Collateral
be released as provided in the foregoing Section 10.8(a) or (b), it shall
deliver to the Collateral Agent a certificate signed by a Responsible Officer of
such Assignor stating that the release of the respective Collateral is permitted
pursuant to Section 10.8(a) or (b) hereof.
10.9. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Collateral Agent.
10.10. The Collateral Agent. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement and as provided in the Uniform
Commercial Code in the State of New York. The Collateral Agent shall act
hereunder on the terms and conditions set forth in Article XI of the Credit
Agreement.
10.11. Additional Assignors. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Sections 7.12 and/or 8.15 of the
Credit Agreement shall automatically become an Assignor hereunder by executing a
counterpart hereof and delivering the same to the Collateral Agent.
* * *
<PAGE>
Page 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
GLOBE HOLDINGS, INC.,
as an Assignor
By: /s/ T.A. Rodgers III
--------------------
Title: President and Chief Executive Officer
GLOBE MANUFACTURING CORP.,
as an Assignor
By: /s/ T.A Rodgers III
-------------------
Title: President and Chief Executive Officer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION,
as Collateral Agent
By: /s/ Dietmar Schiel
------------------
Title: Vice President
<PAGE>
ANNEX A
to
SECURITY AGREEMENT
------------------
SCHEDULE OF CHIEF EXECUTIVE OFFICES
-----------------------------------
AND OTHER RECORD LOCATIONS
--------------------------
Annex A lists the offices and record locations of Globe Holdings, Inc. and
Globe Manufacturing Corp.
<PAGE>
ANNEX B
to
SECURITY AGREEMENT
------------------
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
---------------------------------------------
Annex B lists inventory and equipment locations.
<PAGE>
ANNEX C
to
SECURITY AGREEMENT
------------------
TRADE AND FICTITIOUS NAMES
--------------------------
Annex C lists the trade names for Globe Holdings, Inc. and Globe Manufacturing
Corp.
<PAGE>
ANNEX D
to
SECURITY AGREEMENT
------------------
LIST OF MARKS
-------------
Annex D lists registered trademarks and trademark applications.
<PAGE>
ANNEX E
to
SECURITY AGREEMENT
------------------
LIST OF PATENTS AND APPLICATIONS
--------------------------------
Annex E lists patents and patent applications.
<PAGE>
ANNEX F
to
SECURITY AGREEMENT
------------------
LIST OF COPYRIGHTS AND APPLICATIONS
-----------------------------------
None.
<PAGE>
ANNEX G TO SECURITY AGREEMENT
-------
GRANT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
---------------------------------------
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which
are hereby acknowledged, [Name of Grantor], a ____________ (the Grantor") with
principal offices at _______________________________, hereby grants to Bank of
America National Trust and Savings Association, as Collateral Agent, with
principal offices at 1455 Market Street, 12th Floor, San Francisco, CA 94103
(the "Grantee"), a security interest in (i) all of the Grantor's right, title
and interest in and to the United States trademarks, trademark registrations and
trademark applications (the "Marks") set forth on Schedule A attached hereto,
(ii) all of the Grantor's rights, title and interest in and to the United States
patents (the "Patents") set forth on Schedule B attached hereto, in each case
together with (iii) all Proceeds (as such term is defined in the Security
Agreement referred to below) and products of the Marks and Patents, (iv) the
goodwill of the businesses with which the Marks are associated and (v) all
causes of action arising prior to or after the date hereof for infringement of
any of the Marks and Patents or unfair competition regarding the same.
THIS AGREEMENT is made to secure the satisfactory performance and
payment of all the Obligations of the Grantor, as such term is defined in the
Security Agreement among Grantor, the other assignors from time to time party
thereto and the Grantee, dated as of July 31, 1998 (as amended from time to
time, the "Security Agreement"). Upon the occurrence of the Termination Date
(as defined in the Security Agreement), the Grantee shall, upon such
satisfaction, execute, acknowledge, and deliver to the Grantor an instrument in
writing releasing the security interest in the Marks and Patents acquired under
this Agreement.
<PAGE>
Annex G
Page 2
This Agreement has been granted in conjunction with the security
interest granted to the Grantee under the Security Agreement. The rights and
remedies of the Grantee with respect to the security interest granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Agreement are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the ___ day of ____________.
[NAME OF GRANTOR],
as Grantor
By_____________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION,
as Collateral Agent and Grantee
By_______________________________________
Name:
Title:
<PAGE>
Annex G
Page 3
STATE OF )
) ss.:
COUNTY OF )
On this ____ day of ______________, _____, before me personally came
_________________ who, being by me duly sworn, did state as follows: that [s]he
is _______________ of [Name of Grantor], that [s]he is authorized to execute the
foregoing Agreement on behalf of said corporation and that [s]he did so by
authority of the Board of Directors of said corporation.
___________________________
Notary Public
<PAGE>
Annex G
Page 4
STATE OF )
) ss.:
COUNTY OF )
On this ___ day of _____________, _____, before me personally came
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bank of America National Trust and Savings
Association, that [s]he is authorized to execute the foregoing Agreement on
behalf of said corporation and that [s]he did so by authority of the Board of
Directors of said corporation.
___________________________
Notary Public
<PAGE>
Annex G
Page 5
SCHEDULE A
----------
MARK REG. NO. REG. DATE
- ---- -------- ---------
<PAGE>
Annex G
Page 6
SCHEDULE B
----------
PATENT PATENT NO. ISSUE DATE
- ------ ---------- ----------
<PAGE>
GRANT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
---------------------------
WHEREAS, [Name of Grantor], a _____________ ___________ (the
"Grantor"), having its chief executive office at
______________________________________________ is the owner of all right, title
and interest in and to the United States copyrights and associated United States
copyright registrations and applications for registration set forth in Schedule
A attached hereto;
WHEREAS, Bank of America National Trust and Savings Association, as
Collateral Agent, having its principal offices at 1455 Market Street, 12th
Floor, San Francisco, CA 94103 (the "Grantee"), desires to acquire a security
interest in said copyrights and copyright registrations and applications
therefor; and
WHEREAS, the Grantor is willing to grant to the Grantee a security
interest in the copyrights and copyright registrations and applications therefor
described above;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and subject to the terms and conditions of the
Security Agreement, dated as of July 31, 1998, made by the Grantor, the other
assignors from time to time party thereto and the Grantee (as amended from time
to time, the "Security Agreement"), the Grantor hereby grants to the Grantee a
security interest in the copyrights and copyright registrations and applications
therefor set forth in Schedule A attached hereto.
This Agreement has been granted in conjunction with the security
interest granted to the Grantee under the Security Agreement. The rights and
remedies of the Grantee with respect to the security interest granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Agreement are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
Executed at ________, ________, the ___ day of _____ _____.
[NAME OF GRANTOR],
as Grantor
By_____________________________
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Collateral Agent and Grantee
By______________________________________
Name:
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On this ___ day of _____ ______, before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
___________________ of [Name of Grantor], that [s]he is authorized to execute
the foregoing Agreement on behalf of said corporation and that [s]he did so by
authority of the Board of Directors of said corporation.
___________________________
Notary Public
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On this ___ day of ______, _______, before me personally came
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bank of America National Trust and Savings
Association, that [s]he is authorized to execute the foregoing Agreement on
behalf of said corporation and that [s]he did so by authority of the Board of
Directors of said corporation.
___________________________
Notary Public
<PAGE>
SCHEDULE A
----------
U.S. COPYRIGHTS
---------------
REGISTRATION PUBLICATION COPYRIGHT
NUMBERS DATE TITLE
- ------------ ----------- ---------
<PAGE>
Exhibit 10.12
GLOBE HOLDINGS, INC.
Amended and Restated
Performance Option Agreement
This Amended and Restated Performance Option Agreement (this
"Agreement") amends and restates the Globe Manufacturing Co.
Performance Option Agreement under the Management Incentive Plan by
and between the Optionee (as hereinafter defined) and the Company (as
hereinafter defined), which option agreement was effective immediately
prior to the consummation of the merger (the "Merger") contemplated by
the Agreement and Plan of Merger dated June 23, 1998 by and between
the Company and Globe Acquisition Company, as amended. Such option
agreement provided for the right to purchase 2246.5 shares of Class C
Common Stock of the Company. Effective upon the Merger, each share of
Class C Common Stock represented the right to receive a Unit (as
hereinafter defined).
1. Grant of Option. Globe Holdings, Inc,. a Massachusetts corporation
formerly known as Globe Manufacturing Co. (the "Company"), hereby grants to
_____________ (the "Optionee") an option (the "Option") to purchase an aggregate
of 2,246.5 Units (as defined below) at a price of thirty dollars ($30.00) per
Unit, purchasable as set forth in, and subject to the terms and conditions of,
the Globe Manufacturing Co. Management Incentive Plan (the "Plan"), the
Executive Securities Agreement of even date herewith by and between the Optionee
and the Company (the "Executive Securities Agreement") and this Option. Except
where the context otherwise requires, the term "Company" shall include the
parent and all present and future subsidiaries of the Company as defined in
Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or
replaced from time to time (the "Code"). For purposes hereof, a Unit shall
consist of ten (10) shares of the Company's Class A Common Stock, par value $.01
per share ("Class A Common Stock:"), and .13354106 shares of the Company's Class
A Preferred Stock, par value $.01 per share ("Preferred Stock").
2. Non-Qualified Stock Option. This Option is not intended to qualify as
an incentive stock option under Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
3.1 Vesting Schedule. Except as otherwise provided in this Agreement
or the Executive Securities Agreement, this Option may be exercised at any time
and from time to time after the date hereof as to part or all of the Units
hereunder prior to termination of this Option as provided herein.
3.2 Exercise Procedure. Subject to the conditions set forth in this
Agreement, this Option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company specifying the number of
Units to be purchased and the purchase price to be paid therefor
1
<PAGE>
and accompanied by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase fewer than
the total number of Units covered hereby, provided that no partial exercise of
this Option may be for fewer than ten Units. This Option shall expire and shall
not be exercisable after July 31, 2008.
3.3 Continuous Relationship with the Company Required. Except as
otherwise provided in this Section 3 or as otherwise provided in the Executive
Securities Agreement, this Option may not be exercised unless the Optionee, at
the time he or she exercises this Option, is, and has been at all times since
the date of grant of this Option, an employee or officer of the Company (an
"Eligible Optionee").
