<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 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
--------------------------
EVENFLO COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 6719 31-1360477
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
--------------------------
NORTHWOODS BUSINESS CENTER II
707 CROSSROADS COURT
VANDALIA, OHIO 45377
(937) 415-3300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
NORTHWOODS BUSINESS CENTER II
707 CROSSROADS COURT
VANDALIA, OHIO 45377
(937) 415-3300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH A COPY TO:
ARTHUR D. ROBINSON, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act Registration number of the earlier effective
Registration Statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Registration Statement number of the earlier effective Registration Statement
for the same offering: / /
--------------------------
CALCULATION OF REGISTRATION FEE CHART
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
11 3/4% Series B Senior Notes due 2006 $110,000,000 100% $110,000,000 $32,450.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE OR
JURISDICTION.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1998
PROSPECTUS
EVENFLO COMPANY, INC.
OFFER TO EXCHANGE UP TO
$110,000,000 OF ITS 11 3/4% SERIES B SENIOR NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING
11 3/4% SENIOR NOTES DUE 2006
Evenflo Company, Inc., a Delaware corporation (the "Company" or "Evenflo"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (together, constituting
the "Exchange Offer"), to exchange an aggregate of up to $110,000,000 principal
amount of 11 3/4% Series B Senior Notes due 2006 (the "Exchange Notes") of the
Company for an identical face amount of the issued and outstanding 11 3/4%
Senior Notes due 2006 (the "Old Notes" and, together with the Exchange Notes,
the "Notes") of the Company from the holders thereof. As of the date of this
Prospectus, there is $110,000,000 aggregate principal amount of the Old Notes
outstanding. The terms of the Exchange Notes are identical in all material
respects to the Old Notes, except that the Exchange Notes have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and
therefore will not bear legends restricting their transfer and will not contain
provisions providing for an increase in the interest rate on the Old Notes under
the circumstances described in the Registration Rights Agreement (as defined),
which provisions will terminate as to all of the Notes upon the consummation of
the Exchange Offer. See "Description of the Exchange Notes-- Registration
Rights; Liquidated Damages."
The Exchange Notes will bear interest at a rate of 11 3/4% per annum,
payable semi-annually on August 15 and February 15 of each year, commencing
February 15, 1999. The Exchange Notes will mature on August 15, 2006. At any
time or from time to time on or after August 15, 2002, the Company may redeem
the Exchange Notes, in whole or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption.
Notwithstanding the foregoing, at any time or from time to time on or prior to
August 15, 2001, the Company may redeem up to 35% of the aggregate principal
amount of the Exchange Notes originally issued at a redemption price equal to
111.75% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption with the net cash proceeds of one or more Equity
Offerings (as defined); PROVIDED that at least 65% in aggregate principal amount
of the Exchange Notes originally issued remains outstanding after each such
redemption. The Exchange Notes will not be subject to any sinking fund
requirements. Upon the occurrence of a Change of Control (as defined), the
Company will have the option, at any time on or prior to August 15, 2002, to
redeem the Exchange Notes, in whole but not in part, at a redemption price equal
to 100% of the principal amount thereof plus the Applicable Premium (as
defined), together with accrued and unpaid interest, if any, to the date of
redemption. Upon the occurrence of a Change of Control, if the Company does not
so redeem such Exchange Notes or if a Change of Control occurs after August 15,
2002, the Company will be required to make an offer to purchase all of the
outstanding Exchange Notes at a price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase. See
"Risk Factors--Change of Control" and "Description of the Exchange
Notes--Repurchase at the Option of Holders--Change of Control."
The Exchange Notes will be senior unsecured obligations of the Company and
will rank PARI PASSU in right of payment to all existing and future senior
indebtedness of the Company. The Exchange Notes will be effectively subordinated
to all existing and future senior secured indebtedness of the Company to the
extent of the value of the assets securing such indebtedness and will be
effectively subordinated to all obligations of the subsidiaries of the Company.
As of June 30, 1998, on a pro forma basis after giving effect to the
Transactions (as defined), the aggregate principal amount of the Company's
indebtedness would have been approximately $120.0 million (excluding $48.0
million of availability under the Credit Facility (as defined) after giving
effect to $42.0 million of outstanding letters of credit and bankers'
acceptances), $10.0 million of which would have been senior secured indebtedness
under the Credit Facility. See "Description of the Exchange Notes." As of June
30, 1998, on a pro forma basis after giving effect to the Transactions, the
aggregate principal amount of the outstanding indebtedness and other liabilities
and commitments of the subsidiaries of the Company would have been approximately
$2.8 million (excluding guarantees in respect of the Credit Facility). As of
June 30, 1998, on the same pro forma basis, the Exchange Notes would not have
been senior to any indebtedness of the Company. See "Description of the Exchange
Notes--General," "Risk Factors--Effective Structural Subordination" and
"--Encumbrances on Assets to Secure Credit Facility."
(CONTINUED ON NEXT PAGE)
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
------------------------
THE EXCHANGE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE 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.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
(CONTINUED FROM COVER PAGE)
The Old Notes were issued and sold on August 20, 1998 (the "Closing Date")
in a private placement to initial purchasers which offered the Old Notes for
resale within the United States to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act and outside the United States in accordance
with Regulation S under the Securities Act (the "Offering"). In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The Exchange Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement. Based on interpretations by the staff (the "Staff") of the Securities
and Exchange Commissions (the "Commission") set forth in no-action letters
issued to third parties, the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, PROVIDED that such
Exchange Notes are acquired in the ordinary course of such holder's business,
such holder has no arrangement with any person to participate in the
distribution of such Exchange Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such Exchange
Notes. However, the Company has not sought, and does not intend to seek, its own
no-action letter, and there can be no assurance that the Staff of the Commission
would make a similar determination with respect to the Exchange Offer.
Notwithstanding the foregoing, each broker-dealer that receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a 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 Exchange Notes received in exchange for such
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). A broker-dealer may not participate in the
Exchange Offer with respect to Old Notes acquired other than as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the date of this Prospectus, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." If any holder of Old Notes is an
affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with any person to participate in the distribution
of the Exchange Notes to be acquired in the Exchange Offer, such holder (i) can
not rely on the applicable interpretations of the Commission and (ii) must
comply with the registration requirements of the Securities Act in connection
with any resale transaction.
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the Exchange Notes. The Company currently does
not intend to list the Exchange Notes on any securities exchange or to seek
approval for quotation of the Exchange Notes through any automated quotation
system. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The date of acceptance and
exchange of the Old Notes (the "Exchange Date") will be the third business day
following the Expiration Date. Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date. The Company will not
receive any proceeds from the Exchange Offer. The Company will pay all of the
expenses incident to the Exchange Offer. The Exchange Offer will expire 5:00
p.m., New York City Time, on , 1998 (the "Expiration Date"). The
Company does not currently intend to extend the Expiration Date.
i
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes, reference is made to the Registration Statement. While the
Company believes that the material information has been provided regarding the
contracts and documents described herein, the statements contained in this
Prospectus as to the contents of any such contract or other document are not
necessarily complete, and, where such contract or other document is an exhibit
to the Registration Statement, each such statement is qualified in all respects
by the provisions in such exhibit, to which reference is hereby made. The
Company is not currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon
completion of the Exchange Offer, the Company will be subject to the information
requirements of the Exchange Act and, in accordance therewith, will file
periodic reports and other information with the Commission. The Registration
Statement, such reports and other information can be inspected and copied at the
Public Reference Section of the Commission located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at regional public
reference facilities maintained by the Commission located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material,
including copies of all or any portion of the Registration Statement, can be
obtained from the Public Reference Section of the Commission at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov). In addition,
pursuant to the Indenture governing the Notes, the Company has agreed that,
beginning with the fiscal period ending September 30, 1998 and for so long as
any of the Notes remain outstanding, it will furnish to the holders of the Notes
(the "Holders") within 15 days after it is or would have been required to file
such with the Commission, quarterly and annual financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission, if the Company were subject to Section 13
or 15(d) of the Exchange Act, including, with respect to annual information
only, a report thereon by the Company's certified independent public accountants
as such would be required in such reports to the Commission, and, in each case,
together with a management's discussion and analysis of financial condition and
results of operations which would be so required. Such requirements may be
satisfied through the filing and provision of such documents and reports which
would otherwise be required pursuant to Section 13 in respect of the Company.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
FORWARD-LOOKING STATEMENTS
This Prospectus, including the "Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
sections, contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology, such as "may," "intend," "will," "expect,"
"anticipate," "plan," "the Company believes," "management believes," "estimate,"
"continue," or "position" or the negative thereof or other variations thereon or
comparable terminology. In particular, any statements, express or implied,
concerning future operating results or the ability to generate revenues, income
or cash flow to service the Exchange Notes are forward-looking statements.
Investors in the Exchange Notes offered hereby are
ii
<PAGE>
cautioned that reliance on any forward-looking statements involves risks and
uncertainties and that, although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable,
any of those assumptions could be incorrect, and actual results may differ
materially from any results indicated or suggested thereby. The uncertainties in
this regard include, but are not limited to, those identified herein under "Risk
Factors." In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
the Company that the Company's plans and objectives will be achieved. All
forward-looking statements are expressly qualified by such cautionary
statements, and the Company expressly disclaims any duty to update such
forward-looking statements.
CERTAIN DEFINED TERMS AND MARKET SHARE DATA
As used in this Prospectus, unless the context otherwise requires, the
"Company" or "Evenflo" refers to Evenflo Company, Inc. and its direct and
indirect subsidiaries and "Spalding" refers to Spalding Holdings Corporation
(formerly known as Evenflo & Spalding Holdings Corporation), and its direct and
indirect subsidiaries. The Company's fiscal year ends September 30, and thus,
for example, references to "fiscal 1997" refer to the fiscal year ended
September 30, 1997.
As used in this Prospectus, unless the context otherwise requires, the
"juvenile products industry" refers to hard goods, as opposed to clothing,
linens and other apparel items, manufactured for infants and juveniles. Although
the Company's fiscal year ends on September 30, market share data, the size of
given markets and the Company's relative ranking within a certain product
category have each been prepared on the basis of a calendar year and on the
basis of U.S. dollar sales for the domestic market. The Company has defined its
markets to include "On The Go" products, "Play Time" products, "Bed and Bath"
products and "Feeding Time" products and has presented market share and other
data on the basis of such product categories, although industry sources do not
similarly divide the juvenile products industry. This Prospectus includes market
share information for certain products in each of these categories and such
products do not represent the entirety of the Company's product line in each
such category. In addition, the Company does not compete in every product line
it includes in its definition of On The Go, Play Time, Bed and Bath and Feeding
Time products. With respect to data relating to the juvenile products industry
as a whole and the size of given markets, such data was prepared by the Juvenile
Products Manufacturing Association ("JPMA") for the 1997 calendar year on the
basis of net sales reported by its members. Unless otherwise indicated, all
references to market share data and the Company's relative ranking within a
certain product category with respect to feeding products are prepared on the
basis of U.S. retail sales data prepared by ACNielsen Corporation ("ACNielsen")
reporting for food stores, drug stores and mass merchandisers for the 1997
calendar year. In all other product categories, such data is based on U.S.
retail sales data prepared by The NPD Group, Inc. ("NPD") reporting for a
sampling of retailers, excluding all specialty retailers, which have elected to
participate in its database for the 1997 calendar year.
BELTRIGHT-Registered Trademark-, CARRY RIGHT-TM-,
CHAMPION-Registered Trademark-, DISCOVERY-TM-, DISCOVERY TRAVEL SYSTEM-TM-,
EVENFLO-Registered Trademark-, EVENFLO-Registered Trademark- TO GROW-TM-,
EVOLUTION-Registered Trademark-, EXERSAUCER-Registered Trademark-, FIRST
CHOICE-TM-, GERRY-Registered Trademark-, HAPPY CAMPER-Registered Trademark-,
HIKE 'N ROLL-Registered Trademark-, HORIZON-TM-,
MEDALLION-Registered Trademark-, ON MY WAY-Registered Trademark-, ON MY WAY
TRAVEL SYSTEM-Registered Trademark-, PHASES-Registered Trademark-, PLAY
CRIB-TM-, SCOUT-Registered Trademark- (registered trademark in Australia only),
SIDEKICK-TM-, SNUGLI-Registered Trademark-, SUPERSAUCER-TM-, TEACH ME TOYS-TM-,
TRAVEL TANDEM-Registered Trademark-, TRENDSETTER-TM-,
TROOPER-Registered Trademark-, TWO-IN-ONE (registration pending),
ULTARA-Registered Trademark- and ULTARA I-Registered Trademark- are trademarks
of the Company. This Prospectus also includes references to companies other than
the Company, including Babies "R" Us ("Babies "R" Us"), a division of Toys "R"
Us, Inc. ("Toys "R" Us"), the Children's National Medical Center, a non-profit
corporation that operates the National SAFE KIDS CAMPAIGN-Registered Trademark-
(the "SAFE KIDS CAMPAIGN-Registered Trademark-"), Disney Enterprises, Inc.
("Disney"), Huffy Corporation ("Huffy"), Kmart Corporation ("Kmart"), Lamaze
Institute for Higher Education ("Lamaze"), Lordship Industrial Co. ("Lordship"),
OshKosh B'Gosh, Inc. ("OshKosh"), Sears, Roebuck & Co. ("Sears"), Serta, Inc.
("Serta"), Target (a division of Dayton Hudson Corporation) ("Target"), Wal-Mart
Stores, Inc. ("Wal-Mart") and Warner Bros., a division of Time Warner
Entertainment Company L.P. ("Warner Bros."), and to trademarks of other
companies, including DISNEY BABIES-Registered Trademark-, BABY LOONEY
TUNES-Registered Trademark-, OSHKOSH B'GOSH-Registered Trademark- and
SERTA-Registered Trademark-.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND OTHER FINANCIAL DATA,
INCLUDING THE FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. YOU ARE URGED TO READ THIS PROSPECTUS IN ITS
ENTIRETY.
GENERAL
Evenflo is one of the largest manufacturers and marketers of juvenile
products in the United States as well as a leader in several international
markets based on pro forma net sales in 1997. Established in 1920, Evenflo is
one of the oldest and most recognized names in the juvenile products industry,
with a 97% brand awareness for infant feeding products among new mothers in the
United States. The Company believes it is a leading supplier of juvenile
products to such key national retailers as Toys "R" Us, Wal-Mart, Sears, Kmart
and Target.
Evenflo distinguishes itself from its competitors by developing innovative,
high quality products which have sometimes redefined their product categories.
For example, the 1994 introduction of the EXERSAUCER redefined the activity
product category. Evenflo followed this success with the introduction of the ON
MY WAY TRAVEL SYSTEM in 1996, which was, according to NPD, the single largest
selling product in the juvenile products industry by dollar volume in 1997. The
Company further distinguishes itself from its competitors through its co-branded
product offerings with other national brands such as OSHKOSH
B'GOSH-Registered Trademark- and SERTA-Registered Trademark-. For the twelve
months ended June 30, 1998, the Company had net sales of $336.3 million and
Adjusted EBITDA (as defined) of $20.0 million.