4. Payment of Purchase Price.
4.1 Method of Payment. Payment of the purchase price for Units
purchased upon exercise of this Option shall be made by (i) delivery to the
Company of cash or a check to the order of the Company in an amount equal to the
purchase price of such Units, (ii) subject to the consent of the Company, by
delivery to the Company of shares of common stock of the Company then owned by
the Optionee having a Fair Market Value (as defined in the Executive Securities
Agreement) equal in amount to the purchase price of such Units, (iii) by any
other means which the Board of Directors determines are consistent with the
purpose of the Plan and applicable laws and regulations (including, without
limitation, Regulation T promulgated by the Federal Reserve Board), or (iv) by
any combination of such methods of payment.
4.2 Delivery of Shares Tendered in Payment of Purchase Price. If the
Company permits the Optionee to exercise options by delivery of shares of common
stock of the Company, the certificate or certificates representing the shares of
common stock of the Company to be delivered shall be duly executed in blank by
the Optionee or shall be accompanied by a stock power duly executed in blank
suitable for purposes of transferring such shares to the Company. Fractional
shares of common stock of the Company will not be accepted in payment of the
purchase price of shares acquired upon exercise of this Option.
4.3 Restrictions Upon Use of Option Stock. Notwithstanding the
foregoing, no shares of common stock of the Company may be tendered in payment
of the purchase price of Units purchased upon exercise of this Option if the
shares to be so tendered were acquired within twelve (12) months before the date
of such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
5. Delivery of Shares; Compliance With Securities Law, Etc.
5.1 General. The Company shall, upon payment of the option price for
the number of Units purchased and paid for, make prompt delivery of the shares
comprising such Units to the Optionee, provided that if any law or regulation
requires the Company to take any action with respect to such shares before the
issuance thereof, then the date of delivery of such securities shall be extended
for the period necessary to complete such action.
2
<PAGE>
5.2 Listing, Qualification, Etc. This Option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares comprising the Units
subject hereto upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any other condition
is necessary as a condition of, or in connection with, the issuance or purchase
of Units hereunder, this Option may not be exercised, in whole or in part,
unless such listing, registration, qualification, consent or approval,
disclosure, or satisfaction of such other condition shall have been effected or
obtained on terms acceptable to the Board of Directors. Nothing herein shall be
deemed to require the Company to apply for, effect or obtain such listing,
registration, qualification, or disclosure or satisfy such other condition.
6. Legend on Certificates. Each outstanding certificate representing
shares comprising Units that are subject to this Agreement shall bear legends
substantially in the following form:
These securities have not been registered under the Securities Act of
1933. They may not be offered or transferred by sale, assignment,
pledge or otherwise unless (i) a registration statement for the
securities under the Securities Act of 1933 is in effect or (ii) the
corporation has received an opinion of counsel, which opinion is
satisfactory to the corporation, to the effect that such registration
is not required under the Securities Act of 1933.
The sale, assignment, pledge, encumbrance or other transfer of the
securities represented by this certificate is subject to the
provisions of an executive securities agreement by and between the
corporation and the holder of such securities, a copy of each of which
is on file at the principal executive office of the corporation.
7. No Special Employment or Similar Rights. Nothing contained in the
Plan or this Option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment or other
relationship of the Optionee with the Company for the period within which this
Option may be exercised.
8. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares comprising Units which may be purchased
by exercise of this Option (including, without limitation, any rights to receive
dividends or non-cash distributions with respect to such shares) unless and
until a certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
3
<PAGE>
9. Adjustment Provisions.
9.1 General. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, conversion or other similar transaction, (i) the
outstanding shares of Class A Common Stock or Preferred Stock are increased or
decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Class A Common Stock, Preferred Stock or other
securities, the Optionee shall, with respect to this Option or any unexercised
portion hereof, be entitled to the rights and benefits, and be subject to the
limitations, set forth in Section 15(a) of the Plan.
9.2 Board Authority to Make Adjustments. Any adjustments under this
Section 9 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive.
10. Subject to Terms of Executive Securities Agreement. This Option, the
shares of Class A Common Stock and Preferred Stock issuable pursuant to this
Agreement and the rights of the Optionee hereunder are subject to the terms and
conditions of the Executive Securities Agreement. In the event of any conflict
between the terms of the Executive Securities Agreement, on the one hand, and
the Plan or this Agreement, on the other hand, the terms of the Executive
Securities Agreement shall control.
11. Withholding Taxes. The Company's obligation to deliver shares upon
the exercise of this Option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
12. Miscellaneous.
12.1 Except as provided herein, this Option may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Optionee.
12.2 All notices under this Option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.
12.3 This Option shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
Date of Grant: July 31, 1998 GLOBE HOLDINGS, INC.
By:__________________________
Title:_______________________
Address: 456 Bedford Street
Fall River, MA 02720
4
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's Management Incentive Plan.
OPTIONEE
_______________________________
ADDRESS: _____________________
_____________________
5
<PAGE>
Exhibit 10.13
GLOBE MANUFACTURING CO.
MANAGEMENT INCENTIVE PLAN
(Adopted April 1, 1993)
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Globe Manufacturing
Co. (the "Company") and its stockholders the benefits arising from capital stock
ownership by key employees and officers of the Company and its parent and
subsidiary corporations who are expected to contribute to the Company's future
growth and success. Except where the context otherwise requires, the term
"Company" shall include the parent and all present and future subsidiaries of
the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended or replaced from time to time (the "Code"). Those
provisions of the Plan which make express reference to Section 422 of the Code
shall apply only to Incentive Stock Options (as that term is defined in the
Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-qualified options which are not intended to meet the requirements of
Section 422 of the Code. Of the options to be granted by the Board of
Directors, it is anticipated that approximately one half will be service options
which will become exercisable based on the length of service to the Company of
the optionee ("Service Options") and approximately one half will be performance
options which will become exercisable based on the financial performance of the
Company ("Performance Options"). However, the Board of Directors of the Company
shall be authorized to grant options on other terms and conditions in its
discretion.
(b) Administration. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors
may in its sole discretion grant options to purchase shares of the Company's
Class B Common Stock, par value $.01 per share ("Common Stock") and issue shares
upon exercise of such options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to construe the
respective option agreements and the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
the respective option agreements, which need not be identical, and to make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The Board of Directors may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any option agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect and it shall be the sole and final judge
of such expediency. No director or person acting pursuant to authority
delegated by the Board of Directors shall be liable for any action or
determination made in good faith. The Board of Directors may, to
<PAGE>
the full extent permitted by or consistent with applicable laws or regulations
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
3. Eligibility.
Options may be granted to persons who are, at the time of grant, employees
or officers of the Company; provided, that Incentive Stock Options may be
granted only to persons who are eligible to receive such options under Section
422 of the Code. No person shall be granted any Incentive Stock Option under
the Plan who, at the time such option is granted, owns, directly or indirectly,
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company, unless the requirements of Section 11(b) are satisfied.
The attribution of stock ownership provisions of Section 424(d) of the Code, and
any successor provisions thereto, shall be applied in determining the shares of
stock owned by a person for purposes of applying the foregoing percentage
limitation. A person who has been granted an option may, if he or she is
otherwise eligible, be granted an additional option or options if the Board of
Directors shall so determine.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 102,570 shares. Such shares may be authorized and unissued shares or may
be shares issued and thereafter acquired by the Company. If an option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject to such option shall again be
available for subsequent option grants the Plan. If shares issued upon exercise
of an option under the Plan are tendered to the Company in payment of the
exercise price of an option granted under the Plan, such tendered shares shall
again be available for subsequent option grants under the Plan; provided, that
in no event shall total number of shares issued pursuant to the exercise of
Incentive Stock Options under the Plan, on a cumulative basis, exceed the
maximum number of shares authorized for issuance under the Plan.
5. Forms of Option.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Each option agreement
shall specifically state whether the options granted thereby are intended to be
Incentive Stock Options or non-qualified options. Such option agreements may
differ among recipients. Service Options shall be granted pursuant to a Service
Option Agreement substantially in the form attached hereto as Exhibit A and the
Performance Options shall be granted pursuant to a Performance Option Agreement
substantially in the form attached hereto as Exhibit B.
-2-
<PAGE>
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors, provided,
however, that (i) in the case of an Incentive Stock Option, the exercise price
shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b), and (ii) in the case of a non-qualified option, the exercise
price shall not be less than $1.00.
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (ii) by any other means which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board) or (iii) by any combination of such
methods of payment. The fair market value of any shares of the Company's Common
Stock or other non-cash consideration which may be delivered upon exercise of an
option shall be determined by the Board of Directors.
7. Option Period
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, except that (i) in the case of an Incentive
Stock Option, such date shall not be later than ten years after the date on
which the option is granted, (ii) in the case of an Incentive Stock Option
described in Section 11(b), such date shall not be later than five years after
the date on which the option is granted and (iii) in all cases, options shall be
subject to earlier termination as provided in the Plan.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Transferability of Options.
Options granted under the Plan shall be assignable or transferable in
accordance with the provisions of the option agreement covering such grant.
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock
Options, the Board of Directors shall determine the period of time during which
an optionee may exercise an option
-3-
<PAGE>
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Stockholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), provided, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-qualified
option under the Plan;
-4-
<PAGE>
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of Section
22(e) (3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within
the period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in any option agreement covering
options granted under the Plan, including without limitation restrictions on
transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange
for or guaranty loans or to transfer other property to optionees upon exercise
of options, or such other provisions as shall be determined by the Board of
Directors; provided that such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code.
13. General Restrictions
(a) Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
-5-
<PAGE>
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that if, at any time counsel to the Company shall determine that the
listing, registration or qualification of the shares subject to such option upon
any securities exchange or under any state or federal law; or the consent or
approval of any governmental or regulatory body, or that the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of , or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company
to apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
14. Rights as a Stockholder
The holder of an option shall have no rights as a stockholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares.
No adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions
(a) General. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are increased or decreased or are exchanged for a different number of kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to then outstanding options under the
Plan, and/or (z) the price for each share subject to any then outstanding
options under the Plan, without changing the aggregate purchase price as to
which such options remain exercisable, provided that no adjustment shall be made
pursuant to this Section 15 if such adjustment would cause the Plan to fail to
comply with Section 422 of the Code.
(b) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for
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<PAGE>
securities, cash or other property of any other corporation or business entity
or in the event of a liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, may, in its discretion, take any one or more of the following
actions, as to outstanding options: (i) provide that such options shall be
assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), provided that any such options
substituted for Incentive Stock Options shall meet the requirements of Section
425 (a) of the Code, (ii) upon written notice to the optionees, provide that all
unexercised options will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified period following
the date of such notice, (iii) in the event of a merger under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the merger (the "Merger
Price"), make or provide for a cash payment to the optionees equal to the
difference between (A) the Merger Price times the number of shares of Common
Stock subject to such outstanding options (to the extent then exercisable at
prices not in excess of the Merger Price) and (B) the aggregate exercise price
of all outstanding options (to the extent then exercisable at prices not in
excess of the Merger Price) in exchange for the termination of such options and
(iv) provide that all or any outstanding options shall become exercisable in
full immediately prior to such event.
(b) Substitute Options. Subject to the maximum number of shares of Common
Stock issuable under the Plan, the Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, or property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
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<PAGE>
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
stockholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, the Board of
Directors may not effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected, the
Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code.
20. Withholding.
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect
to satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
21. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
canceled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
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<PAGE>
22. Effective date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no further Incentive Stock Options shall be granted. Amendments to the Plan
not requiring stockholder approval shall become effective when adopted by the
Board of Directors; amendments requiring stockholder approval (as provided in
Section 19) shall become effective when adopted by the Board of Directors, but
no Incentive Stock Option granted after the date of such amendment shall become
exercisable (to the extent that such amendment to the Plan was required to
enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this limitation, options
may be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all share available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options granted under the
Plan. Unless sooner terminated in accordance with Section 16, the Plan shall
terminate with respect to options which are not Incentive Stock Options on the
date specified in (ii) above. If the date of termination is determined under
(i) above, then options outstanding on such date shall continue to have force
and effect in accordance with the provisions of the instruments evidencing such
options.
23. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by Board of Directors: April 1, 1993
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<PAGE>
Exhibit A
GLOBE MANUFACTURING CO.
Service Option Agreement
under the
Management Incentive Plan
1. Grant of Option. Globe Manufacturing co., a Massachusetts corporation
(the "Company"), hereby grants to ________________________ (the "Optionee") an
option, pursuant to the Company's Management Incentive Plan (the "Plan"), to
purchase an aggregate of ________ shares of Class B Common Stock, par value $.01
per share ("Common Stock"), of the Company at a purchase price of $1.00 per
share, purchasable as set forth in, and subject to the terms and conditions of,
this option and the Plan. Except where the context otherwise requires, the term
"Company" shall include the parent and all present and future subsidiaries of
the Company as defined in Sections 424(3) and 424(f) of the Internal Revenue
Code of 986, as amended or replaced from time to time (the "Code").
2. Non-Qualified Stock Option. This option is not intended to qualify as
an incentive stock option under Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
3.1 Vesting Schedule. Subject to the last sentence of this Section
3.1 and except as otherwise provided in this Agreement, this option may be
exercised in installments as to not more than the number of shares and during
the respective installment periods set forth in the table below.
<TABLE>
<CAPTION>
Percentage of Shares as to
Exercise Period which Option is Exercisable
--------------- ---------------------------
<S> <C>
Prior to _________________, 1994 -0-
On or after ______________, 1994 20%
But prior to ______________, 1995
On or after ______________, 1995 40%
But prior to ______________, 1996
On or after ______________, 1996 60%
But prior to ______________, 1997
On or after ______________, 1997 80%
But prior to ______________, 1998
On or after ______________, 1998 100%
</TABLE>
The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to
<PAGE>
all shares not so purchased at any time prior to the termination of this option.
Notwithstanding any provision to the contrary herein, this option may be
exercised only if, on the date of exercise of this option, the Fair Value (as
defined in Section 6.5(a) below) per share of Common Stock is equal to or
greater than $60.00 (as appropriately adjusted to reflect the Fair Value of any
dividends or distributions received or to be received by the holders of Common
Stock).
3.2 Exercise Procedure. Subject to the conditions set forth in this
Agreement, this Option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase fewer than
the total number of shares covered hereby, provided that no partial exercise of
this option may be for any fractional share or for fewer than one hundred whole
shares.
3.3 Continuous Relationship with the Company Required. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Optionee, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee or officer of the
Company (an "Eligible Optionee").
3.4 Discharge for Cause. If the Optionee ceases his or her
relationship with the Company because such relationship is terminated by the
Company for "cause" (as defined below), the right to exercise this option shall
terminate immediately upon such cessation. "Cause" may exist upon the
Optionee's (i) continued willful failure to perform the duties of his or her
employment in any material respect, (ii) malfeasance or gross negligence in the
performance of his or her duties with respect to the Company, (iii) conviction
for a felony under the laws of the United States or any state thereof or (iv)
intentional disclosure of confidential information concerning the Company's
business to any individual or entity not entitled to such information, as
determined by the Company, which determination shall be conclusive.
3.5 Retirement from the Company. If the Optionee ceases his or her
relationship with the Company as a result of his or her retirement (as
determined in good faith by the Board of Directors), then, except as provided in
Section 3.8 below, the right to exercise this option shall terminate upon the
earlier of (i) three years after such cessation and (ii) the day the Optionee
ends his or her retirement (as determined in good faith by the Board of
Directors), provided that this option shall be exercisable only to the extent
that the Optionee was entitled to exercise this option on the date of such
cessation.
3.6 Voluntary Termination of Employment. If the Optionee ceases his
or her relationship with the Company because such relationship is voluntarily
terminated by the Optionee other than for retirement (and other than to preclude
the imminent involuntary termination of the relationship by the Company for
cause, as determined in good faith by the Board of Directors, in which case the
Optionee shall be deemed to have been terminated for cause), then, except as
provided in Section 3.8 below, the right to exercise this option shall terminate
three months after
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<PAGE>
such cessation, provided that this option shall be exercisable only to the
extent that the Optionee was entitled to exercise this option on the date of
such cessation.
3.7 Involuntary Termination of Employment. If the Optionee ceases
his or her relationship with the Company because such relationship is terminated
by the Company without cause, then, except as provided in Section 3.8 below, the
right to exercise this option shall terminate one year after such cessation,
provided that this option shall be exercisable only to the extent that the
Optionee was entitled to exercise this option on the date of such cessation.
3.8 Termination Resulting from Death or Disability. If the Optionee
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
while he or she is an Eligible Optionee, this option shall be exercisable,
within the period of three years following the date of death or disability of
the Optionee, by the Optionee or by the person to whom this option is
transferred by will or the laws of descent and distribution, provided that this
option shall be exercisable only to the extent that this option was exercisable
by the Optionee on the date of his or her death or disability. If the Optionee
dies or becomes disabled during any post-termination exercise period, as
described in Sections 3.5, 3.6 or 3.7 above, this option shall be exercisable,
within the period of 60 days following the date of death or disability of the
Optionee or (if longer) for the remainder of such post-termination exercise
period, by the Optionee or by the person to whom this option is transferred by
will or the laws of descent and distribution, provided that this option shall be
exercisable by the Optionee on the date of his or her death or was exercisable
by the Optionee on the date of his or her death or disability. Except as
otherwise indicated by the context, the term "Optionee," as used in this option,
shall be deemed to include the estate of the Optionee or any person who acquires
the right to exercise this option by bequest or inheritance or otherwise by
reason of the death of the Optionee.
4. Payment of Purchase Price.
4.1 Method of Payment. Payment of the purchase price for shares
purchased upon exercise of this option shall be made by (i) delivery to the
Company of cash or a check to the order of the Company in an amount equal to the
purchase price of such shares, (ii) subject to the consent of the Company, by
delivery to the Company of shares of Common Stock of the Company then owned by
the Optionee having a Fair Value (as defined in Section 6.5(a) below) equal in
amount to the purchase price of such shares, (iii) by any other means which the
Board of Directors determines are consistent with the purpose of the Plan and
applicable laws and regulations (including, without limitation, Regulation T
promulgated by the Federal Reserve Board), or (iv) by any combination of such
methods of payment.
4.2 Delivery of Shares Tendered in Payment of Purchase Price. If the
Company permits the Optionee to exercise options by delivery of shares of Common
Stock of the Company, the certificate or certificates representing the shares of
Common Stock of the Company to be delivered shall be duly executed in blank by
the Optionee or shall be accompanied by a stock power duly executed in blank
suitable for purposes of transferring such shares to the Company. Fractional
shares of Company will not be accepted in payment of the purchase price of
shares acquired upon exercise of this option.
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<PAGE>
4.3 Restrictions Upon Use of Option Stock. Notwithstanding the
foregoing, no shares of Common Stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within twelve (12) months before the date
of such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
5. Delivery of Shares: Compliance With Securities law, Etc.
5.1 General. The Company shall, upon payment of the option price for
the number of shares purchased and paid for, make prompt delivery of such shares
to the Optionee, provided that if any law or regulation requires the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.
5.2 Listing, Qualification, Etc. This option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject hereto upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, or that the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
hereunder, this option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure, or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to the Board of Directors. Nothing herein shall be deemed to
require the Company to apply for, effect or obtain such listing, registration,
qualification, or disclosure or satisfy such other condition.
6. Transfer of Shares.
6.1 Restrictions on Transfers; Permitted Transferees.
(a) The Optionee shall not directly or indirectly, offer, sell,
assign, pledge, encumber or otherwise transfer this option or any shares of
Common Stock issued upon exercise of this option (this option and such shares of
Common Stock are hereinafter referred to collectively as the "Shares") without
the prior written consent of the Board of Directors, unless such offer, sale,
assignment, pledge or other transfer (i) is pursuant to the effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") and has been registered under all applicable state securities
or "blue sky" laws or (ii) is pursuant to a transaction complying with Rule 144
promulgated under the Securities Act.
(b) Except in the case of a sale of Shares pursuant to an
effective registration statement under the Securities Act or a sale of Shares
pursuant to a transaction complying with Rule 144 promulgated under the
Securities Act, no Optionee shall sell, assign, pledge, encumber or otherwise
transfer any Shares to any person unless (i) such Shares bear legends as
provided in Section 6.4 and (ii) such transferee shall have executed and
delivered to the Company, as a condition precedent to any acquisition of Shares,
an instrument in form and substance
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<PAGE>
satisfactory to the Company confirming that such transferee takes such Shares
subject to the restrictions set forth in this Agreement and agrees to be bound
by the terms of this Agreement.