The Company's products fall into four principal categories, representing the
daily activities in which the products are used: (i) "On The Go" products,
including car seats, strollers, travel systems and carriers, (ii) "Play Time"
products, including stationary activity products, swings, gates and doorway
jumpers, (iii) "Bed and Bath" products, including cribs, portable play yards,
monitors, mattresses, bath items and toilet trainers and (iv) "Feeding Time"
products, including reusable and disposable nurser systems, breastfeeding aids,
high chairs, oral development items such as teethers and pacifiers, bibs and
other feeding accessories.
During fiscal 1997 and the nine months ended June 30, 1998, Evenflo invested
an aggregate of approximately $103 million to improve its operations, expand its
product lines and support the growth of its base business. In March 1998,
Evenflo completed a $15.8 million capital expenditure program ($12.7 million of
which was invested in the twenty-one months ended June 30, 1998) ("Project
Discovery") to improve productivity and increase capacity levels by
reengineering its Piqua, Ohio assembly lines and reconfiguring its principal
warehouse. In April 1997, Evenflo acquired certain net assets of Gerry Baby
Products Company ("Gerry") for a purchase price of $68.7 million (the "Gerry
Acquisition"). The Gerry Acquisition provided Evenflo with additional market
leading products in categories such as gates, monitors, infant carriers and
baths, which complemented the Company's traditional strengths in juvenile
furniture and infant feeding products. To realize the manufacturing efficiencies
achievable through the Gerry Acquisition, Evenflo invested an additional $6.9
million to integrate the Gerry operations into the Company's Piqua, Ohio and
Canton, Georgia plants. The Company anticipates that significant production
efficiencies will be realized in fiscal 1999 from Project Discovery and the
integration of Gerry. In addition, the Company is developing a stock-keeping
unit ("SKU") rationalization program aimed at discontinuing a substantial number
of SKUs it produces in order to eliminate certain low margin SKUs and to
decrease the manufacturing burden of producing the current number of product
variations. The Company believes that this effort will contribute to a reduction
in inventory levels and an improvement in margins.
1
<PAGE>
BUSINESS STRATEGY
The Company's primary business objective is to increase net sales and
improve cash flow by increasing worldwide market share and improving operating
efficiencies. Evenflo seeks to achieve this objective by leveraging its leading
market positions, strong brand recognition and innovative product development
efforts in the pursuit of the following strategies:
ATTAIN LEADING MARKET SHARE IN ADDITIONAL KEY PRODUCT AREAS. In 1997,
Evenflo was the largest domestic manufacturer of juvenile products measured by
total pro forma dollar sales, with products competing in ten of the fifteen
highest dollar volume product categories for juvenile products. Evenflo has the
number one or number two market share (by dollars based on pro forma net sales
in 1997) in many of its key product categories as demonstrated by the following
table.
<TABLE>
<CAPTION>
1997 U.S.
1997 1997 RETAIL MARKET
U.S. MARKET U.S. MARKET SIZE
PRODUCT CATEGORY(1) SHARE RANK (MILLIONS)
- ------------------------------------------------------------- ----------------- ----------------- -------------
<S> <C> <C> <C>
ON THE GO
Infant Car Seats........................................... 45% 1 $ 46.0
Convertible Car Seats...................................... 47% 1 $ 113.9
Stroller Travel Systems.................................... 43% 1 $ 58.0
Soft Infant Carriers....................................... 62% 1 $ 15.2
Frame Infant Carriers...................................... 99% 1 $ 4.0
PLAY TIME
Gates...................................................... 58% 1 $ 50.7
Stationary Activity Products (excluding walkers)........... 51% 1 $ 31.8
BED AND BATH
Baby Baths................................................. 40% 1 $ 15.7
Play Yards................................................. 14% 2 $ 82.2
Baby Monitors.............................................. 23% 2 $ 38.5
FEEDING TIME
Breastfeeding Products..................................... 48% 1 $ 39.9
Reusable Nurser Systems.................................... 26% 2 $ 110.8
High Chairs................................................ 27% 2 $ 55.9
</TABLE>
- ------------------------
Source: NPD and ACNielsen sales data.
(1) The Company has defined its four principal categories to include "On The Go"
products, "Play Time" products, "Bed and Bath" products and "Feeding Time"
products and has presented market share and other data on the basis of such
product categories, although industry sources do not similarly divide the
juvenile products industry. The above chart includes market share
information for selected products in each of these categories and such
products do not represent the entirety of the Company's product line in each
such category. In addition, the Company does not compete in every product
line it includes in its definitions of On The Go, Play Time, Bed and Bath
and Feeding Time.
In 1997, Evenflo held leading market share positions (number one or number
two) in products that generated 78% of its pro forma net sales and 85% of its
pro forma gross profit. Evenflo believes that its strong market shares are
attributable to its dedication to products that appeal to parents' desires for
safe, convenient and fashionable products. The Company intends to focus its
marketing and product development resources on product categories in which the
Company believes it can achieve either a number one or a number two market
share. The Company believes that a number one or number two market share for a
product category is an important factor in achieving a desirable level of shelf
space with its key mass merchant and national accounts.
2
<PAGE>
CONTINUE TO FOCUS ON PRODUCT DEVELOPMENT AND INNOVATION. The Company
believes that it is one of the leading innovators in the juvenile products
industry, with frequent introductions of innovative products and refinements
that improve a product's design and appeal. Throughout its long history, Evenflo
has developed innovative juvenile products, from its introduction of the first
fully integrated baby bottle system in 1935, to its successful 1994 introduction
of the EXERSAUCER stationary activity product, a safer alternative to infant
walkers. Also introduced in 1994 was the ON MY WAY car seat, with its
innovative, ergonomically correct CARRY RIGHT handle. The ON MY WAY car seat was
the best selling infant car seat in U.S. dollar sales in 1997 (Evenflo's ULTARA
I was the best selling convertible car seat in U.S. dollar sales in 1997). In
1995, the Company introduced the PHASES multi-use high chair, which converts
from an infant feeding seat to a booster seat to a play table and chair. In
1997, the PHASES line was the second best selling line of high chairs in U.S.
dollar sales. In 1996, Evenflo achieved incremental growth opportunities in
strollers by designing a stroller that integrates with the ON MY WAY car seat to
form the new ON MY WAY TRAVEL SYSTEM, the best selling travel system in U.S.
dollar sales in 1997. The Company plans to continue its tradition of product
development and innovation by introducing new products to serve each of its four
principal product categories with over twenty new products expected to be
introduced in the next twelve months.
CAPITALIZE ON STRONG BRAND IDENTITY. The Company believes that the strength
and 78 year history of its brand name creates a significant competitive
advantage. Evenflo is one of the most widely recognized names in the juvenile
products industry and benefits from a 97% brand awareness for infant feeding
products among new mothers in the United States. Evenflo believes that its long
history of developing safety-tested, high quality, innovative products is
responsible for the high levels of brand loyalty achieved by its products.
Evenflo's strength in core products such as car seats and high chairs (required
products for most families with infants and juveniles) contributes to customers
recognizing Evenflo as a brand name associated with high quality consumer
products. By capitalizing on its strong brand identity, Evenflo is able to
introduce new lines and related products, such as Evenflo's car seat/stroller
combination, or product innovations, such as the EXERSAUCER.
The Company is implementing measures to improve the appeal of its product
line through an increased emphasis on fashionable patterns and fabrics for
products such as strollers and play yards. In order to further distinguish its
products, the Company has arrangements with other national brands such as Serta,
Disney, Warner Bros. and OshKosh in co-branded product offerings such as new
infant mattresses by SERTA-Registered Trademark-, Play Time products decorated
with BABY LOONEY TUNES-REGISTERED TRADEMARK- characters and Feeding Time
products decorated with DISNEY BABIES-Registered Trademark- characters. As part
of its co-branding strategy, Evenflo recently introduced a line of OSHKOSH
B'GOSH-Registered Trademark- by Evenflo products, including car seats,
strollers, play yards and carriers, which the Company believes is the first
product grouping with an integrated look of this kind in the industry. The
Company intends to pursue additional opportunities to improve the design appeal
of its products through co-branding arrangements in the future.
IMPROVE CUSTOMER SERVICE AND SUPPORT. Evenflo's customer service strategy
is premised on management's belief that Evenflo has two customer audiences: the
retail merchant and the end-user of its products. To improve service to its
retail customers, Evenflo has made significant investments as part of Project
Discovery to improve its distribution and warehousing facilities as well as
increase the flexibility of its manufacturing operations to satisfy the "just in
time" needs of many of its largest customers. In addition, Evenflo is in the
process of implementing a $6.5 million information technology program designed
to enhance the Company's information systems, electronic data interchange
("EDI") capabilities and data processing capabilities pursuant to which the
Company spent $1.8 million in the aggregate in the three months ended June 30,
1998. The Company's improved EDI system will lower order placement costs and
increase the accuracy and timeliness of order processing while enabling the
customer to manage inventory levels more efficiently. In addition, the enhanced
information capabilities will permit improved analyses of orders, sales,
customer service levels and inventory and more readily permit the identification
of trends in these items. To improve customer service levels to end-users, in
the past twelve months the Company completed construction of a consumer service
center in Ohio which is staffed with 36 service representatives. In addition,
Evenflo has launched its own website (www.evenflo.com) and has formed
3
<PAGE>
alliances with Lamaze and the SAFE KIDS CAMPAIGN-Registered Trademark-, a
childrens safety advocacy group, to provide safety-related educational materials
to new parents. Further, Evenflo has recently launched a marketing and education
program targeting Hispanic child birth educators and expectant parents in order
to serve the Hispanic community, one of the fastest growing demographic groups
in the United States.
INCREASE INTERNATIONAL PENETRATION. The Company intends to be a global
leader in juvenile products and to significantly increase international net
sales and cash flow. The Company believes that higher birth rates, increasing
income levels, the lowering of trade barriers and the standardization of
juvenile product regulations in certain world markets present significant growth
opportunities. The Company's international sales have historically been made
primarily through its Canadian, Mexican and Philippine operations, as well as
through independent distributors selling to customers in 63 foreign countries.
Recently, the Company has begun to develop additional sales and marketing
capabilities in targeted markets. For example, in May 1998, the Company entered
the European market on a direct basis with a line of locally manufactured
products sold through its own sales and marketing group. The Company is
exploring similar opportunities in Southeast Asia.
REALIZE BENEFITS OF PROJECT DISCOVERY AND GERRY INTEGRATION. During fiscal
1997 and the nine months ended June 30, 1998, Evenflo invested an aggregate of
approximately $88.2 million in capital expenditures to expand its product line
(through the Gerry Acquisition), improve its operations and integrate the
operations of Gerry into its manufacturing and distribution infrastructure.
Evenflo has begun to realize operating efficiencies from these investments,
although the challenges posed by the integration of Gerry's operations have
resulted in increased costs during fiscal 1998 for indirect and non-standard
labor, product testing, scrap, freight, inventory obsolescence and delays in
product introductions which have more than offset the cost savings achieved
through these investments. The Company expects that the process of integrating
the manufacture and distribution of Gerry product lines at the Company's
facilities will be substantially completed by the end of fiscal 1998. In fiscal
1999, the Company believes that its investments in improved manufacturing and
distribution facilities and the increased experience of its workforce in
manufacturing and distributing Gerry products will result in significant
production efficiencies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effects of Gerry Integration; Factors
Affecting Fiscal 1998 Performance." In an effort to improve customer service and
operating efficiencies, Evenflo is developing a program to discontinue a
substantial number of SKUs it produces in order to eliminate certain low margin
SKUs and to decrease its manufacturing burden.
4
<PAGE>
THE TRANSACTIONS
On the Closing Date, KKR 1996 Fund L.P., a Delaware limited partnership
affiliated with Kohlberg Kravis Roberts & Co. L.P. ("KKR"), entered into a stock
purchase agreement (the "KKR Stock Purchase Agreement") pursuant to which KKR
1996 Fund L.P. acquired from Lisco, Inc., a wholly-owned subsidiary of Spalding
("Lisco"), (i) 51% of the outstanding shares of common stock, par value $1.00
per share, of the Company (the "Common Stock"), for a purchase price of $25.5
million and (ii) 400,000 shares of variable rate cumulative preferred stock with
a liquidation preference of $100.00 per share (the "Cumulative Preferred Stock")
for a purchase price of $40.0 million, representing 100% of the outstanding
shares of Cumulative Preferred Stock (the "Preferred Stock Investment"). Lisco
received the 400,000 shares of newly-authorized Cumulative Preferred Stock as a
distribution from the Company (the "Preferred Stock Distribution"). In addition,
on the Closing Date, Great Star Corporation ("Great Star"), an affiliate of
Abarco N.V. ("Abarco"), entered into a stock purchase agreement (the "Great Star
Stock Purchase Agreement") pursuant to which, prior to the acquisition of Common
Stock by KKR 1996 Fund L.P., Great Star acquired 6.6% of the outstanding shares
of Common Stock from Lisco for a purchase price of $3.3 million (collectively,
the "Stock Acquisitions"). Lisco continues to own 42.4% of the Company's
outstanding Common Stock after giving effect to the Transactions. Abarco
currently holds approximately 7% of the outstanding common stock of Spalding.
Concurrently with the Stock Acquisitions and the Preferred Stock Investment, the
Company (i) issued and sold $110.0 million aggregate principal amount of Old
Notes in the Offering and (ii) entered into a $100.0 million revolving credit
facility led by Merrill Lynch Capital Corporation, DLJ Capital Funding, Inc. and
Bank of America National Trust and Savings Association (the "Credit Facility")
and borrowed $10.0 million under the Credit Facility (with an additional $42.0
million of the Credit Facility used to support outstanding letters of credit and
bankers' acceptances on the Closing Date). The Offering and the borrowings under
the Credit Facility are collectively referred to in this Prospectus as the
"Financings."
The Company applied the proceeds of the Financings to repay approximately
$110.0 million of indebtedness owed to Spalding as part of the Stock
Acquisitions and pay transaction fees and expenses of approximately $10.0
million. The Financings, the Preferred Stock Distribution, the Preferred Stock
Investment, the Stock Acquisitions and the repayment of approximately $110.0
million of indebtedness which was owed to Spalding are collectively referred to
in this Prospectus as the "Transactions."
------------------------
The Company's principal offices are located at Northwoods Business Center
II, 707 Crossroads Court, Vandalia, Ohio 45377, and its telephone number is
(937) 415-3300.
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ The Company is offering to exchange pursuant to the
Exchange Offer up to $110,000,000 aggregate principal
amount of its Exchange Notes for a like aggregate
principal amount of its Old Notes. The terms of the
Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity)
to the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that
the Exchange Notes will not bear legends restricting
their transfer, and will not contain provisions
providing for an increase in interest rates under the
circumstances described in the Registration Rights
Agreement. See "The Exchange Offer" and "Description of
the Exchange Notes--Registration Rights; Liquidated
Damages."
Minimum Condition................. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered
for exchange.
Expiration Date; Withdrawal of
Tender.......................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless the Exchange
Offer is extended, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended. The Company does not
currently intend to extend the Expiration Date. Tenders
may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal Rights."
Exchange Date..................... The date of acceptance for exchange of the Old Notes
will be the third business day following the Expiration
Date.
Conditions to the Exchange
Offer........................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the conditions
will be satisfied and that no waivers will be necessary.
See "The Exchange Offer--Certain Conditions to the
Exchange Offer." The Company reserves the right to
terminate or amend the Exchange Offer at any time prior
to the Expiration Date upon the occurrence of any such
condition. If the Company waives or amends any of such
conditions, it will, if required by law, extend the
Exchange Offer for a minimum of five business days from
the date that the Company first gives notice, by public
announcement or otherwise, of such waiver or amendment,
if the Exchange Offer would otherwise expire within such
five business day period.
Procedures for Tendering
Old Notes....................... Each Holder wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with the Old Notes and
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
any other required documentation to the Exchange Agent
at the address set forth therein. See "The Exchange
Offer-- Procedures for Tendering Old Notes" and "Plan of
Distribution."
Use of Proceeds................... There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Federal Income Tax Consequences... The exchange of Notes pursuant to the Exchange Offer
will not be a taxable event for federal income tax
purposes.
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 beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing
the Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's
name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time. See "The Exchange
Offer--Procedures for Tendering Old Notes."
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 Exchange Agent prior to the
Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Old Notes."
Acceptance of Old Notes and
Delivery of Exchange Notes...... The Company will accept for exchange any and all Old
Notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant to
the Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer--Acceptance
of Old Notes for Exchange; Delivery of Exchange Notes."
Effect on Holders of Old Notes.... As a result of the making of, and upon acceptance for
exchange of all validly tendered Old Notes pursuant to
the terms of this Exchange Offer, the Company will have
fulfilled a covenant contained in the Registration
Rights Agreement (the "Registration Rights Agreement")
dated as of August 20, 1998 among the Company and
Donaldson, Lufkin & Jenrette Securities Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
BancAmerica Robertson Stephens (the "Initial
Purchasers") and, accordingly, there will be no increase
in the interest rate on the Old Notes under the
circumstances
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
described in the Registration Rights Agreement, and the
holders of the Old Notes will have no further
registration or other rights under the Registration
Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will
continue to hold such Old Notes and will be entitled to
all the rights and limitations applicable thereto under
the Indenture dated as of August 20, 1998 between the
Company and Marine Midland Bank relating to the Old
Notes and the Exchange Notes (the "Indenture"), except
for any such rights under the Registration Rights
Agreement that by their terms terminate or cease to have
further effectiveness as a result of the making of, and
the acceptance for exchange of all validly tendered Old
Notes pursuant to, the Exchange Offer. All untendered
Old Notes will continue to be subject to the
restrictions on transfer provided for in the Old Notes
and in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading
market for untendered Old Notes could be adversely
affected. See "Description of the Exchange
Notes--Registration Rights; Liquidated Damages."
Consequence of Failure
to Exchange..................... Holders of Old Notes who do not exchange their Old Notes
for Exchange 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. In
general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state
securities laws. Other than in connection with the
Exchange Offer, the Company does not currently
anticipate that it will register the Old Notes under the
Securities Act.
Exchange Agent.................... Marine Midland Bank is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer.
See "The Exchange Offer--Exchange Agent."
</TABLE>
THE EXCHANGE NOTES
<TABLE>
<S> <C>
Issuer:........................... Evenflo Company, Inc.
Securities Offered:............... $110,000,000 aggregate principal amount of 11 3/4%
Series B Senior Notes due 2006.
Maturity Date:.................... August 15, 2006.
Interest Payment Dates:........... Interest on the Exchange Notes will accrue at the rate
of 11 3/4% per annum, payable semi-annually in cash in
arrears on August 15, and February 15, of each year,
commencing February 15, 1999.
Optional Redemption:.............. At any time or from time to time on or after August 15,
2002, the Company may redeem the Exchange Notes, at the
redemption prices set forth herein, plus accrued and
unpaid
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
interest, if any, to the date of redemption.
Notwithstanding the foregoing, at any time or from time
to time on or prior to August 15, 2001, the Company may
redeem, at its option, up to 35% of the aggregate
principal amount of the Exchange Notes originally issued
at a redemption price equal to 111.75% of the principal
amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption with the net cash
proceeds of one or more Equity Offerings; PROVIDED that
at least 65% in aggregate principal amount of the
Exchange Notes originally issued remains outstanding
after each such redemption. See "Description of the
Exchange Notes--Optional Redemption."
Ranking:.......................... The Exchange Notes will be senior unsecured obligations
of the Company and will rank PARI PASSU in right of
payment to all existing and future senior indebtedness
of the Company. The Exchange Notes will be effectively
subordinated to all existing and future senior secured
indebtedness of the Company to the extent of the value
of the assets securing such indebtedness and will be
effectively subordinated to all obligations of the
subsidiaries of the Company. As of June 30, 1998, on a
pro forma basis after giving effect to the Transactions,
the aggregate principal amount of indebtedness of the
Company would have been approximately $120.0 million
(excluding $48.0 million of availability under the
Credit Facility after giving effect to $42.0 million of
outstanding letters of credit and bankers' acceptances),
$10.0 million of which would have been senior secured
indebtedness under the Credit Facility. As of June 30,
1998, on a pro forma basis after giving effect to the
Transactions, the aggregate principal amount of the
outstanding indebtedness and other liabilities and
commitments of the subsidiaries of the Company would
have been approximately $2.8 million (excluding
guarantees in respect of the Credit Facility). As of
June 30, 1998, on the same pro forma basis, the Exchange
Notes would not have been senior to any indebtedness of
the Company. See "Risk Factors--Effective Structural
Subordination", "--Encumbrances on Assets to Secure
Credit Facility" and "Description of the Credit
Facility."
Change of Control:................ Upon the occurrence of a Change of Control, the Company
will have the option, at any time on or prior to August
15, 2002, to redeem the Exchange Notes, in whole but not
in part, at a redemption price equal to 100% of the
aggregate principal amount thereof plus the Applicable
Premium, together with accrued and unpaid interest, if
any, to the date of redemption. Upon the occurrence of a
Change of Control, if the Company does not so redeem the
Exchange Notes or if a Change of Control occurs after
August 15, 2002, the Company will be required to make an
offer to purchase all of the outstanding Exchange Notes
at a price equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of
purchase. See "Description of the Exchange Notes--
Repurchase at the Option of Holders--Change of Control."
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Certain Covenants:................ The Indenture (as defined) contains certain covenants
that, among other things, limit the ability of the
Company and its Restricted Subsidiaries (as defined) to:
(i) incur additional indebtedness; (ii) repay certain
other indebtedness; (iii) pay dividends or make certain
other distributions; (iv) repurchase equity interests;
(v) consummate certain asset sales; (vi) enter into
certain transactions with affiliates; (vii) enter into
sale and leaseback transactions; (viii) incur liens;
(ix) merge or consolidate with any other person; (x)
enter into certain guarantees of indebtedness; (xi)
sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the
Company or a Restricted Subsidiary; or (xii) enter into
certain agreements which restrict the rights of
subsidiaries to make dividends or sell assets. See "Risk
Factors--Restrictive Covenants" and "Description of the
Exchange Notes--Certain Covenants." In addition, under
certain circumstances, the Company is required to make
an offer to purchase the Exchange Notes at a price equal
to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of purchase,
with the proceeds of certain Asset Sales (as defined).
See "Description of the Exchange Notes--Repurchase at
the Option of Holders--Asset Sales."
Use of Proceeds:.................. There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders of Old Notes prior to tendering Old Notes in the Exchange
Offer.
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary historical and pro forma
consolidated financial data of the Company. The historical consolidated
operating statement data of the Company for the three fiscal years ended
September 30, 1997 have been derived from, and should be read in conjunction
with, the audited consolidated financial statements of the Company and the
related notes thereto included elsewhere in this Prospectus. The historical
unaudited consolidated financial data for the nine months ended June 30, 1997
and 1998 have been derived from, and should be read in conjunction with, the
unaudited condensed consolidated financial statements of the Company and the
related notes thereto included elsewhere in this Prospectus. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included in the unaudited condensed consolidated financial statements of
the Company. Interim results for the nine months ended June 30, 1998 are not
necessarily indicative of results that can be expected for the entire 1998
fiscal year. The pro forma consolidated financial data have been derived from
the Pro Forma Financial Statements (as defined) and the related notes thereto
included elsewhere in this Prospectus. The pro forma operating statement data
(i) for fiscal 1997 give effect to the Transactions and the Gerry Acquisition as
if such transactions were consummated on October 1, 1996 and (ii) for the 52
weeks ended June 30, 1998 give effect to the Transactions as if the Transactions
occurred on July 1, 1997. The pro forma balance sheet data give effect to the
Transactions as if such transactions had occurred as of June 30, 1998. See
"Selected Consolidated Historical Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Pro Forma Condensed
Consolidated Financial Statements" and the historical consolidated financial
statements and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
52 WEEKS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
-------------------------------------------- JUNE 30, -----------
PRO FORMA -------------------- PRO FORMA
1995 1996 1997 1997 1997 1998 1998
--------- --------- --------- ----------- --------- --------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Net sales............................... $210,039 $237,165 $296,743 $358,105 $205,650 $245,233 $336,326
Cost of sales(1)........................ 157,611 178,733 235,925 288,200 161,036 197,119 272,008
--------- --------- --------- ----------- --------- --------- -----------
Gross profit............................ 52,428 58,432 60,818 69,905 44,614 48,114 64,318
Selling, general and administrative
expenses(2)........................... 41,518 42,801 52,232 65,766 36,688 45,363 63,757
Restructuring costs(3).................. 0 0 9,591 9,591 404 1,443 10,630
Allocated Spalding expenses(4).......... 2,500 2,500 2,900 0 2,150 2,100 0
1994 Management Stock Ownership Plan
expense(5)............................ 107 2,621 0 0 0 0 0
--------- --------- --------- ----------- --------- --------- -----------
Income (loss) from operations........... 8,303 10,510 (3,905) (5,452) 5,372 (792) (10,069)
Interest expense, net................... 4,273 4,128 7,243 15,280 4,572 8,102 15,646
Currency loss, net...................... 833 204 47 47 100 510 457
--------- --------- --------- ----------- --------- --------- -----------
Earnings (loss) before income taxes and
extraordinary loss.................... 3,197 6,178 (11,195) (20,779) 700 (9,404) (26,172)
Income taxes (benefit).................. 1,052 3,197 (4,884) (8,622) 308 (3,675) (10,767)
--------- --------- --------- ----------- --------- --------- -----------
Earnings (loss) before extraordinary
loss.................................. 2,145 2,981 (6,311) (12,157) 392 (5,729) (15,404)
Extraordinary loss on early
extinguishment of debt, net of $360
tax benefit........................... 0 560 0 0 0 0 0
--------- --------- --------- ----------- --------- --------- -----------
Net earnings (loss)..................... $2,145 $2,421 $(6,311) $(12,157)(6) $392 $(5,729) $(15,404)(6)
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
OTHER DATA
EBITDA(7)............................... $12,988 $16,808 $14,952 $15,614 $12,743 $10,901 $13,110
Adjusted EBITDA(7)...................... 12,988 20,450 24,710 25,372 16,583 11,835 19,961
Depreciation and amortization........... 5,518 6,502 9,313 11,522 7,067 10,760 13,006
Capital expenditures.................... 6,531 9,377 20,927 23,237 14,865 13,112 19,174
Cash interest expense(8)................ 4,266 3,732 6,763 14,334 4,302 7,730 14,598
Adjusted EBITDA to pro forma cash interest expense.......................................................... 1.4x
Total debt to Adjusted EBITDA............................................................................... 6.0x
</TABLE>
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<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
------------------------
HISTORICAL PRO FORMA
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................................................. $ 3,756 $ 3,756
Working capital(9)........................................................................ 69,816 69,816
Total assets.............................................................................. 271,535 275,435
Total debt(10)............................................................................ 131,737 120,000
Common shareholders' equity............................................................... 50,890 26,527
</TABLE>
- ------------------------
(1) Included in cost of sales are unusual costs related to (i) Project
Discovery for the manufacturing and warehouse reconfiguration at Piqua,
Ohio, consisting of charges of $2.7 million in fiscal 1997, $1.5 million in
the nine months ended June 30, 1997, and $0.2 million in the nine months
ended June 30, 1998 and (ii) the integration of Gerry for (a) a $3.1
million inventory write-down in fiscal 1997 resulting from a decision to
discontinue the sale of certain Gerry products, (b) a charge of $1.3
million in fiscal 1997 and in the nine months ended June 30, 1997 as a
result of expensing the increase to fair value of Gerry's inventories as
such inventory was sold, such increase resulting from the application of
purchase accounting in the Gerry Acquisition, and (c) a charge of $0.2
million in the nine months ended June 30, 1998, for expenses to relocate
the Gerry Colorado warehouse operations to Evenflo's Ohio and Georgia
locations.
(2) Included in selling, general and administrative expenses are unusual costs
related to (i) combining Evenflo's feeding and furniture operations which
were previously managed separately, consisting of charges of $1.3 million
in fiscal 1996, $2.6 million in fiscal 1997 and $1.0 million in the nine
months ended June 30, 1997, (ii) accounts receivable charge-offs as a
result of the bankruptcy of two of its customers consisting of a charge of
$2.3 million in fiscal 1996 and (iii) Year 2000 conversions costs
consisting of a charge of $0.5 million in the nine months ended June 30,
1998. Selling, general and administrative expenses, on a pro forma basis,
include an amount equal to the expense incurred by the Company for
allocated Spalding expenses. See footnote 4.
(3) In fiscal 1997, the nine months ended June 30, 1997 and the nine months
ended June 30, 1998, the Company incurred $9.6 million, $0.4 million and
$1.4 million, respectively, of restructuring costs to relocate the Gerry
Colorado administrative and manufacturing operations to Evenflo's Ohio and
Georgia locations. See Note F of the Notes to the Consolidated Financial
Statements appearing elsewhere in this Prospectus.
(4) Represents an allocation from Spalding (based on the Company's net sales as
a percentage of those of Spalding) of administrative expenses for
assistance provided in the areas of accounting, auditing, employee
relations, insurance, legal, planning, tax and treasury and $0.8 million in
allocated out-of-pocket expenses relating to acquisition activity incurred
by Spalding on behalf of the Company in fiscal 1997. After the
Transactions, the Company will incur expenses pursuant to the Transition
Services Agreement (as defined) with Spalding at the cost of providing such
services for the continuation of such services during the period in which
the Company develops its internal capabilities. Such costs will be
reflected as a selling, general and administrative expense. After the
termination of the Transition Services Agreement, the Company expects to
incur $3.0 million of expense on an annual basis to replace such services.