(c) None of the restrictions contained in this Agreement with
respect to transfers of Shares (other than those set forth in Section 6.1(a),
6.1(b) and 6.8) shall apply: (i) to any transfer or assignment for consideration
or to any gift by the Optionee to any spouse, child, parent, or grandchild of
the Optionee, or by any of such relatives to the Optionee or any such relatives
to a trust of which there are no principal beneficiaries other than the Option
or one or more of such relatives; (ii) to any gift by the Optionee to a bona
fide charity or foundation approved by the Board of Directors (such approval not
to be unreasonably withheld); (iii) to any transfer to a legal representative in
the event the Optionee becomes mentally incompetent; and (iv) to any transfer by
will or the laws of descent; provided that in each of cases (i) through (iv)
each transferee, donee or distributee (a "Permitted Transferee") agrees to take
subject to and comply with the provisions of this Section 6.1. For purposes
hereof, the Permitted Transferees of the Optionee shall include the Permitted
Transferees of the Optionee's Permitted Transferees.
6.2 Right of First Offer.
(a) Except as provided in Sections 6.1(c), 6.3 and 6.5(b) if the
Optionee desires to sell, assign or otherwise transfer any Shares he or she
shall first give written notice (a "Seller's Notice") to the Company stating the
Optionee's desire to make such transfer, the number of Shares to be transferred
(the "Offered Shares") and the cash price which the Optionee proposes to be paid
for the Offered Shares (the "First Offer Price").
(b) Upon receipt of the Seller's Notice (the "First Offer"), the
Company shall have the irrevocable and exclusive option to purchase up to all of
the Offered Shares at the First Offer Price; provided that the Company shall not
have the right to purchase any of the Offered Shares unless either (i) the
Company purchases all such Offered Shares; or (ii) the Optionee consents to the
purchase of less than all of the Offered Shares. The Company's option under
this Section 6.2(b) shall be exercisable by a written notice to the Optionee,
given within 15 days from the date of the Seller's Notice.
(c) If the Seller's Notice shall be duly given, and if the
Company shall not exercise its option to purchase the Offered Shares at the
First Offer Price or does not purchase all Shares offered by the Optionee, then
the Optionee shall be free for a period of 90 days from the 15th day following
the date of the Seller's Notice to sell the Offered Shares to any third party
transferee at a cash price equal to or greater than the First Offer Price;
provided that such sale complies with the provisions of Section 6.1 of this
Agreement.
(d) If the proposed purchase price of a transferee for the
Offered Shares is less than the First Offer Price, the Optionee shall not sell
or otherwise transfer any of the Offered Shares unless the Optionee shall first
reoffer the Offered Shares at such lesser price to the Company by giving written
notice (the "Reoffer Notice") thereof, stating the Optionee's intention to make
such transfer at such lower price (the "Reoffer Price"). The Company shall then
have the irrevocable and exclusive option to purchase all of the Offered Shares
at the Reoffer Price, exercisable in the same
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<PAGE>
manner as provided in Section 6.2(b). If the Company does not then purchase all
the Offered Shares, such Offered Shares may be sold by the Optionee within 60
days following the 15th day from the date of the Reoffer Notice, at a cash price
equal to or greater than the Reoffer Price; provided that such sale complies
with the provisions of Section 6.1 of this Agreement.
(e) If the Company does not exercise its option to purchase the
Offered Shares at a First Offer Price or at the Reoffer Price, and the Optionee
shall not have sold the Offered Shares to any transferee for any reason before
the expiration of the 60-day period described in Section 6.2(d) in the event of
a Reoffer or, if no Reoffer Notice is given, the 90-day period described in
Section 6.2(c), then the Optionee shall not give a Seller's Notice with respect
to a transaction which would require compliance with this Section 6.2 for a
period of 90 days from the last day of such 60- or 90-day period, as the case
may be.
(f) The closing of all purchases pursuant to the first offer
rights granted under this Section 6.2 shall take place at the principal offices
of the Company at 10 a.m. on the tenth Business Day following the delivery to
the Optionee of all notices exercising such first offer rights with respect to
all of the Offered Shares to be sold by the Optionee unless otherwise mutually
agreed. At such closing, (i) the Optionee shall assign and transfer to the
Company good and valid title to the Shares being purchased by it, by delivery of
the certificates representing the Shares to be sold and transferred, duly
endorsed in blank, with the requisite stock transfer tax stamps attached,
together with such stock powers, certificate, legal opinions and other
instruments of transfer as the Company shall reasonably request; and (ii) the
Company shall pay to the Optionee the purchase price for the Shares being
purchased by it in cash, by delivery of a certified or bank check or by wire
transfer of immediately available funds to such account as the Optionee shall
direct.
6.3 Merger Transactions. Notwithstanding any other provision of this
Agreement to the contrary, the Company may enter into an agreement to
consolidate with or merge with or into any other corporation if such agreement
is duly approved by the Board of Directors and by the requisite vote of the
stockholders in accordance with the Articles of Organization of the Company. In
such event, Section 6.2 of this Agreement shall not be applicable and all Shares
may be transferred pursuant to such merger or consolidation for such
consideration in accordance with the terms thereof.
6.4 Legend on Certificates. Each outstanding certificate
representing Shares that are subject to this Agreement shall bear legends
substantially in the following form:
These securities have not been registered under the
Securities Act of 1933. They may not be offered or
transferred by sale, assignment, pledge or otherwise
unless (i) a registration statement for the securities
under the Securities Act of 1933 is in effect or (ii)
the corporation has received an opinion of counsel, which
opinion is satisfactory to the corporation, to the effect
that such registration is not required under the Securities
Act of 1933.
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<PAGE>
The sale, assignment, pledge, encumbrance or other transfer
of the securities represented by this certificate is subject
to the provisions of an option agreement among the
corporation and the holder of such securities, a copy of
which is on file at the principal executive office of the
corporation.
6.5 Purchase Option on Shares.
(a) In the event the Optionee shall cease to be employed by the
Company or a subsidiary of the Company for any reason, or no reason, with or
without cause, including involuntary termination, death or temporary or
permanent disability (a "Termination"), the Optionee and his or her Permitted
Transferees shall be required to offer all of the Shares owned by the Optionee
and his or her Permitted Transferees to the Company in accordance with the
procedures set forth in Section 6.2, provided, however, that the Company's
option to purchase such shares shall be exercisable by a written notice to the
Seller, given within six (6) months from the date of the Seller's Notice. For
purpose of such offer, the First Offer Price for such Shares shall be the Fair
Value (as defined below) of such Shares as of the date of the Termination of the
Optionee (appropriately adjusted to reflect the Fair Value of any dividends or
distributions received or to be received by the holder of such Shares subsequent
to such date); provided, that if the Optionee's employment is terminated by the
Company for cause, the First Offer Price for such Shares shall be the lower of
the original purchase price paid by the Optionee or his or her Permitted
Transferees to the Company for such Shares (appropriately adjusted to reflect
the Fair Value of all dividends or distributions received or to be received in
respect of such Shares subsequent to the original purchase of such Shares) or
the Fair Value of such Shares as of the date of the Termination of the Optionee
(appropriately adjusted as provided above). The Board of Directors shall make
or obtain a determination of the Fair Value of such Shares no later than thirty
(30) days following the date of the Termination of the Optionee, and the
Seller's Notice with respect to such Shares shall be given as promptly as
practicable following such determination. For purposes of this Agreement, Fair
Value shall have the meaning ascribed to it in the Shareholders' Agreement dated
as of December 22, 1992 among the Company and the shareholders and other
individuals named on the signature pages thereto (the "Shareholders Agreement").
(b) In the event of the death of the Optionee, the Optionee's
estate (the "Estate") shall have the right, at its option, for a period of six
(6) months from the date of the Optionee's death, to sell to the Company, and
the Company shall be required to purchase, all of the Shares held by the Estate.
If it desires to sell such Shares to the Company, the Estate shall, within the
six (6) month period, send written notice thereof to the Company pursuant to
this Section 6.5(b) (the "Put Notice"). The purchase price for such Shares shall
be the Fair Value of such Shares as of the date of the Put Notice (appropriately
adjusted to reflect the Fair Value of any dividends or distributions received or
to be received by the holder of such Shares subsequent to such date). The Board
of Directors shall make or obtain a determination of the Fair Value of such
Shares no later than ninety (90) days following its receipt of a Put Notice. The
closing of such purchase shall take place at the principal office of the Company
no later than the tenth Business Day following the making of such determination
of Fair Value.
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<PAGE>
6.6 Involuntary Transfers. If the Optionee involuntarily transfers
directly or indirectly any or all of his or her Shares for any reason and such
transfer is not to a Permitted Transferee, the transferee of such Shares and its
Permitted Transferees shall be required to offer all of the Shares held by such
Transferee and its Permitted Transferees to the Company in accordance with the
procedures set forth in Section 6.2, provided, however, that the Company's
option to purchase such shares shall be exercisable by a written notice to the
Seller, given within six (6) months from the date of the Seller's Notice. For
purposes of such offer, the First Offer Price for such Shares shall be the Fair
Value of such Shares as of the date of the involuntary transfer of such Shares
to such transferee (appropriately adjusted to reflect the Fair Value of any
dividends or distributions received or to be received by the holder of such
Shares subsequent to the date of such involuntary transfer). The Board of
Directors shall make or obtain a determination of the Fair Value of such Shares
no later than thirty (30) days following the date of any such involuntary
transfer, and the Seller's Notice with respect to such Shares shall be given by
such transferee or by the Company on behalf of such transferee as promptly as
practicable following such determination.
6.7 Consideration for Certain Purchases of Shares by the Company.
Notwithstanding any provision hereof to the contrary, in the event that the
Company exercises its option to purchase Shares offered to the Company as
required by the provisions of Section 6.5 or 6.6, and at such time the Company
is prohibited by the terms of then outstanding indebtedness of the Company from
purchasing such Shares for cash, the Company may, in lieu of paying cash for
such Shares, instead pay for such Shares by delivering a promissory note of the
Company, substantially in the form attached hereto as Exhibit A, having a
principal amount equal to the cash purchase price for such Shares.