The Transition Services Agreement terminates with respect to the majority
of such services on September 30, 1998.
(5) Represents $0.1 million and $2.6 million of compensation expense for fiscal
1995 and 1996, respectively, related to the increase in the value of common
stock of Spalding held by certain members of Company management through the
1994 Management Stock Ownership Plan and to the settlement of such plan in
the 1996 recapitalization of Spalding (the "Recapitalization").
(6) Represents pro forma net earnings (loss) before reduction for annual
preferred stock dividend requirements of $5.6 million, assuming an annual
dividend rate of 14%.
(7) "EBITDA", as defined, represents earnings (loss) before interest expense,
income taxes, depreciation, amortization, extraordinary items and
restructuring costs. "Adjusted EBITDA" represents EBITDA before unusual
costs. The Company believes that EBITDA and Adjusted EBITDA provide useful
information regarding the Company's ability to service its debt, and the
Company understands that such information is considered by certain
investors to be an additional basis for evaluating the Company's ability to
pay interest and repay debt. EBITDA and Adjusted EBITDA do not, however,
represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as a substitute for net
earnings as an indicator of the Company's operating performance or cash
flow as a measure of liquidity. Because EBITDA and Adjusted EBITDA are not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies. EBITDA,
as defined, has been presented before giving effect to restructuring costs
for fiscal 1997, for pro forma fiscal 1997, for the nine months ended June
30, 1997, for the nine months ended June 30, 1998, and for the pro forma 52
weeks ended June 30, 1998. After giving effect to such restucturing costs,
earnings (loss) before interest expense, income taxes, depreciation,
amortization and extraordinary items for such periods are (in millions)
$5.4, $6.0, $12.3, $9.4 and
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$2.5, respectively. See the Company's Consolidated Financial Statements,
and related notes thereto, included elsewhere in this Prospectus. The
components of EBITDA and Adjusted EBITDA are as follows:
<TABLE>
<CAPTION>
52 WEEKS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
-------------------------------------------- JUNE 30, -----------
PRO FORMA -------------------- PRO FORMA
1995 1996 1997 1997 1997 1998 1998
--------- --------- --------- ----------- --------- --------- -----------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes and
extraordinary loss............................ $ 3.2 $ 6.2 $ (11.2) $ (20.8) $ 0.7 $ (9.4) $ (26.2)
Interest expense............................... 4.3 4.1 7.2 15.3 4.6 8.1 15.6
Depreciation and amortization.................. 5.5 6.5 9.3 11.5 7.1 10.8 13.0
Restructuring costs(a)......................... -- -- 9.6 9.6 0.4 1.4 10.6
--------- --------- --------- ----------- --------- --------- -----------
EBITDA......................................... 13.0 16.8 15.0 15.6 12.7 10.9 13.1
Unusual costs(a):
Project Discovery.......................... -- -- 2.7 2.7 1.5 0.2 1.4
Combining feeding and furniture
operations................................. -- 1.3 2.6 2.6 1.0 -- 1.6
Gerry integration.......................... -- -- 4.4 4.4 1.3 0.2 3.3
Other...................................... -- 2.3 -- -- -- 0.5 0.5
--------- --------- --------- ----------- --------- --------- -----------
Adjusted EBITDA................................ $ 13.0 $ 20.5 $ 24.7 $ 25.4 $ 16.6 $ 11.8 $ 20.0
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
</TABLE>
- ------------------------
(a) For a more complete description of such items, see footnotes (1), (2)
and (3) above.
The Company estimates fiscal 1998 total restructuring and other unusual
costs may approximate $2.6 million in the aggregate.
(8) Cash interest expense is defined as interest expense paid exclusive of
amortization of deferred financing costs.
(9) Working capital excludes cash and cash equivalents.
(10) Historical total debt includes long-term debt and payable to Spalding.
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<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION SET FORTH IN THIS
PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE FOLLOWING RISKS BEFORE
DECIDING TO TENDER OLD NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH
BELOW ARE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE EXCHANGE NOTES.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange 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. In general,
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. The Company does not currently intend to register the Old Notes under the
Securities Act. 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 will be adversely affected.
SIGNIFICANT LEVERAGE AND DIVIDEND REQUIREMENTS
The Company incurred substantial indebtedness and preferred stock dividend
requirements in connection with the Transactions. As a result, the Company is
highly leveraged. As of June 30, 1998, after giving pro forma effect to the
Transactions, the Company would have had $120.0 million of consolidated
indebtedness and $26.5 million of consolidated common shareholders' equity. Pro
forma interest expense for fiscal 1997 and the nine months ended June 30, 1998
would have been $15.3 million and $11.7 million, respectively. See
"Capitalization" and "Pro Forma Condensed Consolidated Financial Statements." In
addition, the Company issued $40.0 million of aggregate liquidation preference
of Cumulative Preferred Stock on August 20, 1998. On a pro forma basis after
giving effect to the Transactions, for fiscal 1997 and the nine months ended
June 30, 1998, the Company would have had noncash preferred stock dividends of
$5.6 million and $4.2 million, respectively. The Company and its subsidiaries
may incur additional indebtedness in the future, subject to certain limitations
contained in the instruments governing its indebtedness, including the Exchange
Notes. Accordingly, the Company will have significant debt service obligations.
The Company's debt service obligations could have important consequences to
the Holders, including the following: (i) a substantial portion of the Company's
cash flow will be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for
operations, product research and development, future business opportunities and
other purposes and increasing the Company's vulnerability to adverse general
economic and industry conditions; (ii) the Company's ability to obtain
additional financing in the future may be limited; (iii) certain of the
Company's borrowings (including, but not limited to, $10.0 million of borrowings
under the Credit Facility on the Closing Date) are and will continue to be at
variable rates of interest, which could cause the Company to be vulnerable to
increases in interest rates; (iv) all of the indebtedness incurred in connection
with the Credit Facility will become due prior to the time the principal
payments on the Exchange Notes will become due; and (v) the Company will be
substantially more leveraged than certain of its competitors, which might place
the Company at a competitive disadvantage.
The Company's ability to make scheduled payments of the principal of, or to
pay interest on, or to refinance its indebtedness (including the Exchange
Notes), to make scheduled payments under its leases, to fund planned capital
expenditures and finance acquisitions depends on its future performance, which
to a certain extent is subject to economic, financial, competitive and other
factors beyond its control. Based upon the current level of operations and
anticipated growth, management believes that future cash flow from operations,
together with available borrowings under the Credit Facility, will be adequate
to meet the Company's anticipated requirements for working capital, capital
expenditures, lease payments, interest
14
<PAGE>
payments and scheduled principal payments. Any future acquisitions, joint
ventures or other similar transactions will likely require additional capital
and there can be no assurance that any such capital will be available to the
Company on acceptable terms or at all. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources." There can also be no assurance that the Company's business will
continue to generate sufficient cash flow from operations in the future to
service its debt, make necessary capital expenditures or meet its other cash
needs. If unable to do so, the Company may be required to refinance all or a
portion of its existing debt, including the Exchange Notes, to sell assets or to
obtain additional financing. There can be no assurance that any such refinancing
would be possible or that any such sales of assets or additional financing could
be achieved on terms reasonably favorable to the Company.
RESTRICTIVE COVENANTS
The Credit Facility and the Indenture contain numerous financial and
operating covenants that limit the discretion of the Company's management with
respect to certain business matters. These covenants place significant
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to make certain
payments and investments, and to sell or otherwise dispose of assets and merge
or consolidate with other entities. See "Description of the Credit Facility" and
"Description of the Exchange Notes--Certain Covenants." The Credit Facility also
requires the Company to meet certain financial ratios and tests. The ability of
the Company to comply with these and other provisions of the Credit Facility and
the Indenture may be affected by changes in economic or business conditions or
other events beyond the Company's control. A failure to comply with the
obligations contained in the Credit Facility or the Indenture could result in an
event of default under either the Credit Facility or the Indenture which could
result in acceleration of the related debt and the acceleration of debt under
other instruments evidencing indebtedness that may contain cross-acceleration or
cross-default provisions. If the indebtedness under the Credit Facility were to
be accelerated, there can be no assurance that the assets of the Company would
be sufficient to repay in full such indebtedness and the other indebtedness of
the Company, including the Exchange Notes.
EFFECTIVE STRUCTURAL SUBORDINATION
The Company derives a substantial portion of its revenue from its
subsidiaries. Holders of indebtedness of, and trade creditors of, subsidiaries
of the Company would generally be entitled to payment of their claims from the
assets of the affected subsidiaries before such assets were made available for
distribution to the Company. The Indenture permits the incurrence of substantial
indebtedness by the Company's subsidiaries and permits significant investments
by the Company in subsidiaries, including Restricted Subsidiaries. In the event
of a bankruptcy, liquidation or reorganization of a subsidiary, holders of any
of such subsidiary's indebtedness will have a claim to the assets of the
subsidiary that is prior to the Company's interest in those assets. As of June
30, 1998, on a pro forma basis after giving effect to the Transactions, the
aggregate principal amount of the outstanding indebtedness and other liabilities
and commitments of the subsidiaries of the Company would have been $2.8 million
(excluding guarantees in respect of the Credit Facility). As of June 30, 1998,
on the same pro forma basis, the Exchange Notes would not have been senior to
any indebtedness of the Company.
ENCUMBRANCES ON ASSETS TO SECURE CREDIT FACILITY
The Exchange Notes will not be secured by any of the Company's assets. The
Exchange Notes will be effectively subordinated to any secured indebtedness of
the Company to the extent of the value of the assets securing such indebtedness,
including indebtedness under the Credit Facility. The Company's obligations
under the Credit Facility are secured by a first priority pledge of and security
interest in (i) the stock of all the existing and subsequently acquired material
direct domestic subsidiaries of the Company other than common stock of
unrestricted subsidiaries and certain subsidiaries created or acquired in
15
<PAGE>
connection with permitted acquisitions, (ii) 65% of the common stock of existing
and subsequently acquired material direct foreign subsidiaries, with certain
exceptions, and (iii) accounts receivable, inventory and certain intangible
assets, including intellectual property, with certain exceptions. In addition,
the Company's obligations under the Credit Facility are guaranteed by each of
its domestic subsidiaries, with certain exceptions, and the Exchange Notes will
not be similarly guaranteed. If the Company becomes insolvent or is liquidated,
or if payment under the Credit Facility is accelerated, the lenders under the
Credit Facility will be entitled to exercise the remedies available to a secured
lender under applicable law. Holders will participate ratably with all holders
of unsecured indebtedness of the Company that is deemed to be of the same class
as the Exchange Notes, and potentially with all other general creditors of the
Company, based upon the respective amounts owed to each holder or creditor, in
the remaining assets of the Company. In any of the foregoing events, there can
be no assurance that there would be sufficient assets to pay amounts due on the
Exchange Notes. As a result, Holders may receive less, ratably, than holders of
secured indebtedness.
As of June 30, 1998, on a pro forma basis after giving effect to the
Transactions, $10.0 million of senior secured indebtedness of the Company and
its subsidiaries (all of which are borrowings under the Credit Facility) would
have been outstanding, and $48.0 million would have been available for
additional borrowing under the Credit Facility, subject to certain limitations
and after giving effect to $42.0 million of outstanding letters of credit and
bankers' acceptances. The Indenture permits the incurrence of substantial
additional secured indebtedness by the Company and its Restricted Subsidiaries
in the future. See "Description of the Credit Facility" and "Description of the
Exchange Notes."
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control
(unless the Change of Control occurs on or prior to August 15, 2002 and the
Company elects to redeem the Exchange Notes), the Company will make an offer to
purchase all of the Exchange Notes at a price in cash equal to 101% of the
aggregate principal amount thereof together with accrued and unpaid interest, if
any, to the date of purchase. The Credit Facility prohibits the Company from
repurchasing any Exchange Notes, except with the proceeds of one or more Equity
Offerings and a portion of excess cash flow and other amounts not applied to
repay borrowings. The Credit Facility also provides that certain change of
control events with respect to the Company will constitute a default thereunder.
A default under the Credit Facility would result in an Event of Default under
the Indenture if the lenders under the Credit Facility accelerate their loans.
Any future credit agreements or other agreements to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing the
Exchange Notes, or if the Company is required to make an Asset Sale Offer (as
defined) pursuant to the terms of the Exchange Notes, the Company could seek the
consent of its lenders to the purchase of the Exchange Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing the Exchange Notes. In such case, the Company's
failure to purchase tendered Exchange Notes would constitute an Event of Default
under the Indenture, which would result in an event of default under the Credit
Facility. The provisions relating to a Change of Control included in the
Indenture may increase the difficulty of a potential acquiror obtaining control
of the Company. See "Description of the Exchange Notes--Repurchase at the Option
of Holders--Change of Control" and "Description of the Credit Facility."
POTENTIAL FOR INCREASED COMPETITION
The juvenile products industry is highly competitive and is characterized by
frequent introductions of new products, often accompanied by advertising and
promotional programs. Evenflo competes with numerous national and international
companies which manufacture and distribute infant and juvenile products, a
number of which have greater financial and other resources at their disposal.
Evenflo's
16
<PAGE>
principal competitors include Century Products Company, Inc. (a subsidiary of
Rubbermaid, Inc.) ("Century"), Graco Children's Products, Inc. (a subsidiary of
Rubbermaid, Inc.) ("Graco"), Cosco Inc. (a subsidiary of Dorel Industries Inc.)
("Cosco"), The First Years, Inc. ("First Years"), Fisher-Price (a division of
Mattel, Inc.) ("Fisher-Price"), Gerber Products Company (a subsidiary of Sandoz
Ltd.) ("Gerber"), Johnson & Johnson, Kolcraft Enterprises, Inc. ("Kolcraft"),
Playtex Products, Inc. ("Playtex") and Safety 1st, Inc. ("Safety 1st").
A number of factors affect competition in the juvenile products manufactured
and/or sold by the Company, including quality, price competition from
competitors and price points parameters established by the Company's customers.
Shelf space is a key factor in determining retail sales of juvenile care
products. A competitor that is able to maintain or increase the amount of retail
space allocated to its product may gain a competitive advantage for that
product. The allocation of retail space is influenced by many factors, including
brand name recognition, quality and price of the product, level of service by
the manufacturer and promotions.
In addition, new product introductions are an important factor in the
categories in which the Company's products compete. Other important competitive
factors are brand identification, style, design, packaging and the level of
service provided to customers. The importance of these competitive factors
varies from customer to customer and from product to product. See "--Product
Innovation" and "Business--Competition." There can be no assurance that the
Company will be able to compete successfully against current and future sources
of competition or that the current and future competitive pressures faced by the
Company will not adversely affect its profitability or financial performance.
In the On The Go product category, Graco has recently entered the monitor
and travel system markets, which has resulted in an increase in competition in
these markets.
NO PRIOR OPERATIONS AS AN INDEPENDENT COMPANY
Prior to the Transactions, the Company was operated as a wholly-owned
subsidiary of Spalding. While a wholly-owned subsidiary of Spalding, Spalding
provided the Company with credit support, as well as accounting, auditing,
employee relations, insurance, legal, planning, tax, treasury and other
administrative support services. Spalding has agreed to continue to provide many
of these services for up to six months after the Closing Date, after which time
the Company will be required to provide for such services either internally or
through third parties. The Transition Services Agreement terminates with respect
to the majority of such services on September 30, 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--General" and "Certain Relationships and Related Transactions." There
can be no assurance that the Company will be able to obtain replacement sources
for such services, or if obtained, that the cost of such services will not be
significantly in excess of allocated Spalding expenses for periods prior to the
Transactions or that the provision of such services during the transition period
after the termination of the Transition Services Agreement will be performed
without interruption or delay due to unanticipated circumstances. The historical
financial statements and Pro Forma Financial Statements presented in this
Prospectus may not necessarily be indicative of the results that would have been
attained had the Company operated as an independent entity.
IMPLEMENTATION OF BUSINESS STRATEGY
The Company is pursuing a strategy of attaining leading market shares in
additional product areas, focusing on production and development, capitalizing
on its strong brand identity, improving customer service and support, increasing
its international penetration and realizing the benefits of Project Discovery
and the Gerry integration. The Company's ability to achieve its objectives is
subject to a variety of factors, many of which are beyond the Company's control.
In recent periods, the Company's financial results have been adversely affected
by inventory reductions by Toys "R" Us, declines in international sales due to,
among other things, economic disruptions in certain Asian economies, the effects
of product recalls and
17
<PAGE>
corrective actions, delays in product introductions, delays in the shipment of
products to certain customers, product introductions by competitors and a change
in the mix of sales as the Company expedites the sale of certain slower moving
inventory in anticipation of the SKU reduction program. In addition, while the
Company has begun to realize operating efficiencies from its investments in
integrating Gerry and from Project Discovery, the challenges posed by the
integration of Gerry's operations have resulted in increased costs during fiscal
1998 for indirect and non-standard labor, product testing, scrap, freight,
inventory obsolescence and delays in product introductions which have more than
offset the cost savings achieved from these investments. While the Company
expects that the process of integrating the manufacture and distribution of
Gerry product lines at the Company's facilities will be substantially completed
by the end of fiscal 1998, there can be no assurance that the anticipated
savings will be achieved or that any such savings will not be offset by the
factors discussed above or other factors, some of which may be beyond the
control of the Company. There can be no assurance that the Company will be
successful in implementing its business strategy or that the implementation of
this strategy will improve operating results. See "--Risks Associated with
International Markets; Dependence on Foreign Manufacturing," "--Product
Regulation; Product Recalls," "--Product Liability Litigation" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Effects of Gerry Integration; Factors Affecting Fiscal 1998
Performance."
DEPENDENCE ON CERTAIN CUSTOMERS
Certain customers are material to the business and operations of the
Company. The five largest customers of Evenflo represented approximately 59% of
Evenflo's pro forma net sales for fiscal 1997 with Toys "R" Us, Wal-Mart and
Sears representing 20%, 17% and 8%, respectively, of pro forma net sales for
such period. For fiscal 1996, the five largest customers of Evenflo represented
approximately 51% of Evenflo's net sales with Toys "R" Us, Wal-Mart and Sears
representing 19%, 15% and 8%, respectively, of net sales for such period. The
Company does not have long-term purchase agreements or other contractual
assurances as to future sales to these major customers. Toys "R" Us announced in
April 1998 that it would change its buying patterns to reduce inventory and
spread purchasing more evenly throughout the year. The Company, as a result of
this action, recorded lower net sales to Toys "R" Us in the third quarter of
fiscal 1998 than in the comparable period of the prior year. In addition, in
September 1998, Toys "R" Us announced additional measures to restructure its
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Integration of Gerry; Factors Affecting Fiscal 1998."
Decreased levels or the deferral of orders by the Company's major customers in
the past have had, and in the future may have, a material adverse effect on the
Company's results of operations. In addition, due to the allocation of retail
shelf space to suppliers' products far in advance of the placement and shipment
of orders for such products, the Company's net sales are reliant to a certain
extent on the ability of its national accounts to successfully execute on such
plans, and any deferral of orders may not allow sufficient notice to obtain
satisfactory alternative arrangements for the sale of such products. Although
management does not currently expect to lose any of these customers, the loss of
one or more such customers would have a material adverse effect on the business
and operations of the Company.
In addition, continued consolidation within the retail industry has resulted
in an increasingly concentrated retail base. To the extent such consolidation
continues to occur, the Company's net sales and profitability may be
increasingly sensitive to a deterioration in the financial condition of or other
adverse developments in its relationships with one or more customers.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS; DEPENDENCE ON FOREIGN MANUFACTURING
A significant portion of the Company's sales is derived from international
markets. During fiscal 1997, approximately 14% of the Company's pro forma net
sales were generated outside of the United States, primarily in Mexico and
Canada. In recent periods, the Company has experienced declines in net sales in
its international markets and there can be no assurance that such trend will not
continue in future periods.
18
<PAGE>
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." Approximately 28% of the Company's international pro forma net
sales in fiscal 1997 were made in U.S. dollars, with the balance realized in
other currencies. Currency exchange rate fluctuations may significantly affect
the Company's foreign sales and earnings. Increased strength of the U.S. dollar
will increase the effective price of the Company's products sold in U.S. dollars
and therefore may materially adversely affect net sales. The Company's costs are
primarily denominated in U.S. dollars, although the Company sources product, as
described below, from China, Thailand, Taiwan, Hong Kong and other countries in
Southeast Asia. In fiscal 1997, approximately 10% of net sales were generated in
non-U.S. currencies. With respect to the sales conducted in foreign currencies,
increased strength of the U.S. dollar could decrease the Company's reported
revenues and margins in respect of such sales to the extent the Company is
unable or determines not to increase local currency prices.
Increasing its sales in international markets, particularly Europe, Latin
America and Asia, is a component of the Company's business strategy. As a
result, economic conditions in these markets could have an increasingly
significant effect on the Company's operating results. Certain Asian economies
have experienced recent economic disruptions, including significant currency
devaluation. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
For fiscal 1997, sales of products which were manufactured by suppliers in
foreign countries, primarily in China, Thailand, Taiwan, Hong Kong and other
countries in Southeast Asia, represented approximately 26% of the Company's pro
forma net sales, with one supplier, Lordship, manufacturing products
representing approximately 17% of Evenflo's pro forma net sales for fiscal 1997.
Although the Company believes that products manufactured by its foreign
suppliers could be replaced over time, any interruption in the supply of such
goods or increase in price or decline in quality could have a material adverse
effect on its results of operations. In addition, the Company owns two
manufacturing facilities in Mexico. The facility in Mexico City produces goods
for sale in Mexico and elsewhere in Latin America and the facility in Tijuana
produces goods for sale in the United States and Canada. Products produced by
the Company's facilities in Mexico generated 4.5% of the Company's pro forma
fiscal 1997 net sales.
The Company's international sales, operations and arrangements with foreign
manufacturers are also subject to other risks, including different legal and
regulatory requirements in local jurisdictions; export duties or import quotas;
domestic and foreign customs and tariffs or other trade barriers; potential
difficulties in staffing and labor disputes; managing and obtaining support and
distribution for local operations; increased costs of transportation or
shipping; credit risk or financial condition of local customers and
distributors; potential difficulties in protecting intellectual property; risk
of nationalization of private enterprises; potential imposition of restrictions
on investments; potentially adverse tax consequences, including imposition or
increase of withholding and other taxes on remittances and other payments by
subsidiaries; foreign exchange restrictions; and local political and social
conditions, including the possibility of hyperinflationary conditions and
political instability in certain countries. There can be no assurance that the
foregoing factors will not have a material adverse effect on the Company's
international operations or sales or arrangements with foreign manufacturers and
therefore upon its financial condition and results of operations.
The Company's continued growth is dependent in part upon its ability to
expand its operations into international markets where it currently has little
presence. The Company may experience difficulty entering new international
markets due to greater regulatory barriers than in the United States, the
necessity of adapting to new regulatory systems and problems related to entering
new markets with different cultural bases and political systems. As the Company
continues to expand its international operations, these and other risks
associated with international operations are likely to increase. In addition, as
the Company enters new geographic markets, it may encounter significant
competition from the primary participants in such markets, some of which may
have substantially greater resources than the Company.
19
<PAGE>
PRODUCT REGULATION; PRODUCT RECALLS
The Company's products are subject to the provisions of the Federal Consumer
Product Safety Act and the Federal Hazardous Substances Act, the Highway Safety
Act of 1970 (collectively, the "Safety Acts") and the regulations promulgated
thereunder. The Safety Acts authorize the Consumer Product Safety Commission
("CPSC") to protect the public from products which present a substantial risk of
injury. The Highway Safety Act of 1970 authorizes the National Highway Traffic
Safety Administration (the "NHTSA") to protect the public from risks of injury
from motor vehicles and motor vehicle equipment. The CPSC, the NHTSA and the
Federal Trade Commission (the "FTC") can initiate litigation requesting that a
manufacturer be required to remedy, repurchase or recall articles which fail to
comply with federal regulations, which contain a safety related defect or which
represent a substantial risk of injury to users. They may also impose fines or
penalties on the manufacturer. Similar laws exist in some states and in other
countries in which the Company markets its products. Any recall of its products
could have a material adverse effect on the Company.
In the past five years, Evenflo had two product recalls and took ten
corrective actions with respect to recalled and other products. Corrective
actions are steps taken by the Company short of a recall which involve
delivering instructions or repair kits to consumers in order to assure proper
usage and performance of a product. Within the last 12 months, the Company
executed two recalls and took five corrective actions, including: the offer of a
repair kit for the ON MY WAY car seat in March 1998 affecting approximately
800,000 units due to the potential for slippage of the handle lock when used as
a carrier; and the provision of a retrofit plastic reinforcing sleeve for the
HAPPY CAMPER play yard in June 1997 affecting approximately 1.2 million units to
encourage full rotation of the locking hinge and to prevent breaking or cracking
of the plastic hinges. These two corrective actions accounted for 52% of the
Company's expenditures for recalls and corrective actions in fiscal 1997 and for
the nine months ended June 30, 1998. In fiscal 1997 and the nine months ended
June 30, 1998, the aggregate cost of recalls and other corrective actions was
$4.4 million and $4.9 million, respectively. Previously announced recalls and
corrective actions are expected to cost less than $0.1 million in the remainder
of fiscal 1998 (including costs related to the recall of the TWO-IN-ONE booster
car seat affecting approximately 32,000 units due to cracking and breakage
during recent testing). In addition, the Company has instituted a corrective
action offering a repair kit for the HIKE 'N ROLL wheeled frame carrier
affecting approximately 31,000 units after recent reports of the potential for a
child to slip into an improper position. The Company anticipates that this
corrective action will cost approximately $0.1 million in the aggregate. The
Company believes it is indemnified by Spalding for the costs of the corrective
action for the HIKE 'N ROLL under the terms of the Indemnification Agreement (as
defined) entered into on the Closing Date. See "Transactions." The Company
expects that recalls have had, and will continue to have, an effect on net sales
in fiscal 1998. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." In addition to product recalls and corrective
actions required by the CPSC or the NHTSA, Consumers Union, the publisher of
CONSUMER REPORTS, and other product evaluation groups conduct product safety
testing and publish the results of such evaluations. The results of these
reports are widely disseminated and may spur investigations by governmental
agencies or result in negative publicity.
Child safety is a principal factor in the purchase decision for car seats
and other juvenile products, as consumers in the highly competitive juvenile
products industry are particularly sensitive to safety and quality issues. The
Company's reputation for safety and quality is essential to maintain its market
share in all of its product categories. Although the Company does not believe
that its recent recalls and corrective actions have adversely affected its
reputation, recalls and/or corrective actions taken in connection with the
Company's products as well as negative reports by Consumer Union or other
adverse media coverage may adversely affect the reputation of the Company as a
manufacturer of high-quality, safe juvenile products and could have a material
adverse effect on the Company's results of operations.
20
<PAGE>
Pursuant to the Indemnification Agreement entered into on the Closing Date,
Spalding indemnified the Company for the expense of product recalls and
corrective actions relating to products manufactured by the Company prior to the
Closing Date.
PRODUCT LIABILITY LITIGATION
Due to the nature of its products, the Company has been engaged in, and will
continue to be engaged in, the defense of product liability claims related to
its products, particularly with respect to juvenile car seats and play yards.
Such claims have caused the Company to incur material litigation and insurance
expenses. Since 1988, approximately 280 product liability claims have been
brought against the Company, 188 of which related to juvenile car seats.
From April 1, 1988 to June 30, 1998, out-of-pocket indemnities and expenses
(exclusive of payments by insurers and insurance premiums) for car seat claims
(including damage awards, settlements, attorneys' fees and other related
expenses) have averaged approximately $1.6 million per year, when allocated to
the policy periods when the related injuries occurred, while the total
out-of-pocket indemnities and expenses (exclusive of payments by insurers and
insurance premiums) for all product liability claims have averaged approximately
$2.0 million per year, on a similar basis. From fiscal 1993 through fiscal 1997,
the Company has incurred average costs for out-of-pocket indemnities and
expenses (exclusive of payments by insurers and insurance premiums) for all
product liability claims of approximately $2.7 million per year when allocated
to the policy periods when the related injuries occurred. The increase in
average costs for product liability claims from $2.0 million per year for the
ten-year average to $2.7 million per year for the five-year average is due to an
increase in Spalding's insurance policy deductibles. Prior to the Transactions,
the Company's insurance was purchased on a consolidated basis by Spalding.
Spalding increased the size of its insurance deductibles due to industry wide
increases in insurance premiums. As described below, Spalding purchased separate
additional indemnity insurance in 1995 to reduce the size of its insurance
deductibles. The Company anticipates that it will continue to incur average
product liability claims of levels similar to the five-year average for the next
several years.
Based on its experience with product liability claims, the amount of
reserves established for product liability claims against it and the levels of
insurance that it maintains, the Company believes that there are no product
liability claims pending which, if adversely determined, would have a material
adverse effect on its consolidated financial position, results of operations or
cash flows. However, due to the inherent uncertainty of litigation, it is
possible that the Company may be subject to adverse judgments which, singly or
in the aggregate, could be substantial in amount and may not be covered by
insurance or reserves. In addition, no assurance can be given that in the future
a claim will not be brought against the Company which would have a material
adverse effect on the Company. In addition, in any product liability claim, a
judgment against the Company may include the imposition of punitive damages, the
award of which, pursuant to certain state laws, may not be covered by insurance.
In addition, because there may be a lapse of time between a product recall or
corrective action and the filing of lawsuits against the Company relating to
alleged defects, the Company may experience, due to the occurrence of a number
of recent recalls and corrective actions, an increase in the number of product
liability claims in future periods. See "Business--Legal Proceedings."
Prior to the Transactions, the Company's insurance was purchased on a
consolidated basis by Spalding. In fiscal 1997, the cost of such insurance
allocated to the Company was $11.3 million. Spalding product liability insurance
coverage has been established on policy years beginning April 1 of each year.