6.8 Drag-Along Right. If, after compliance with the appropriate
provisions of the Shareholders Agreement and provided that Section 4.6 of the
Shareholders Agreement remains in effect, any shareholder or group of
shareholders of the Company acting together or pursuant to a common plan or
arrangement propose to make a bona fide sale of shares of capital stock (other
than pursuant to a registered public offering) representing 70% or more of the
issued and outstanding shares of capital stock of the Company to a third party
which is not, and following such sale will not be, affiliated with any of such
shareholders, such shareholders shall have the right (a "Drag-Along Right"),
exercisable upon fifteen (15) days' prior written notice to the Optionee and his
or her Permitted Transferees, to require the Optionee and his or her Permitted
Transferees to sell the same proportion of their Share as such proposing
shareholders propose to sell to such third party on the same terms as such
proposing shareholders, provided that the exercise of such Drag-Along Right is
required by the third party. Section 6.2 shall not apply to sales of shares by
the Optionee resulting from the exercise of a Drag-Along Right in accordance
with this Section 6.8.
7. No Special Employment or Similar Rights. Nothing contained in the
Plan or this option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment or other
relationship of the Optionee with the Company for the period within which this
option may be exercised.
8. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without
<PAGE>
limitation, any rights to receive dividends or non-cash distributions with
respect to such shares) unless and until a certificate representing such shares
is duly issued and delivered to the Optionee. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
9. Adjustment Provisions.
9.1 General. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, conversion or other similar transaction, other than those
described in Section 10 below (i) the outstanding shares of Common Stock are
increased or decreased or are exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, the
Optionee shall, with respect to this option or any unexercised portion hereof,
be entitled to the rights and benefits, and be subject to the limitations, set
forth in Section 15(a) of the Plan.
9.2 Board Authority to Make Adjustments. Any adjustments under this
Section 9 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under this option on
account of any such adjustments.
10. Mergers, Consolidation, Distributions, Liquidations, Etc. In the
event of a merger or consolidation (other than for the purpose of change of
state of incorporation) or sale of all or substantially all of the assets of the
Company, in which outstanding shares of Common Stock are exchanged for
securities, cash or other property of any other corporation or business entity
or in the event of a liquidation of the Company, prior to the termination of
this option, this option shall become exercisable in full immediately prior to
such event.
11. Withholding Taxes. The Company's obligation to deliver shares upon
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
12. Miscellaneous.
12.1 Except as provided in herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Optionee.
12.2 All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designed in writing by either of the
parties to one another.
12.3 This option shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
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Date of Grant: GLOBE MANUFACTURING CO.
_________________, 1993 By:________________________________
Title:_____________________________
Address: 156 Bedford Street
Fall River, MA 02720
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Exhibit B
GLOBE MANUFACTURING CO.
Performance Option Agreement
under the
Management Incentive Plan
1. Grant of Option. Globe Manufacturing Co., a Massachusetts corporation
(the "Company"), hereby grants to ________________________ (the "Optionee") an
option, pursuant to the Company's Management Incentive Plan (the "Plan"), to
purchase an aggregate of ________ shares of Class B Common Stock, par value $.01
per share ("Common Stock"), of the Company at a purchase price of $30.00 per
share, purchasable as set forth in, and subject to the terms and conditions of,
this option (including Exhibit A hereto) and the Plan. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 986, as amended or replaced from time to time
(the "Code").
2. Non-Qualified Stock Option. This option is not intended to qualify as
an incentive stock option under Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
3.1 Vesting Schedule. Subject to the last sentence of this Section
3.1 and except as otherwise provided in this Agreement, this option may be
exercised in installments as to not more than the number of shares and during
the respective installment periods set forth in Exhibit A, attached hereto. The
right of exercise shall be cumulative so that if the option is not exercised to
the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the termination of this option. Notwithstanding any provision
to the contrary herein, this option may be exercised only if, on the date of
exercise of this option, the Fair Value (as defined in Section 6.5(a) below) per
share of Common Stock is equal to or greater than $60.00 (as appropriately
adjusted to reflect the Fair Value of any dividends or distributions received or
to be received by the holders of Common Stock).
3.2 Exercise Procedure. Subject to the conditions set forth in this
Agreement, this option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase fewer than
the total number of shares covered hereby, provided that no partial exercise of
this option may be for any fractional share or for fewer than one hundred whole
shares.
3.3 Continuous Relationship with the Company Required. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Optionee, at the time he or
<PAGE>
she exercises this option, is, and has been at all times since the date of grant
of this option, an employee or officer of the Company (an "Eligible Optionee").
3.4 Discharge for Cause. If the Optionee ceases his or her
relationship with the Company because such relationship is terminated by the
Company for "cause" (as defined below), the right to exercise this option shall
terminate immediately upon such cessation. "Cause" may exist upon the
Optionee's (i) continued willful failure to perform the duties of his or her
employment in any material respect, (ii) malfeasance or gross negligence in the
performance of his or her duties with respect to the Company, (iii) conviction
for a felony under the laws of the United States or any state thereof or (iv)
intentional disclosure of confidential information concerning the Company's
business to any individual or entity not entitled to such information, as
determined by the Company, which determination shall be conclusive.
3.5 Retirement from the Company. If the Optionee ceases his or her
relationship with the Company as a result of his or her retirement (as
determined in good faith by the Board of Directors), then, except as provided in
Section 3.8 below, the right to exercise this option shall terminate upon the
earlier of (i) three years after such cessation and (ii) the day the Optionee
ends his or her retirement (as determined in good faith by the Board of
Directors), provided that this option shall be exercisable only to the extent
that the Optionee was entitled to exercise this option on the date of such
cessation.
3.6 Voluntary Termination of Employment. If the Optionee ceases his
or her relationship with the Company because such relationship is voluntarily
terminated by the Optionee other than for retirement (and other than to preclude
the imminent involuntary termination of the relationship by the Company for
cause, as determined in good faith by the Board of Directors, in which case the
Optionee shall be deemed to have been terminated for cause), then, except as
provided in Section 3.8 below, the right to exercise this option shall terminate
three months after such cessation, provided that this option shall be
exercisable only to the extent that the Optionee was entitled to exercise this
option on the date of such cessation.
3.7 Involuntary Termination of Employment. If the Optionee ceases
his or her relationship with the Company because such relationship is terminated
by the Company without cause, then, except as provided in Section 3.8 below, the
right to exercise this option shall terminate one year after such cessation,
provided that this option shall be exercisable only to the extent that the
Optionee was entitled to exercise this option on the date of such cessation.
3.8 Termination Resulting from Death or Disability. If the Optionee
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
while he or she is an Eligible Optionee, this option shall be exercisable,
within the period of three years following the date of death or disability of
the Optionee, by the Optionee or by the person to whom this option is
transferred by will or the laws of descent and distribution, provided that this
option shall be exercisable only to the extent that this option was exercisable
by the Optionee on the date of his or her death or disability. If the Optionee
dies or becomes disabled during any post-termination exercise period as
described in Sections 3.5, 3.6 or 3.7 above, this option shall be exercisable,
within the period of 60 days following the date of death or disability of the
Optionee or (if longer) for the remainder of such post-
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<PAGE>
termination exercise period, by the Optionee or by the person to whom this
option is transferred by will or the laws of descent and distribution, provided
that this option shall be exercisable only to the extent that this option was
exercisable by the Optionee on the date of his or her death or disability.
Except as otherwise indicated by the context, the term "Optionee," as used in
this option, shall be deemed to include the estate of the Optionee or any person
who acquires the right to exercise this option by bequest or inheritance or
otherwise by reason of the death of the Optionee.
4. Payment of Purchase Price.
4.1 Method of Payment. Payment of the purchase price for shares
purchased upon exercise of this option shall be made by (i) delivery to the
Company of cash or a check to the order of the Company in an amount equal to the
purchase price of such shares, (ii) subject to the consent of the Company, by
delivery to the Company of shares of Common Stock of the Company then owned by
the Optionee having a Fair Value (as defined in Section 6.5(a) below) equal in
amount to the purchase price of such shares, (iii) by any other means which the
Board of Directors determines are consistent with the purpose of the Plan and
applicable laws and regulations (including, without limitation, Regulation T
promulgated by the Federal Reserve Board), or (iv) by any combination of such
methods of payment.
4.2 Delivery of Shares Tendered in Payment of Purchase Price. If the
Company permits the Optionee to exercise options by delivery of shares of Common
Stock of the Company, the certificate or certificates representing the shares of
Common Stock of the Company to be delivered shall be duly executed in blank by
the Optionee or shall be accompanied by a stock power duly executed in blank
suitable for purposes of transferring such shares to the Company. Fractional
shares of Company will not be accepted in payment of the purchase price of
shares acquired upon exercise of this option.
4.3 Restrictions Upon Use of Option Stock. Notwithstanding the
foregoing, no shares of Common Stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within twelve (12) months before the date
of such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
5. Delivery of Shares: Compliance With Securities Law, Etc.
5.1 General. The Company shall, upon payment of the option price for
the number of shares purchased and paid for, make prompt delivery of such shares
to the Optionee, provided that if any law or regulation requires the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.
5.2 Listing, Qualification, Etc. This option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject hereto upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, or that the disclosure of
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<PAGE>
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
hereunder, this option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure, or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to the Board of Directors. Nothing herein shall be deemed to
require the Company to apply for, effect or obtain such listing, registration,
qualification, or disclosure or satisfy such other condition.
6. Transfer of Shares.
6.1 Restrictions on Transfers; Permitted Transferees.
(a) The Optionee shall not directly or indirectly, offer, sell,
assign, pledge, encumber or otherwise transfer this option or any shares of
Common Stock issued upon exercise of this option (this option and such shares of
Common Stock are hereinafter referred to collectively as the "Shares") without
the prior written consent of the Board of Directors, unless such offer, sale,
assignment, pledge or other transfer (i) is pursuant to the effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") and has been registered under all applicable state securities
or "blue sky" laws or (ii) is pursuant to a transaction complying with Rule 144
promulgated under the Securities Act.