Spalding's primary insurance per occurrence deductible for 1998 was $2.0 million
and the corresponding policy aggregate deductible was $4.5 million. Spalding
purchased separate additional indemnity insurance to effectively reduce the per
occurrence deductible from $2.0 million to $0.5 million and to reduce the policy
year aggregate deductible from $4.5 million to $3.0 million. Spalding's lead
umbrella insurance carrier provided for $5.0 million of insurance coverage above
the deductible amount of $2.0 million per occurrence and $4.5 million in the
aggregate. Commencing in 1992, Spalding purchased a total of $75
21
<PAGE>
million in umbrella coverage for each policy year. The Company believes that,
for periods prior to the Transactions, its reserve levels for out-of-pocket
indemnities and expenses for product liability claims are adequate. The Company
is currently in the process of implementing an insurance program with
substantially the same coverage and deductibles for slightly increased premiums.
The Gerry Acquisition did not impact insurance coverage or materially impact
product liability premium costs. The Company is indemnified by Huffy pursuant to
the Gerry Acquisition purchase agreement for any liability arising out of claims
with respect to products shipped prior to the date of the Gerry Acquisition.
There have not been any known significant claims with respect to Gerry products
since the date of the Gerry Acquisition.
PRODUCT INNOVATION
The Company depends, in part, on the continued introduction of products
which represent an improvement over existing products offered by the Company or
other manufacturers. The Company believes that its future growth and success
will depend significantly on its continued ability to introduce innovative
juvenile products, and there can be no assurance of the Company's ability to do
so. Innovative designs are often not successful, and successful product designs
are frequently displaced by the introduction of other product designs by
competitors which shift market preferences in their favor. The Company's
operating results may fluctuate as a result of the amount, timing and market
acceptance of new product introductions by the Company or its competition.
COST AND AVAILABILITY OF CERTAIN MATERIALS
Plastic resins, natural and synthetic rubbers, wood, textiles and paper
products are significant components of the Company's products and packaging. A
shortage of any of these components or significant increases in price could
adversely affect the Company's ability to maintain its profit margin in the
event price competition did not permit the Company to increase prices. Plastic
resins prices may fluctuate as a result of changes in natural gas and crude oil
prices and the capacity, supply and demand for resins and the petrochemical
intermediates from which they are produced. The Company has not experienced any
material adverse effect over the past five years from an increase in the cost of
such materials.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of
pollutants into the environment and establish standards for the handling,
generation, emission, release, discharge, treatment, storage and disposal of
certain materials, substances and wastes and the remediation of environmental
contamination (collectively, "Environmental Laws"). Risks of significant costs
and liabilities are inherent in the Company's operations and facilities as they
are with other companies engaged in like businesses. The Company believes that
its operations are in substantial compliance with the terms of all applicable
Environmental Laws as currently interpreted.
While historically the costs of environmental compliance have not had a
material adverse effect on the consolidated financial condition, results of
operations or cash flows of the Company, the Company cannot predict with
certainty its future costs of environmental compliance because of continually
changing compliance standards and technology. Compliance with such requirements
may make it necessary, at costs which may be substantial, to retrofit existing
facilities with additional pollution-control equipment and to undertake new
measures in connection with the storage, transportation, treatment and disposal
of by-products and wastes.
The Company has been named as a potentially responsible party ("PRP") with
respect to the generation and disposal of hazardous substances at the Miami
County Incinerator Site, in Miami County,
22
<PAGE>
Ohio (the "Miami Site") and the Mid-State Disposal Landfill (the "Mid-State
Site") in Marathon County, Wisconsin under the federal "Superfund" statute.
Pursuant to various federal, state and local laws and regulations, PRPs can
become liable for the costs of removal and/or remediation of those hazardous
substances disposed on, or in or about such properties. The liability imposed by
the Superfund statute and analogous state statutes generally is joint and
several and imposed without regard to whether the generator knew of, or was
responsible for, the presence of such hazardous substances. The Company
estimates its liability with respect to the Miami Site is approximately $86,000
in the aggregate, $54,000 of which was paid through July 31, 1998, and with
respect to the Mid-State Site is $105,000 in the aggregate, all of which has
been paid, based on its share of Environmental Protection Agency estimates of
cleanup costs, settlement negotiations and discussions with contractors.
However, there can be no assurance that such liabilities will not exceed this
estimate. Prior to the consummation of the Transactions, Spalding and its
subsidiaries were identified as PRPs at 14 sites, including the Miami Site and
the Mid-State Site. Pursuant to the KKR Stock Purchase Agreement, the Company
has been indemnified by Spalding for environmental liabilities unrelated to the
business of the Company which might be incurred regarding these sites. The
Company does not anticipate that any material expenditures will be required
regarding these sites.
CONTROL BY KKR
Following the Transactions, 51% of the outstanding shares of Common Stock is
owned by KKR 1996 Fund L.P. and 42.4% is owned by Spalding. Approximately 9% of
the outstanding shares of Spalding are currently owned by KKR 1996 Fund L.P. KKR
1996 Fund L.P. is a Delaware limited partnership whose sole general partner is
KKR Associates 1996 L.P. KKR Associates 1996 L.P. is a Delaware limited
partnership whose sole general partner is KKR 1996 GP LLC. KKR 1996 GP LLC is a
Delaware limited liability company whose members are also the members of the
limited liability company that is the general partner of KKR. Strata Associates
L.P. ("Strata"), of which KKR Associates (Strata), L.P. ("KKR Associates
(Strata)") is the general partner, owns approximately 79% of the outstanding
shares of Spalding. The general partner of KKR Associates (Strata) is Strata
L.L.C., a limited liability company organized under Delaware law. The members of
Strata L.L.C. are also the members of the limited liability company which is the
general partner of KKR. Accordingly, affiliates of KKR control the Company and
have the power to elect all of its directors, appoint new management and approve
any action requiring the approval of the Company's shareholders, including
adopting amendments to the Company's certificate of incorporation and approving
mergers or sales of substantially all of the Company's assets. There can be no
assurance that the interests of the members of KKR and its affiliates will not
conflict with the interests of Holders. See "Management," "Ownership of Common
Stock" and "Certain Relationships and Related Transactions."
DEPENDENCE ON MANAGEMENT; NEED FOR ADDITIONAL PERSONNEL
The Company is currently dependent upon the ability and experience of
certain members of its senior management team and administrative services
provided by Spalding. As part of the Company's transition to stand-alone
capabilities, the Company is currently in the process of an executive search for
the position of Treasurer. Competition for qualified personnel is intense, and
the process of hiring such qualified personnel can be lengthy. The loss of the
services of key personnel or the inability to attract and retain additional
qualified personnel could have an adverse effect on the Company's operations.
Pursuant to the Transition Services Agreement, Spalding continues to provide
certain administrative services to the Company following the Stock Acquisitions.
There can be no assurance, however, that after the termination of the Transition
Services Agreement that the Company will be able to replace Spalding's services
under such agreement for the fees charged by Spalding, that the functions
assumed by the Company will not cost significantly in excess of allocated
Spalding expenses for periods prior to the Transactions or that the provision of
such services during the transition period after the Transactions will be
performed without interruption or delay due to unanticipated circumstances. The
Company does not maintain key man life insurance polices on any of its
executives nor has it entered into employment agreements with any of its
executives. See "Management."
23
<PAGE>
LABOR RELATIONS
As of June 30, 1998, approximately 22% of the Company's employees were
covered by collective bargaining agreements. While the Company believes that its
relations with its employees are good, a prolonged labor dispute could have a
material adverse effect on the Company.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance law, if the Company, at
the time it issues the Exchange Notes, (a) incurs such indebtedness with the
intent to hinder, delay or defraud creditors, or (b)(i) receives less than
reasonably equivalent value or fair consideration, and (ii)(A) is insolvent at
the time of such incurrence, (B) is rendered insolvent by reason of such
incurrence (and the application of the proceeds thereof), (C) is engaged or was
about to engage in a business or transaction for which the assets remaining with
the Company constituted unreasonably small capital to carry on its business, or
(D) intends to incur, or believes that it would incur, debts beyond its ability
to pay such debts as they mature, then, in each such case, a court of competent
jurisdiction could avoid, in whole or in part, the Exchange Notes or, in the
alternative, subordinate the Exchange Notes to existing and future indebtedness
of the Company. The measure of insolvency for purposes of the foregoing would
likely vary depending upon the law applied in such case. Generally, however, the
Company would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at a fair valuation,
or if the present fair saleable value of its assets was less than the amount
that would be required to pay the probable liabilities on its existing debts,
including contingent liabilities, as such debts become absolute and matured.
Management of the Company believes that, for purposes of the U.S. Bankruptcy
Code and state fraudulent transfer or conveyance laws, the Exchange Notes are
being issued without the intent to hinder delay or defraud creditors and for
proper purposes and in good faith, and that the Company will receive reasonably
equivalent value or fair consideration therefor. Based on projections prepared
by the Company of expected cash flows and estimates of the fair value of the
Company's assets and liabilities, management believes that after the issuance of
the Exchange Notes and the application of the net proceeds therefrom, the
Company will be solvent, will have sufficient capital for carrying on its
business and will be able to pay its debts as they mature. However, there can be
no assurance that a court passing on such issues would agree with the
determination of the Company's management.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements. Forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors (many of which are beyond the Company's control)
that could cause actual results to differ materially from future results
expressed or implied by such forward-looking statements. Among these statements
are portions of this Prospectus concerning the Company's future operations,
economic performance and financial condition, including the Company's business
strategy and measures to implement such strategy, competitive strengths,
objectives, expansion, growth of the Company's business and operations,
acquisitions and references to future success. The forward-looking statements
regarding such matters are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments, as well as other factors it
believes are appropriate in the circumstances. Whether actual results and
developments will conform with the Company's expectations and predictions,
however, is subject to a number of risks and uncertainties, in addition to the
risk factors discussed above, including: a global economic slowdown in any one,
or all, of the Company's sales categories; unpredictable difficulties or delays
in the development of new product programs; increased difficulties in obtaining
a consistent supply of basic raw materials; development by the Company of an
adequate administrative infrastructure; technological shifts away from the
Company's technologies and core competencies; unforeseen interruptions to the
Company's business with its largest customers resulting from, but not limited
to,
24
<PAGE>
financial instabilities or inventory excesses; the effects of extreme changes in
monetary and fiscal policies in the United States and abroad, including extreme
currency fluctuations and unforeseen inflationary pressures such as those
recently experienced by certain Asian economies; drastic and unforeseen price
pressures on the Company's products or significant cost increases that cannot be
recovered through price increases or productivity improvements; significant
changes in interest rates or in the availability of financing for the Company or
certain of its customers; loss of any material intellectual property rights; any
difficulties in obtaining or retaining the management or other human resource
competencies that the Company needs to achieve its business objectives; and
other factors, many of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Prospectus are
qualified by these cautionary statements, and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequences to
or effects on the Company and its subsidiaries or their business or operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ABSENCE OF A PUBLIC MARKET
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in August 1998 to a small number of
institutional investors and are eligible for trading in the PORTAL Market.
The Company does not intend to apply for a listing of the Exchange Notes on
a securities exchange. There is currently no established market for the Exchange
Notes and there can be no assurance as to the liquidity of markets that may
develop for the Exchange Notes, the ability of the holders of the Exchange Notes
to sell their Exchange Notes or the price at which such holders would be able to
sell their Exchange Notes. If such markets were to exist, the Exchange Notes
could trade at prices that may be lower than the initial market values thereof
depending on many factors, including prevailing interest rates and the markets
for similar securities. Although there is currently no market for the Exchange
Notes, the Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Notes. However, the Initial Purchasers
are not obligated to do so, and any market making with respect to the Exchange
Notes may be discontinued at any time without notice.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
25
<PAGE>
TRANSACTIONS
GENERAL
KKR 1996 Fund L.P. entered into the KKR Stock Purchase Agreement with Lisco
on the Closing Date pursuant to which KKR 1996 Fund L.P. acquired from Lisco (i)
5,100,000 shares of Common Stock for a purchase price of $25.5 million,
representing 51% of the outstanding shares of Common Stock, and (ii) 400,000
shares of Cumulative Preferred Stock for a purchase price of $40.0 million,
representing 100% of the outstanding shares of Cumulative Preferred Stock,
subsequent to the Preferred Stock Distribution. In addition, Great Star entered
into the Great Star Stock Purchase Agreement on the Closing Date pursuant to
which, prior to the acquisiton of Common Stock by KKR 1996 Fund L.P., Great Star
acquired from Lisco 660,000 shares of Common Stock for a purchase price of $3.3
million, representing 6.6% of the outstanding shares of Common Stock.
Concurrently with the Stock Acquisitions and the Preferred Stock Investment, the
Company (i) issued and sold $110.0 million aggregate principal amount of Old
Notes in the Offering and (ii) entered into the Credit Facility and borrowed
$10.0 million under the Credit Facility (with an additional $42.0 million of the
Credit Facility used to support outstanding letters of credit and bankers'
acceptances on the Closing Date).
The Company applied the proceeds of the Financings to repay approximately
$110.0 million of indebtedness owed to Spalding as part of the Stock
Acquisitions, and to pay transaction fees and expenses of approximately $10.0
million. As of June 30, 1998, after giving pro forma effect to the Transactions,
the Company would have had $48.0 million available under the Credit Facility to
fund the working capital needs of the Company (after giving effect to $42.0
million of outstanding letters of credit and bankers' acceptances).
TRANSITION SERVICES AGREEMENT
On the Closing Date, Spalding and the Company entered into a Transition
Services Agreement (the "Transition Services Agreement"). Pursuant to the
Transition Services Agreement, for a period of up to six months Spalding will
provide certain financial, accounting and other corporate related services to
the Company for the costs associated with providing such services. The Company
will also reimburse Spalding for its out-of-pocket expenses incurred in
rendering such services. The Transition Services Agreement terminates with
respect to the majority of such services on September 30, 1998.
STOCKHOLDERS AGREEMENTS
On the Closing Date, the Company, KKR 1996 Fund L.P. and Lisco entered into
a stockholders agreement (the "KKR Stockholders Agreement"). Pursuant to the KKR
Stockholders Agreement, Lisco has the right to participate pro rata in certain
sales of Common Stock by KKR 1996 Fund L.P. and affiliates (a "Tag Along"), and
KKR 1996 Fund L.P. has the right to require Lisco to participate pro rata in
certain sales of Common Stock by KKR 1996 Fund L.P. and affiliates (a "Drag
Along"). The KKR Stockholders Agreement provides Lisco with "piggyback"
registration rights and two demand registration rights and provides for certain
restrictions and rights regarding the transfer of Common Stock by Lisco. The KKR
Stockholders Agreement also grants Lisco the right to appoint one member of the
Company's Board of Directors, subject to maintaining specified ownership
thresholds.
On the Closing Date, the Company, KKR 1996 Fund L.P. and Great Star entered
into a stockholders agreement (the "Great Star Stockholders Agreement").
Pursuant to the Great Star Stockholders Agreement, Great Star has a Tag Along
right with respect to sales of Common Stock by KKR 1996 Fund L.P. and KKR 1996
Fund L.P. has a Drag Along right to require Great Star to participate in certain
sales of Common Stock by KKR 1996 Fund L.P. The Great Star Stockholders
Agreement also provides Great Star certain "piggyback" registration rights and
provides for certain restrictions and rights regarding the transfer of Common
Stock held by Great Star.
26
<PAGE>
REGISTRATION RIGHTS AGREEMENT
KKR 1996 Fund L.P. has the right, under certain circumstances and subject to
certain conditions, to require the Company to register under the Securities Act
shares of Common Stock held by it and its affiliates pursuant to a registration
rights agreement entered into between KKR 1996 Fund L.P. and the Company on the
Closing Date (the "Fund Registration Rights Agreement"). The Fund Registration
Rights Agreement provides, among other things, that the Company will pay all
registration expenses in connection with the first six demand registrations
requested by KKR 1996 Fund L.P. or its affiliates.
INDEMNIFICATION AGREEMENT
On the Closing Date, Spalding and the Company entered into an
Indemnification Agreement (the "Indemnification Agreement") pursuant to which
Spalding agreed to indemnify the Company for all losses and liabilities of any
kind relating to any non-Evenflo related matters and the Company agrees to
indemnify Spalding for all losses and liabilities of any kind relating to the
Evenflo business. In addition, Spalding agreed to indemnify the Company for the
expense of product recalls and corrective actions relating to products
manufactured by the Company prior to the Closing Date.
27
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Old Notes for
New Notes pursuant to the Exchange Offer. The Company used the gross proceeds
from the Financings to (i) repay approximately $110.0 million of indebtedness
owed to Spalding as part of the Stock Acquisitions and (ii) pay transaction fees
and expenses of approximately $10.0 million. See "Transactions" and "Description
of the Credit Facility." The approximately $110.0 million of indebtness that was
owed to Spalding consisted of (i) a $58.0 million intercompany balance which was
the Company's allocated portion of indebtedness payable by Spalding under the
credit facility entered into in connection with the Recapitalization, (ii) a
$49.1 million note payable to Spalding issued to finance a portion of the Gerry
Acquisition and (iii) a $2.9 million intercompany balance which did not bear
interest. On the consolidated financial statements of the Company, the
indebtedness to Spalding described in clauses (i) and (ii) each bore interest at
a rate of 9.91% at June 30, 1998, based on the interest rate in effect at such
time with respect to Spalding's borrowings under its credit facility.
CAPITALIZATION
The following table sets forth as of June 30, 1998 the unaudited (i)
historical capitalization of the Company and (ii) pro forma capitalization of
the Company, adjusted to give effect to the Transactions, including the
Financings. The following table should be read in conjunction with the "Pro
Forma Condensed Consolidated Financial Statements" and the notes thereto and the
consolidated financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1998
------------------------
HISTORICAL PRO FORMA
----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Long-term debt (including current portion):
Credit Facility(1).................................... $ -- $ 10.0
Old Notes............................................. -- 110.0
Due to Spalding....................................... 131.7 --
----------- -----------
Total long-term debt................................ 131.7 120.0
Cumulative Preferred Stock.............................. -- 40.0
Common shareholders' equity............................. 50.9 26.5
----------- -----------
Total capitalization................................ $ 182.6 $ 186.5
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) At June 30, 1998, on a pro forma basis after giving effect to the
Transactions, the Company would have had additional borrowing availability
of approximately $48.0 million under the Credit Facility subject to certain
conditions (after giving effect to $42.0 million of outstanding letters of
credit and bankers' acceptances). See "Description of the Credit Facility."
28
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Financial Statements") have been derived by the
application of pro forma adjustments to the Company's historical consolidated
financial statements included elsewhere in this Prospectus. The pro forma
condensed statements of consolidated earnings (loss) (i) for fiscal 1997 and the
nine months ended June 30, 1997 give effect to the Transactions and the Gerry
Acquisition and the related transactions as if such transactions were
consummated as of October 1, 1996 and (ii) for the nine months ended June 30,
1998 give effect to the Transactions as if the Transactions occurred on October
1, 1997. The pro forma condensed consolidated balance sheet gives effect to the
Transactions as if such Transactions had occurred as of June 30, 1998. The
adjustments, which include adjustments relating to the Transactions and the
Gerry Acquisition and related transactions, are described in the accompanying
notes. The Pro Forma Financial Statements should not be considered indicative of
actual results that would have been achieved had the Transactions and the Gerry
Acquisition and the related transactions been consummated on the date or for the
periods indicated and do not purport to indicate balance sheet data or results
of operations as of any future date or for any future period. The Pro Forma
Financial Statements should be read in conjunction with the Company's historical
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus. For a discussion of certain nonrecurring and other charges to
be recorded in the fourth quarter of fiscal 1998, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Fourth Quarter
Charges."
29
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
HISTORICAL TRANSACTIONS PRO FORMA
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash...................................................................... $ 3,756 $ 3,756
Receivables............................................................... 75,168 75,168
Inventories............................................................... 67,794 67,794
Deferred income taxes..................................................... 7,835 7,835
Other..................................................................... 2,416 2,416
----------- -----------
Total current assets.................................................... 156,969 156,969
Property, plant and equipment, net........................................ 63,897 63,897
Intangible assets, net.................................................... 47,102 47,102
Deferred financing costs.................................................. 2,100 $ 3,900(a) 6,000
Other..................................................................... 1,467 1,467
----------- ------------ -----------
Total assets............................................................ $ 271,535 $ 3,900 $ 275,435
----------- ------------ -----------
----------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................................... $ 52,202 $ 52,202
Accrued expenses.......................................................... 31,195 31,195
----------- -----------
Total current liabilities............................................... 83,397 83,397
Credit Facility........................................................... 0 $ 10,000(b) 10,000
Notes..................................................................... 0 110,000(b) 110,000
Long-term debt and payable to Spalding.................................... 131,737 (110,000)(b)
(21,737)(d) 0
Other..................................................................... 5,511 5,511
----------- ------------ -----------
Total liabilities....................................................... 220,645 (11,737) 208,908
Cumulative Preferred Stock................................................ 40,000(c) 40,000
Common shareholders' equity............................................... 50,890 (24,363)(d) 26,527
----------- ------------ -----------
Total liabilities and shareholders' equity.............................. $ 271,535 $ 3,900 $ 275,435
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
30
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS)
(a) Represents estimated deferred financing costs of $6,000 incurred as a result
of the Financings, less $2,100 of unamortized deferred financing costs
related to the allocated long-term debt to Spalding, which debt was repaid
with the proceeds of the Transactions. The remaining $4,000 of fees and
expenses incurred in connection with the Transactions was charged to common
shareholders' equity.
(b) The sources and uses of funds for the Transactions were as follows:
<TABLE>
<S> <C>
Sources
Credit Facility proceeds................................................... $ 10,000
Old Notes.................................................................. 110,000
---------
Total sources.............................................................. $ 120,000
---------
---------
Uses
Repayment of long-term debt and payable to Spalding........................ $ 110,000
Estimated transaction fees and expenses.................................... 10,000
---------
Total uses................................................................. $ 120,000
---------
---------
</TABLE>
(c) Represents a nonrecurring distribution of newly-authorized Cumulative
Preferred Stock to Lisco. The Cumulative Preferred Stock was acquired by KKR
1996 Fund L.P. from Lisco for $40,000.
(d) The adjustment represents the net change to common shareholders' equity as a
result of the Transactions:
<TABLE>
<S> <C>
Distribution of newly-authorized Cumulative Preferred Stock (c).............. $ (40,000)
Liabilities forgiven by Spalding............................................. 21,737
Transaction fees and expenses (a)............................................ (4,000)
Write-off of existing unamortized deferred financing costs (a)............... (2,100)
---------
Total........................................................................ $ (24,363)
---------
---------
</TABLE>
31
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED EARNINGS (LOSS)
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE GERRY ADJUSTMENTS
ACQUISITION FOR THE
HISTORICAL (A) TRANSACTIONS PRO FORMA
---------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales................................................... $ 296,743 $ 61,362 $ 358,105
Cost of sales............................................... 235,925 52,275 288,200
---------- ------- ----------
Gross profit................................................ 60,818 9,087 69,905
Selling, general and administrative expenses................ 52,232 10,634(b) $ 2,900(c) 65,766
Restructuring costs......................................... 9,591 0 9,591
Allocated Spalding expenses................................. 2,900 0 (2,900)(c) 0
---------- ------- ------------ ----------
Income (loss) from operations............................... (3,905) (1,547) 0 (5,452)
Interest expense, net....................................... 7,243 68 7,969(d) 15,280
Currency loss, net.......................................... 47 0 47
---------- ------- ------------ ----------
Earnings (loss) before income taxes......................... (11,195) (1,615) (7,969) (20,779)
Income taxes (benefit)...................................... (4,884) (630)(e) (3,108)(e) (8,622)
---------- ------- ------------ ----------
Net earnings (loss)......................................... (6,311) (985) (4,861) (12,157)
Noncash preferred stock dividend............................ 0 0 (5,600)(f) (5,600)
---------- ------- ------------ ----------
Net earnings (loss) for common shareholders................. $ (6,311) $ (985) $ (10,461) $ (17,757)
---------- ------- ------------ ----------
---------- ------- ------------ ----------
Ratio of earnings (loss) to fixed charges (g)............... --
----------
----------
Deficiency of earnings to fixed charges..................... $ 20,779
----------
----------
Deficiency of earnings (loss) to combined fixed charges and
preferred stock dividends................................. $ 29,959
----------
----------
Pro forma EBITDA (h)........................................ $ 15,614
----------
----------
Pro forma Adjusted EBITDA (h)............................... $ 25,372
----------
----------
Depreciation and amortization............................... $ 11,522
----------
----------
</TABLE>
32
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED EARNINGS (LOSS)
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE ADJUSTMENTS
GERRY FOR THE
HISTORICAL ACQUISITION(A) TRANSACTIONS PRO FORMA
---------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales................................................... $ 205,650 $ 61,362 $ 267,012
Cost of sales............................................... 161,036 52,275 213,311
---------- ------------- ----------
Gross profit................................................ 44,614 9,087 53,701
Selling, general and administrative expenses................ 36,688 10,634(b) $ 2,150(c) 49,472
Restructuring costs......................................... 404 0 404
Allocated Spalding expenses................................. 2,150 0 (2,150)(c) 0
---------- ------------- ------------ ----------
Income (loss) from operations............................... 5,372 (1,547) 0 3,825
Interest expense, net....................................... 4,572 68 6,701(d) 11,341
Currency loss, net.......................................... 100 0 100
---------- ------------- ------------ ----------
Earnings (loss) before income taxes......................... 700 (1,615) (6,701) (7,616)
Income taxes (benefit)...................................... 308 (630)(e) (2,614)(e) (2,936)
---------- ------------- ------------ ----------
Net earnings (loss)......................................... 392 (985) (4,087) (4,680)
Noncash preferred stock dividend............................ 0 0 (4,200)(f) (4,200)
---------- ------------- ------------ ----------
Net earnings (loss) for common shareholders................. $ 392 $ (985) $ (8,287) $ (8,880)
---------- ------------- ------------ ----------
---------- ------------- ------------ ----------
Ratio of earnings (loss) to fixed charges (g)............... --
----------
----------
Deficiency of earnings to fixed charges..................... $ 7,616
----------
----------
Deficiency of earnings (loss) to combined fixed charges and
preferred stock dividends................................. $ 14,501
----------
----------
Pro forma EBITDA (h)........................................ $ 13,405
----------
----------
Pro forma Adjusted EBITDA (h)............................... $ 17,245
----------
----------
Depreciation and amortization............................... $ 9,276
----------
----------
</TABLE>
33
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED EARNINGS (LOSS)
FOR THE NINE MONTHS ENDED JUNE 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------ ----------
<S> <C> <C> <C>
Net sales................................................................... $ 245,233 $ 245,233
Cost of sales............................................................... 197,119 197,119
---------- ----------
Gross profit................................................................ 48,114 48,114
Selling, general and administrative expenses................................ 45,363 $ 2,100(c) 47,463
Restructuring costs......................................................... 1,443 1,443
Allocated Spalding expenses................................................. 2,100 (2,100)(c) 0
---------- ------------ ----------
Income (loss) from operations............................................... (792) 0 (792)
Interest expense, net....................................................... 8,102 3,605(d) 11,707
Currency loss, net.......................................................... 510 510
---------- ------------ ----------
Earnings (loss) before income taxes......................................... (9,404) (3,605) (13,009)
Income taxes (benefit)...................................................... (3,675) (1,406)(e) (5,081)
---------- ------------ ----------
Net earnings (loss)......................................................... (5,729) (2,199) (7,928)
Noncash preferred stock dividend............................................ (4,200)(f) (4,200)
---------- ------------ ----------
Net earnings (loss) for common shareholders................................. $ (5,729) $ (6,399) $ (12,128)
---------- ------------ ----------
---------- ------------ ----------
Ratio of earnings (loss) to fixed charges (g)............................... --
----------
----------
Deficiency of earnings to fixed charges..................................... $ 13,009
----------
----------
Deficiency of earnings (loss) to combined fixed
charges and preferred stock dividends..................................... $ 19,894
----------
----------
Pro forma EBITDA (h)........................................................ $ 10,901
----------
----------
Pro forma Adjusted EBITDA (h)............................................... $ 11,835
----------
----------
Depreciation and amortization............................................... $ 10,760
----------
----------
</TABLE>
34
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENTS OF CONSOLIDATED EARNINGS (LOSS)
(DOLLAR AMOUNTS IN THOUSANDS)
(a) Represents adjustments related to the Company's purchase of certain net
assets of Gerry as of April 21, 1997. Gerry's operations from October 1,
1996 through the date of acquisition have been added to the Company's
historical operating results for the year ended September 30, 1997 and the
nine months ended June 30, 1997. The historical operating results of the
Company include the operations of Gerry from April 21, 1997, the date of the
Gerry Acquisition.
(b) For the year ended September 30, 1997 and the nine months ended June 30,
1997, adjustments to selling, general and administrative expenses for the
Gerry Acquisition include $305 of amortization of trademarks and goodwill
arising from the Gerry Acquisition. The acquired trademarks and goodwill are
being amortized over 40 years.
(c) Historically, the Company has been allocated certain administrative expenses
(based on the Company's net sales as a percentage of those of Spalding) and
has been allocated out-of-pocket expenses relating to acquisition activity
incurred by Spalding on behalf of the Company. After the Transactions, the
Company expects to incur approximately the same amount of expenses on an
annual basis pursuant to the Transition Services Agreement with Spalding for
the continuation of such administrative services as the Company develops its
internal capabilities. After the termination of the Transition Services
Agreement, the Company expects to continue to incur approximately the same
amount of expenses on an annual basis to replace such services. Charges
under the Transition Services Agreement and future administrative expense
will be reflected as selling, general and administrative expenses.