(b) Except in the case of a sale of Shares pursuant to an
effective registration statement under the Securities Act or a sale of Shares
pursuant to a transaction complying with Rule 144 promulgated under the
Securities Act, no Optionee shall sell, assign, pledge, encumber or otherwise
transfer any Shares to any person unless (i) such Shares bear legends as
provided in Section 6.4 and (ii) such transferee shall have executed and
delivered to the Company, as a condition precedent to any acquisition of Shares,
an instrument in form and substance satisfactory to the Company confirming that
such transferee takes such Shares subject to the restrictions set forth in this
Agreement and agrees to be bound by the terms of this Agreement.
(c) None of the restrictions contained in this Agreement with
respect to transfers of Shares (other than those set forth in Section 6.1(a),
6.1(b) and 6.8) shall apply: (i) to any transfer or assignment for consideration
or to any gift by the Optionee to any spouse, child, parent, or grandchild of
the Optionee, or by any of such relatives to the Optionee or any such relatives
to a trust of which there are no principal beneficiaries other than the Option
or one or more of such relatives; (ii) to any gift by the Optionee to a bona
fide charity or foundation approved by the Board of Directors (such approval not
to be unreasonably withheld); (iii) to any transfer to a legal representative in
the event the Optionee becomes mentally incompetent; and (iv) to any transfer by
will or the laws of descent; provided that in each of cases (i) through (iv)
each transferee, donee or distributee (a "Permitted Transferee") agrees to take
subject to and comply with the provisions of this Section 6.1. For purposes
hereof, the Permitted Transferees of the Optionee shall include the Permitted
Transferees of the Optionee's Permitted Transferees.
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<PAGE>
6.2 Right of First Offer.
(a) Except as provided in Sections 6.1(c), 6.3 and 6.5(b) if the
Optionee desires to sell, assign or otherwise transfer any Shares he or she
shall first give written notice (a "Seller's Notice") to the Company stating the
Optionee's desire to make such transfer, the number of Shares to be transferred
(the "Offered Shares") and the cash price which the Optionee proposes to be paid
for the Offered Shares (the "First Offer Price").
(b) Upon receipt of the Seller's Notice (the"First Offer"), the
Company shall have the irrevocable and exclusive option to purchase up to all of
the Offered Shares at the First Offer Price; provided that the Company shall not
have the right to purchase any of the Offered Shares unless either (i) the
Company purchases all such Offered Shares; or (ii) the Optionee consents to the
purchase of less than all of the Offered Shares. The Company's option under
this Section 6.2(b) shall be exercisable by a written notice to the Optionee,
given within 15 days from the date of the Seller's Notice.
(c) If the Seller's Notice shall be duly given, and if the
Company shall not exercise its option to purchase the Offered Shares at the
First Offer Price or does not purchase all Shares offered by the Optionee, then
the Optionee shall be free for a period of 90 days from the 15th day following
the date of the Seller's Notice to sell the Offered Shares to any third party
transferee at a cash price equal to or greater than the First Offer Price;
provided that such sale complies with the provisions of Section 6.1 of this
Agreement.
(d) If the proposed purchase price of a transferee for the
Offered Shares is less than the First Offer Price, the Optionee shall not sell
or otherwise transfer any of the Offered Shares unless the Optionee shall first
reoffer the Offered Shares at such lesser price to the Company by giving written
notice (the "Reoffer Notice") thereof, stating the Optionee's intention to make
such transfer at such lower price (the "Reoffer Price"). The Company shall then
have the irrevocable and exclusive option to purchase all of the Offered Shares
at the Reoffer Price, exercisable in the same manner as provided in Section
6.2(b). If the Company does not then purchase all the Offered Shares, such
Offered Shares may be sold by the Optionee within 60 days following the 15th day
from the date of the Reoffer Notice, at a cash price equal to or greater than
the Reoffer Price; provided that such sale complies with the provisions of
Section 6.1 of this Agreement.
(e) If the Company does not exercise its option to purchase the
Offered Shares at a First Offer Price or at the Reoffer Price, and the Optionee
shall not have sold the Offered Shares to any transferee for any reason before
the expiration of the 60-day period described in Section 6.2(d) in the event of
a Reoffer or, if no Reoffer Notice is given, the 90-day period described in
Section 6.2(c), then the Optionee shall not give a Seller's Notice with respect
to a transaction which would require compliance with this Section 6.2 for a
period of 90 days from the last day of such 60- or 90-day period, as the case
may be.
(f) The closing of all purchases pursuant to the first offer
rights granted under this Section 6.2 shall take place at the principal offices
of the Company at 10 a.m. on the tenth
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<PAGE>
Business Day following the delivery to the Optionee of all notices exercising
such first offer rights with respect to all of the Offered Shares to be sold by
the Optionee unless otherwise mutually agreed. At such closing, (i) the
Optionee shall assign and transfer to the Company good and valid title to the
Shares being purchased by it, by delivery of the certificates representing the
Shares to be sold and transferred, duly endorsed in blank, with the requisite
stock transfer tax stamps attached, together with such stock powers,
certificate, legal opinions and other instruments of transfer as the Company
shall reasonably request; and (ii) the Company shall pay to the Optionee the
purchase price for the Shares being purchased by it in cash, by delivery of a
certified or bank check or by wire transfer of immediately available funds to
such account as the Optionee shall direct.
6.3 Merger Transactions. Notwithstanding any other provision of this
Agreement to the contrary, the Company may enter into an agreement to
consolidate with or merge with or into any other corporation if such agreement
is duly approved by the Board of Directors and by the requisite vote of the
stockholders in accordance with the Articles of Organization of the Company. In
such event, Section 6.2 of this Agreement shall not be applicable and all Shares
may be transferred pursuant to such merger or consolidation for such
consideration in accordance with the terms thereof.
6.4 Legend on Certificates. Each outstanding certificate
representing Shares that are subject to this Agreement shall bear legends
substantially in the following form:
These securities have not been registered under the
Securities Act of 1933. They may not be offered or
transferred by sale, assignment, pledge or otherwise
unless (i) a registration statement for the securities
under the Securities Act of 1933 is in effect or (ii) the
corporation has received an opinion of counsel, which
opinion is satisfactory to the corporation, to the effect
that such registration is not required under the
Securities Act of 1933.
The sale, assignment, pledge, encumbrance or other transfer
of the securities represented by this certificate is
subject to the provisions of an option agreement among the
corporation and the holder of such securities, a copy of
which is on file at the principal executive office of the
corporation.
6.5 Purchase Option on Shares.
(a) In the event the Optionee shall cease to be employed by the
Company or a subsidiary of the Company for any reason, or no reason, with or
without cause, including involuntary termination, death or temporary or
permanent disability (a "Termination"), the Optionee and his or her Permitted
Transferees shall be required to offer all of the Shares owned by the Optionee
and his or her Permitted Transferees to the Company in accordance with the
procedures set forth in Section 6.2, provided, however, that the Company's
option to purchase such shares shall be exercisable by a written notice to the
Seller, given within six (6) months from the date of the Seller's Notice. For
purpose of such offer, the First Offer Price for such Shares shall be the Fair
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<PAGE>
Value (as defined below) of such Shares as of the date of the Termination of the
Optionee (appropriately adjusted to reflect the Fair Value of any dividends or
distributions received or to be received by the holder of such Shares subsequent
to such date); provided, that if the Optionee's employment is terminated by the
Company for cause, the First Offer Price for such Shares shall be the lower of
the original purchase price paid by the Optionee or his or her Permitted
Transferees to the Company for such Shares (appropriately adjusted to reflect
the Fair Value of all dividends or distributions received or to be received in
respect of such Shares subsequent to the original purchase of such Shares) or
the Fair Value of such Shares as of the date of the Termination of the Optionee
(appropriately adjusted as provided above). The Board of Directors shall make or
obtain a determination of the Fair Value of such Shares no later than thirty
(30) days following the date of the Termination of the Optionee, and the
Seller's Notice with respect to such Shares shall be given as promptly as
practicable following such determination. For purposes of this Agreement, Fair
Value shall have the meaning ascribed to it in the Shareholders' Agreement dated
as of December 22, 1992 among the Company and the shareholders and other
individuals named on the signature pages thereto (the "Shareholders Agreement").
(b) In the event of the death of the Optionee, the Optionee's
estate (the "Estate") shall have the right, at its option, for a period of six
(6) months from the date of the Optionee's death, to sell to the Company, and
the Company shall be required to purchase, all of the Shares held by the Estate.
If it desires to sell such Shares to the Company, the Estate shall, within the
six (6) month period, send written notice thereof to the Company pursuant to
this Section 6.5(b) (the "Put Notice"). The purchase price for such Shares shall
be the Fair Value of such Shares as of the date of the Put Notice (appropriately
adjusted to reflect the Fair Value of any dividends or distributions received or
to be received by the holder of such Shares subsequent to such date). The Board
of Directors shall make or obtain a determination of the Fair Value of such
Shares no later than ninety (90) days following its receipt of a Put Notice. The
closing of such purchase shall take place at the principal office of the Company
no later than the tenth Business Day following the making of such determination
of Fair Value.
6.6 Involuntary Transfers. If the Optionee involuntarily transfers
directly or indirectly any or all of his or her Shares for any reason and such
transfer is not to a Permitted Transferee, the transferee of such Shares and its
Permitted Transferees shall be required to offer all of the Shares held by such
Transferee and its Permitted Transferees to the Company in accordance with the
procedures set forth in Section 6.2, provided, however, that the Company's
option to purchase such shares shall be exercisable by a written notice to the
Seller, given within six (6) months from the date of the Seller's Notice. For
purposes of such offer, the First Offer Price for such Shares shall be the Fair
Value of such Shares as of the date of the involuntary transfer of such Shares
to such transferee (appropriately adjusted to reflect the Fair Value of any
dividends or distributions received or to be received by the holder of such
Shares subsequent to the date of such involuntary transfer). The Board of
Directors shall make or obtain a determination of the Fair Value of such Shares
no later than thirty (30) days following the date of any such involuntary
transfer, and the Seller's Notice with respect to such Shares shall be given by
such transferee or by the Company on behalf of such transferee as promptly as
practicable following such determination.
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6.7 Consideration for Certain Purchases of Shares by the Company.
Notwithstanding any provision hereof to the contrary, in the event that the
Company exercises its option to purchase Shares offered to the Company as
required by the provisions of Section 6.5 or 6.6, and at such time the Company
is prohibited by the terms of then outstanding indebtedness of the Company from
purchasing such Shares for cash, the Company may, in lieu of paying cash for
such Shares, instead pay for such Shares by delivering a promissory note of the
Company, substantially in the form attached hereto as Exhibit B, having a
principal amount equal to the cash purchase price for such Shares.
6.8 Drag-Along Right. If, after compliance with the appropriate
provisions of the Shareholders Agreement and provided that Section 4.6 of the
Shareholders Agreement remains in effect, any shareholder or group of
shareholders of the Company acting together or pursuant to a common plan or
arrangement propose to make a bona fide sale of shares of capital stock (other
than pursuant to a registered public offering) representing 70% or more of the
issued and outstanding shares of capital stock of the Company to a third party
which is not, and following such sale will not be, affiliated with any of such
shareholders, such shareholders shall have the right (a "Drag-Along Right"),
exercisable upon fifteen (15) days' prior written notice to the Optionee and his
or her Permitted Transferees, to require the Optionee and his or her Permitted
Transferees to sell the same proportion of their Share as such proposing
shareholders propose to sell to such third party on the same terms as such
proposing shareholders, provided that the exercise of such Drag-Along Right is
required by the third party. Section 6.2 shall not apply to sales of shares by
the Optionee resulting from the exercise of a Drag-Along Right in accordance
with this Section 6.8.
7. No Special Employment or Similar Rights. Nothing contained in the
Plan or this option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment or other
relationship of the Optionee with the Company for the period within which this
option may be exercised.
8. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
9. Adjustment Provisions.
9.1 General. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, conversion or other similar transaction, other than those
described in Section 10 below (i) the outstanding shares of Common Stock are
increased or decreased or are exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, the
Optionee shall, with respect to this option or any unexercised portion hereof,
be
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entitled to the rights and benefits, and be subject to the limitations, set
forth in Section 15(a) of the Plan.
9.2 Board Authority to Make Adjustments. Any adjustments under this
Section 9 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under this option on
account of any such adjustments.
10. Mergers, Consolidation, Distributions, Liquidations, Etc. In the
event of a merger or consolidation (other than for the purpose of change of
state of incorporation) or sale of all or substantially all of the assets of the
Company, in which outstanding shares of Common Stock are exchanged for
securities, cash or other property of any other corporation or business entity
or in the event of a liquidation of the Company, prior to the termination of
this option, the Optionee shall, with respect to this option or any unexercised
portion hereof, be entitled to the rights and benefits, and be subject to the
limitations, set forth in Section 16(a) of the Plan, provided, however, that if
at the time of such merger, consolidation, sale or liquidation, the applicable
cumulative target EBITDA set forth on Exhibit A has been achieved, this option
shall become exercisable in full immediately prior to such event.
11. Withholding Taxes. The Company's obligation to deliver shares upon
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
12. Miscellaneous.
12.1 Except as provided in herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Optionee.
12.2 All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designed in writing by either of the
parties to one another.
12.3 This option shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
Date of Grant: GLOBE MANUFACTURING CO.
___________________, 1993 By:______________________________
Title:___________________________
Address: 156 Bedford Street
Fall River, MA 02720
-9-
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's Management Incentive Plan.
OPTIONEE
______________________________________
ADDRESS: _____________________________
______________________________________
-10-
<PAGE>
Exhibit A
Vesting Schedule
"EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization.
A percentage (the "Annual Percentage") of the total number of shares of
Common Stock subject to this option shall become exercisable with respect to
each fiscal year listed below on April 1 following the end of each such year
based on a comparison of the Company's actual EBITDA and Cumulative EBITDA with
the Target EBITDA and Target Cumulative EBITDA as follows:
<TABLE>
<CAPTION>
Fiscal Years
-------------------------------------------------------
1993 1994 1995 1996 1997
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Annual Percentage 20% 20% 20% 20% 20%
Cumulative Percentage 20% 40% 60% 80% 100%
Target EBITDA $24 million * * * *
Target Cumulative EBITDA $24 million ** ** ** **
</TABLE>
_______________
* To be determined by the Board of Directors after approval of each fiscal
year's budget.
** The Target Cumulative EBITDA shall equal the sum of the Target EBITDA for
all prior fiscal years covered by the vesting schedule.
If the Target EBITDA is achieved, the full Annual Percentage of shares of
Common Stock subject to this option will become exercisable.
If the Actual EBITDA divided by the Target EBITDA is less than 100%, the
percentage of the Annual Percentage of shares of Common Stock subject to this
option which shall become exercisable shall be as follows:
<TABLE>
<CAPTION>
If Actual EBITDA divided
by Target EBITDA equals: Percentage
------------------------ ----------
<S> <C>
95% up to 100% 80%
90% up to 95% 60%
85% up to 90% 35%
80% up to 85% 10%
Less than 80% 0%
</TABLE>
If the Actual EBITDA divided by the Target EBITDA is greater than 100%, and
the actual Cumulative EBITDA divided by the Target Cumulative EBITDA is also
greater than 100%, then any shares subject to this option which previously did
not become exercisable because of an EBITDA shortfall shall then become
exercisable.
<PAGE>
Promptly after April 1 following the end of each fiscal year listed above,
the Company will notify the Optionee as to the portion of this option which has
become exercisable. Any portion of this option not vested on December 31, 2003
shall terminate effective as of such date.
-12-
<PAGE>
Globe Manufacturing Corp.
Exhibit 12.1 Statement Re: Computation of ratio of earnings to fixed charges
<TABLE>
<CAPTION>
Fiscal Year Ended: Six Months Ended:
December 31, June 30,
------------------------------------------------- -------------------------
Pro forma Pro forma
1993 1994 1995 1996 1997 1997 1997 1998 1998
------ ------ ------ ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
- --------------
Interest expense 2,256 3,646 6,027 5,347 4,067 23,576 2,145 1,812 11,534
Interest capitalized 0 1,558 422 0 506 635 176 352 469
Interest portion of rental expense 21 22 18 6 7 7 3 4 4
Net amortization of debt issuance expense 490 438 297 151 94 1,492 55 41 746
------ ------ ------ ------ ------ --------- ------ ------ ---------
2,767 5,664 6,764 5,504 4,674 25,710 2,379 2,209 12,753
Earnings:
- ---------
Consolidated pretax income from continuing operations 14,884 6,706 4,127 13,346 25,232 3,592 14,016 17,878 6,758
Fixed charges per above 2,767 5,664 6,764 5,504 4,674 25,710 2,379 2,209 12,753
Less interest capitalized 0 1,558 422 0 506 635 176 352 469
------ ------ ------ ------ ------ --------- ------ ------ ---------
17,651 10,812 10,469 18,850 29,400 28,667 16,219 19,535 19,042
Ratio of earnings to fixed charges 6.38 1.91 1.55 3.42 6.29 1.12 6.92 9.84 1.49
========================================================================================================= =========================
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 24, 1998 (except Note 12, as to which the date is
August 6, 1998) in the Registration Statement (Form S-4 No. 333-00000) and
related Prospectus of Globe Manufacturing Corp. for the registration of
$150,000,000 of its 10% Senior Subordinated Notes due 2008, Series B.
/s/ Ernst & Young LLP
Providence, Rhode Island
September 28, 1998
<PAGE>
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 bank) Identification No.)
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)
----------------
GLOBE MANUFACTURING CORP.
(Exact name of obligor as specified in its charter)
Alabama 63-1101362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
456 Bedford Street
Fall River, Massachusetts 02720
(Address of principal executive offices) (Zip code)
----------------
10% Senior Subordinated Notes due 2008, Series B
(Title of the indenture securities)
================================================================================
<PAGE>
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.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of 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.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-62999.
<PAGE>
EXHIBIT 6
September 22, 1998
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/ Curtis D. Schwegman
------------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
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 22nd day of September 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
------------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR SUBORDINATED NOTES DUE 2008
OF
GLOBE MANUFACTURING CORP.
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Registered or Certified Mail: Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association P.O. Box 1517 Minneapolis, Association Norwest Center 6th and
Minnesota 55480-1517 Attention: Marquette Avenue Minneapolis,
Corporate Trust Services Minnesota 55479-0113 Attention:
Corporate Trust Services
By Hand: Facsimile Transmission:
Norwest Bank Minnesota, National (For Eligible Institutions Only)
Association NorthStar East, 12th Floor (612) 667-4927 Confirm by Telephone:
608 Second Avenue South, North Star (612) 667-9764
East Minneapolis, Minnesota 55479-0113
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL 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.
The undersigned acknowledges receipt of the Prospectus, dated
, 1998 (the "Prospectus") of Globe Manufacturing Corp. (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 10% Senior Subordinated Notes due 2008, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement,
for each $1,000 principal amount of its outstanding 10% Senior Subordinated
Notes due 2008 (the "Notes"), of which $150,000,000 principal amount is
outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on , 1998, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term shall mean the latest date
and time to which the Exchange Offer is extended. The term "Holder" with
respect to the Exchange Offer means any person in whose name Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder. Capitalized terms
used but not defined herein have the respective meanings set forth in the
Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--
<PAGE>
Procedures for Tendering" by any financial institution that is a participant
in the Book-Entry Transfer Facility and whose name appears on a security
position listing as the owner of Notes to the extent provided herein or (iii)
tender of the Notes is to be made according to the guaranteed delivery
procedures described in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
Notwithstanding the foregoing, valid acceptance of the terms of the Exchange
Offer may be effected by a participant in the Book-Entry Transfer Facility
tendering Notes through the Book-Entry Transfer Facility's Automated Tender
Offer Program ("ATOP") where the Exchange Agent receives an Agent's Message
prior to the Expiration Date. Accordingly, such participant must
electronically transmit its acceptance to the Book-Entry Transfer Facility
through ATOP, and then the Book-Entry Transfer Facility will edit and verify
the acceptance, execute a book-entry delivery to the Exchange Agent's account
at the Book-Entry Transfer Facility and send an Agent's Message to the
Exchange Agent for its acceptance. By tendering through ATOP, participants in
the Book-Entry Transfer Facility will expressly acknowledge receipt of this
Letter of Transmittal and agree to be bound by its terms and the Company will
be able to enforce such agreement against such Book-Entry Transfer Facility
participants.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer. Holders who wish to tender their Notes must
complete this letter in its entirety.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Notes: ________________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing
Notes, an Agent's Message or other required documents to reach the Exchange
Agent prior to the Expiration Date, or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2 below.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution that
Guaranteed Delivery: ______________________________________________________
2
<PAGE>
If Delivered by Book-Entry Transfer, the Account Number: __________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
Attention: _________________________________________________________________
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amount of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING
BOX 1
DESCRIPTION OF NOTES
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Principal Amount
Name(s) and Address(es) of Aggregate Principal Tendered (must be
Registered Holder(s) Certificate Amount Represented an Integral Multiple
(Please fill in, if blank) Number(s)* by Certificate(s) of $1,000)**
- -----------------------------------------------------------------------------------
<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 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 Notes.
All other tenders must be in integral multiples of $1,000.
3
<PAGE>
BOX 2 BOX 3
SPECIAL REGISTRATION SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
To be completed ONLY if
To be completed ONLY if certificates for Notes in a
certificates for Notes in a principal amount not tendered, or
principal amount not tendered, or Exchange Notes issued in exchange
Exchange Notes issued in exchange for Notes accepted for exchange,
for Notes accepted for exchange, are to be sent to an address other
are to be issued in a name other than the address appearing in Box
than the name appearing in Box 1 1 above, or if Box 2 is filled in,
above. to an address other than the
address appearing in Box 2.
Issue certificate(s) to:
Deliver certificate(s) to:
Name _______________________________
(Please Print) Name ______________________________
Address ____________________________ (Please Print)
- ------------------------------------ Address ___________________________
(Include Zip Code)
----------------------------------
- ------------------------------------ (Include Zip Code)
(Tax Identification or Social
Security Number) ----------------------------------
(Tax Identification or Social
Security Number)
BOX 4
BROKER-DEALER STATUS
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, A COPY OF THIS LETTER OF TRANSMITTAL
MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY
GLOBE MANUFACTURING CORP., ATTENTION LAWRENCE R. WALSH, VIA FACSIMILE
(508) 674-3580.
4
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of 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 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) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company and (iii) present such Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Notes, all in accordance with the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, that neither the undersigned
nor any other such person has any arrangement or understanding with any person
to participate in the distribution of such Exchange Notes and that neither the
undersigned nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. In addition, the undersigned and
any such person acknowledge that (a) any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must, in the absence
of an exemption therefrom, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes and cannot rely on the position of the staff of
the Securities and Exchange Commission enunciated in no-action letters and (b)
failure to comply with such requirements in such instance could result in the
undersigned or such person incurring liability under the Securities Act for
which the undersigned or such person is not indemnified by the Company. 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 Notes tendered hereby.
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 Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a Prospectus in connection with any resale of such Exchange
Notes, however, by so acknowledging and by delivering a Prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Unless otherwise notified in accordance with
the instructions set forth herein in Box 4 under "Broker-Dealer Status," the
Company will assume that the undersigned is not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given notice
thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Notes will
be returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
5
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer--Procedures for Tendering" in
the Prospectus and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Exchange Offer, subject only to withdrawal of such
tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates
for Notes not tendered or not exchanged, in the name(s) of the registered
holder of the Notes appearing in Box 1 above. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the Exchange Notes issued in exchange for
the Notes accepted for exchange and any certificates for Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below in the undersigned's signature(s). In the event
that the box entitled "Special Registration Instructions" and the box entitled
"Special Delivery Instructions" both are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Notes
accepted for exchange in the name(s) of, and return any certificates for Notes
not tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, an Agent's
Message, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date, may tender their Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2.
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the 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 Notes to
which this Letter of Transmittal relate are held of record by two or more
joint holders, then all such holders must sign this Letter of Transmittal.
SIGNATURES
x
- ----------------------------------------------------- ---------------------
Date
x
- ----------------------------------------------------- ---------------------
Date
Area Code and Telephone Number:_______________________________________________
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, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5.
Name(s): _____________________________________________________________________
(Please Print)
Capacity: ____________________________________________________________________
Address: _____________________________________________________________________
(Include Zip Code)
6
<PAGE>
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: __________________________
(Authorized Signature)
- ------------------------------------------------------------------------------
(Title)
- ------------------------------------------------------------------------------
(Name of Firm)
- ------------------------------------------------------------------------------
(Address, Include Zip Code)
- ------------------------------------------------------------------------------
(Area Code and Telephone Number)
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly
completed and duly executed copy of this Letter of Transmittal (or, in the
case of a book-entry transfer, an Agent's Message), a Substitute Form W-9 and
any other documents required by this Letter of Transmittal must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of certificates for Notes and all other required
documents is at the election and sole risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holder may wish to use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. Neither the
Company nor the Exchange Agent is under an obligation to notify any tendering
holder of the Company's acceptance of tendered Notes prior to the completion
of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account with the Book-Entry Transfer Facility), together
with this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal must be received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a registered holder of Notes may tender such Notes
in the Exchange Offer. Any beneficial owner of Notes who is not the registered
holder and who wishes to tender should arrange with such Holder to execute and
deliver this Letter of Transmittal on such owner's behalf or must, prior to
completing and executing this Letter of Transmittal and delivering such Notes,
either make appropriate
8
<PAGE>
arrangements to register ownership of the Notes in such owner's name or obtain
a properly completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Principal Amount Tendered" of the box
entitled "Description of Notes" (Box 1) above. The entire principal amount of
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of Notes is not
tendered, Notes for the principal amount of Notes not tendered and Exchange
Notes exchanged for any Notes tendered will be sent to the holder at his or
her registered address, unless a different address is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then,
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No medallion signature guarantee is required if this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) and neither the "Special Registration
Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been
completed. In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts not tendered or not
accepted for exchange are to be sent, if different from the name and address
or account of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the tendering
holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to
the Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Notes to the Company or its order pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or on any other person) will be payable by
the tendering holder. If satisfactory evidence of payment of such taxes or
exemption from
9
<PAGE>
taxes therefrom is not submitted with this Letter of Transmittal, the amount
of transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results
in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall
determine. The Company will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Notes, but shall not
incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information
and for additional copies of the Prospectus may be directed to the Exchange
Agent at the address set forth on the first page of this Letter of
Transmittal. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
10
<PAGE>
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has
given notice thereof to the Exchange Agent. If any tendered Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Notes will be returned, without expense, to the undersigned at the address
shown above or at a different address as may be indicated under "Special
Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
PAYOR'S NAME: GLOBE MANUFACTURING CORP.
- -------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social Security
IDENTIFICATION NUMBER ("TIN") IN THE Number
BOX AT RIGHT AND CERTIFY BY SIGNING or TIN
AND DATING BELOW
SUBSTITUTE
FORM W-9
/ / /
DEPARTMENT OF THE -----------------------------------------------------------
TREASURY INTERNAL PART 2--Check the box if you are NOT subject to backup
REVENUE SERVICE 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. [_]
PAYER'S REQUEST
FOR
TAXPAYER
IDENTIFICATION Part 3--
NUMBER (TIN)
Awaiting TIN
[_]
-----------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.
SIGNATURE DATE
-----------------------------------------------------------
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)
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.
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
GLOBE MANUFACTURING CORP.
10% SENIOR SUBORDINATED NOTES DUE 2008
This form must be used by a holder of 10% Senior Subordinated Notes due 2008
(the "Notes") of Globe Manufacturing Corp. (the "Company"), who wishes to
tender Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures," and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the
Exchange Offer. Capitalized terms not defined herein have the meanings
ascribed to them in the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
By Registered or Certified Mail: Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
P.O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue
Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Services
By Hand: Facsimile Transmission:
Norwest Bank Minnesota, National (For Eligible Institutions Only)
Association (612) 667-4927
NorthStar East, 12th Floor Confirm by Telephone:
608 Second Avenue South, North Star (612) 667-9764
East
Minneapolis, Minnesota 55479-0113
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
CERTIFICATE NUMBER(S) (IF KNOWN) OF AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NOTES OR ACCOUNT NUMBER AT THE BOOK- AMOUNT REPRESENTED AMOUNT TENDERED
ENTRY FACILITY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Date: , 1998
Signatures of Registered Holder(s)
or
Address: ____________________________
Authorized Signatory: _______________
-------------------------------------
- -------------------------------------
Area Code and Telephone No.: ________
- -------------------------------------
Name of Registered Holder(s):________
- -------------------------------------
- -------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s)
by endorsements and documents transmitted with this Notice of Guaranteed
Delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
Please print name(s) and address(es)
Name(s): _____________________________________________________________________
- ------------------------------------------------------------------------------
Capacity: ____________________________________________________________________
Address(es): _________________________________________________________________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees that either the Notes tendered
hereby in proper form for transfer (or confirmation of the book-entry
transfer of such Notes into the Exchange Agent's account at Book-Entry
Transfer Facility as described in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures"), together with a properly
completed Letter of Transmittal (or facsimile thereof) (or, in the case of a
book-entry transfer, an Agent's Message) and any other required documents
will be received by the Exchange Agent by 5:00 p.m., New York City time, on
the third New York Stock Exchange trading day following the Expiration Date.
Name of Firm: ______________________ ------------------------------------
Authorized Signature
Address: ___________________________ Name: ______________________________
- ------------------------------------ Title: _____________________________
Area Code and Telephone No.: _______ Date: ______________________ , 1998
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Requests for information
and additional copies of the Prospectus may be directed to the Exchange Agent
at the address set forth on the first page of this Notice of Guaranteed
Delivery. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
GLOBE MANUFACTURING CORP.
10% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
, 1998 (the "Prospectus"), of Globe Manufacturing Corp. (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 10% Senior Subordinated Notes due 2008, Series
B (the "Exchange Notes"), for each $1,000 principal amount of its outstanding
10% Senior Subordinated Notes due 2008 (the "Notes"). Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 10% Senior Subordinated Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED):
$
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned is
not participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "Act"), in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Securities
and Exchange Commission set forth in no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer--Resale of the
Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Act, of the Company; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
<PAGE>
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, A COPY OF THESE INSTRUCTIONS MUST BE
RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY GLOBE
MANUFACTURING CORP., ATTENTION LAWRENCE R. WALSH, VIA FACSIMILE (508) 674-
3580.
SIGN HERE
Name of beneficial owner(s):__________________________________________________
Signature(s):_________________________________________________________________
Name (please print):__________________________________________________________
Address: _____________________________________________________________________
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Telephone number:_____________________________________________________________
Taxpayer Identification or Social Security Number:____________________________
Date:_________________________________________________________________________
2