(d) Pro forma adjustments to interest expense reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1998
------------------- ----------------- -----------------
<S> <C> <C> <C>
Interest expense with respect to the Credit
Facility and the Notes at an assumed
weighted average interest rate of 11.48%.... $ 13,775 $ 10,331 $ 10,331
Amortization of deferred financing costs...... 466 349 349
Historical interest expense on debt repaid.... (6,272) (3,979) (7,075)
------- ------- -------
Net increase in interest expense.............. $ 7,969 $ 6,701 $ 3,605
------- ------- -------
------- ------- -------
</TABLE>
A 0.125% change in the weighted average interest rate would change annual pro
forma interest expense by $150. A $1,000 change in borrowings under the
Credit Facility would change annual pro forma interest expense by $85.
(e) Reflects the tax effect of deductible adjustments at a 39% U.S. federal and
state statutory income tax rate for 1998.
(f) Reflects cumulative dividends to be accrued on shares of Cumulative
Preferred Stock.
(g) For purposes of determining the pro forma ratios of earnings (loss) to fixed
charges and of earnings (loss) to combined fixed charges and preferred stock
dividends, earnings (loss) is defined as earnings (loss) before income taxes
and extraordinary loss and before other comprehensive earnings (loss) plus
fixed charges (net of capitalized interest). Fixed charges consist of
interest expense on all indebtedness, whether expensed or capitalized,
amortization of deferred financing costs and one-third of rental expense on
operating leases, representing that portion of rental expense deemed by the
Company to be attributable to interest. For purposes of the computation of
the ratio of earnings (loss) to combined fixed charges and preferred stock
dividends, the preferred stock dividend requirements were increased to an
amount representing the pre-tax earnings which are required to cover such
dividend requirements.
(h) "EBITDA", as defined, represents earnings (loss) before interest expense,
income taxes, depreciation, amortization, extraordinary items and
restructuring costs. "Adjusted EBITDA" represents EBITDA before unusual
costs. The Company believes that EBITDA and Adjusted EBITDA provide useful
information regarding the Company's ability to service its debt, and the
Company understands that such information is considered by certain investors
to be an additional basis for evaluating the Company's ability to pay
interest and repay debt. EBITDA and Adjusted EBITDA do not, however,
35
<PAGE>
represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as a substitute for net
earnings as an indicator of the Company's operating performance or cash flow
as a measure of liquidity. Because EBITDA and Adjusted EBITDA are not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies. EBITDA, as
defined, has been presented before giving effect to restructuring costs for
the pro forma year ended September 30, 1997 and nine months ended June 30,
1997 and 1998. After giving effect to such restructuring costs, earnings
(loss) before interest expense, income taxes, depreciation, amortization and
extraordinary items for such periods are $6,023, $13,001 and $9,458,
respectively. See the Company's consolidated financial statements, and
related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1998
------------------ ----------------- -----------------
<S> <C> <C> <C>
Pro forma earnings (loss) before income
taxes....................................... $ (20,779) $ (7,616) $ (13,009)
Interest expense.............................. 15,280 11,341 11,707
Depreciation and amortization................. 11,522 9,276 10,760
Restructuring costs........................... 9,591 404 1,443
-------- ------- --------
EBITDA...................................... 15,614 13,405 10,901
Unusual costs:
Project Discovery........................... 2,761 1,524 159
Combining feeding and furniture
operations................................ 2,629 1,048 --
Gerry integration........................... 4,368 1,268 235
Other....................................... -- -- 540
-------- ------- --------
Adjusted EBITDA............................. $ 25,372 $ 17,245 $ 11,835
-------- ------- --------
-------- ------- --------
</TABLE>
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA RESULTS OF OPERATIONS
PRO FORMA NINE MONTHS ENDED JUNE 30, 1998 ("1998 PRO FORMA NINE MONTHS")
COMPARED TO THE PRO FORMA NINE MONTHS ENDED JUNE 30, 1997 ("1997 PRO FORMA
NINE MONTHS")
NET SALES. The Company's net sales decreased to $245.2 million for the 1998
pro forma nine months from $267.0 million for the 1997 pro forma nine months, a
decrease of $21.8 million or 8.2%. The net sales decrease was due to lower net
sales of Gerry products, as Evenflo elected to (i) discontinue certain Gerry
products that did not fit with Evenflo's product line strategies (such Gerry
products accounted for $8.5 million of lower Gerry's net sales for the nine
months ended June 30, 1998) and (ii) the withdrawal of certain Gerry products
from the marketplace in order to test or redesign such products to meet
Evenflo's standards. Net sales were also negatively impacted by (i) an increased
level of returns of breast pumps, monitors and strollers, (ii) lower net sales
of play yards due to the expiration of a patent license for the manufacture of
play yards and a nine-month delay in introducing the PLAY CRIB, the Company's
newest entrant in the play yard product category, which began to be shipped to
retailers in February 1998 and (iii) the effect of certain product safety
campaigns. See "Business--Legal Proceedings." Evenflo's international net sales
were down $0.9 million compared to the 1997 pro forma nine months due primarily
to lower net sales in Canada and Malaysia and the effect of weaker currencies
compared to the U.S. dollar, partially offset by higher net sales in Mexico and
France. While net sales to Toys "R" Us have increased for the comparable nine
month periods, Toys "R" Us has recently announced a plan to reduce its inventory
levels. The Company, as a result of this action, recorded lower net sales to
Toys "R" Us in the third quarter of fiscal 1998 than in the comparable period of
the prior year.
GROSS PROFIT. The Company's gross profit decreased to $48.1 million for the
1998 pro forma nine months from $53.7 million for the 1997 pro forma nine
months, a decrease of $5.6 million or 10.4%. Gross profit declined by $2.0
million due to the lower net sales noted above, as well as lower gross margins.
The Company's gross margin decreased to 19.6% in the 1998 pro forma nine months
from 20.1% in the 1997 pro forma nine months principally due to (i) the impact
of the factors discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effect of Gerry Integration; Factors
Affecting Fiscal 1998 Performance," partially offset by operating efficiencies
attributable to Project Discovery, (ii) an increased level of returns of breast
pumps, monitors and strollers, (iii) $0.4 million in increased distribution
costs and (iv) a less favorable international sales mix due to the strength of
the U.S. dollar versus certain international currencies.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES. The Company's SG&A
expenses decreased to $47.5 million for the 1998 pro forma nine months from
$49.5 million in the 1997 pro forma nine months, a decrease of $2.0 million or
4.0%. However, as a percentage of net sales, SG&A expenses increased to 19.4% in
the 1998 pro forma nine months from 18.5% in the 1997 pro forma nine months. The
1998 pro forma nine month increase in SG&A expenses as a percentage of net sales
is due to (i) an increased number of selling and administrative personnel during
the Gerry integration, (ii) increased product development and engineering
efforts relating to a number of the Company's product lines, (iii) higher safety
campaign and corrective action costs relating to the HAPPY CAMPER play yard, the
ON MY WAY infant car seat, TWO-IN-ONE booster car seat and the Canadian ULTARA
car seat and (iv) higher advertising and promotional costs, partially offset by
(i) lower product liability expenses compared to the 1997 pro forma nine months,
(ii) $1.2 million of royalty income settlements on play yards and strollers and
(iii) lower costs from the elimination of certain redundant functions as part of
the Gerry integration.
RESTRUCTURING COSTS. In the 1998 pro forma nine months, the Company incurred
$1.4 million of restructuring costs to relocate the Gerry Colorado
administrative and manufacturing operations to Evenflo's Ohio and Georgia
locations, compared to $0.4 million of restructuring costs in the 1997 pro forma
nine months for the same reasons.
37
<PAGE>
INTEREST EXPENSE. Interest expense increased to $11.7 million for the 1998
pro forma nine months from $11.3 million for the 1997 pro forma nine months.
CURRENCY LOSS. Currency loss of $0.5 million was $0.4 million higher in the
1998 pro forma nine months compared to the 1997 pro forma nine months. See
"Managements Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
INCOME TAXES. The Company had tax benefits of $4.7 million for the 1998 pro
forma nine months and $2.6 million for the 1997 pro forma nine months, which
represent an effective tax rate of 39% in relation to a loss before income taxes
of $12.1 million and $6.7 million, respectively. The effective tax rate consists
of a U.S. federal statutory rate of 35% and a 4% effective state income tax
rate.
NET LOSS. The Company had a net loss of $7.9 million for the 1998 pro forma
nine months compared to $4.7 million for the 1997 pro forma nine months. The
$3.2 million decrease in earnings was a result of a $4.5 million decrease in
earnings from operations, $0.4 million higher interest expense and $0.4 million
higher currency loss, partially offset by a $2.1 million higher income tax
benefit.
38
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of the Company. The historical consolidated financial data for
the three fiscal years ended September 30, 1997 have been derived from, and
should be read in conjunction with, the audited consolidated financial
statements of the Company and the related notes thereto included elsewhere in
this Prospectus. The historical consolidated financial data for the two fiscal
years ended September 30, 1994 have been derived from unaudited consolidated
financial statements of the Company that do not appear elsewhere in this
Prospectus. The historical consolidated financial data for the nine months ended
June 30, 1997 and 1998 have been derived from the unaudited condensed
consolidated financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. In the opinion of management, the
unaudited financial data include all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the data for such periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Pro Forma Condensed Consolidated Financial Statements," and the
historical consolidated financial statements and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
--------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
----------- ----------- --------- --------- --------- --------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Net sales..................................... $ 158,235 $ 171,533 $ 210,039 $ 237,165 $ 296,743 $ 205,650 $ 245,233
Cost of sales(1).............................. 115,239 123,501 157,611 178,733 235,925 161,036 197,119
----------- ----------- --------- --------- --------- --------- ---------
Gross profit.................................. 42,996 48,032 52,428 58,432 60,818 44,614 48,114
Selling, general and administrative
expenses(2)................................. 34,016 37,070 41,518 42,801 52,232 36,688 45,363
Restructuring costs(3)........................ 0 0 0 0 9,591 404 1,443
Allocated Spalding expenses(4)................ 1,800 2,300 2,500 2,500 2,900 2,150 2,100
1994 Management Stock Ownership Plan
expense(5).................................. 0 0 107 2,621 0 0 0
----------- ----------- --------- --------- --------- --------- ---------
Income (loss) from operations................. 7,180 8,662 8,303 10,510 (3,905) 5,372 (792)
Interest expense, net......................... 868 1,203 4,273 4,128 7,243 4,572 8,102
Currency loss (gain), net..................... 46 (120) 833 204 47 100 510
----------- ----------- --------- --------- --------- --------- ---------
Earnings (loss) before income taxes and
extraordinary loss.......................... 6,266 7,579 3,197 6,178 (11,195) 700 (9,404)
Income taxes (benefit)........................ 2,529 3,523 1,052 3,197 (4,884) 308 (3,675)
----------- ----------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary loss..... 3,737 4,056 2,145 2,981 (6,311) 392 (5,729)
Extraordinary loss on early extinguishment of
debt, net of $360 tax benefit............... 0 0 0 560 0 0 0
----------- ----------- --------- --------- --------- --------- ---------
Net earnings (loss)........................... 3,737 4,056 2,145 2,421 (6,311) 392 (5,729)
Other comprehensive earnings (loss)(6)........ (94) (149) (551) (260) (367) (112) (615)
----------- ----------- --------- --------- --------- --------- ---------
Comprehensive earnings (loss)................. $ 3,643 $ 3,907 $ 1,594 $ 2,161 $ (6,678) $ 280 $ (6,344)
----------- ----------- --------- --------- --------- --------- ---------
----------- ----------- --------- --------- --------- --------- ---------
Ratio of earnings (loss) to fixed
charges(7)(8)............................... 6.57x 6.27x 1.68x 2.32x -- 1.14x --
OTHER DATA
EBITDA(9)..................................... $ 12,549 $ 14,350 $ 12,988 $ 16,808 $ 14,952 $ 12,743 $ 10,901
Adjusted EBITDA(9)............................ 15,349 14,350 12,988 20,450 24,710 16,583 11,835
Statements of cash flows:
Operating activities........................ 12,202 (382) 1,419 24,287 (942) (13,429) (14,354)
Investing activities........................ (9,254) (10,425) (6,531) (9,740) (89,579) (83,517) (13,112)
Financing activities........................ (2,379) 11,165 5,613 (12,244) 87,312 97,047 29,686
Capital expenditures.......................... 9,254 9,668 6,531 9,377 20,927 14,865 13,112
Cash interest expense(10)..................... 884 1,095 4,266 3,732 6,763 4,302 7,730
Depreciation
and amortization............................ 5,415 5,568 5,518 6,502 9,313 7,067 10,760
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF SEPTEMBER 30, JUNE 30,
----------------------------------------------------- -----------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................... $ 1,583 $ 1,941 $ 2,442 $ 4,745 $ 1,536 $ 3,756
Working capital(11)......................................... 16,046 22,269 29,308 17,074 49,990 69,816
Total assets................................................ 124,542 139,674 155,496 177,391 255,725 271,535
Total debt(12).............................................. 14,000 12,000 32,000 43,000 95,966 131,737
Shareholders' equity........................................ 58,244 72,969 66,858 61,825 63,019 50,890
</TABLE>
39
<PAGE>
- ------------------------------
(1) Included in cost of sales are unusual costs related to (i) Project Discovery
for the manufacturing and warehouse reconfiguration at Piqua, Ohio,
consisting of charges of $2.7 million in fiscal 1997, $1.5 million in the
nine months ended June 30, 1997, and $0.2 million in the nine months ended
June 30, 1998, (ii) the integration of Gerry for (a) a $3.1 million
inventory write-down in fiscal 1997 resulting from a decision to discontinue
the sale of certain Gerry products, (b) a charge of $1.3 million in fiscal
1997 and in the nine months ended June 30, 1997, as a result of expensing
the increase to fair value of Gerry's inventories as such inventory was
sold, such increase resulting from the application of purchase accounting in
the Gerry Acquisition, and (c) a charge of $0.2 million in the nine months
ended June 30, 1998, for expenses to relocate the Gerry Colorado warehouse
operations to Evenflo's Ohio and Georgia locations and (iii) the conversion
of two of the Company's manufacturing facilities to distribution centers
consisting of a charge of $2.8 million in fiscal 1993.
(2) Included in selling, general and administrative expenses are unusual costs
related to (i) combining Evenflo's feeding and furniture operations which
were previously managed separately, consisting of charges of $1.3 million in
fiscal 1996, $2.6 million in fiscal 1997 and $1.0 million in the nine months
ended June 30, 1997, (ii) accounts receivable charge-offs as a result of the
bankruptcy of two of its customers consisting of a charge of $2.3 million in
fiscal 1996 and (iii) Year 2000 conversions costs consisting of a charge of
$0.5 million in the nine months ended June 30, 1998. Selling, general and
administrative expenses, on a pro forma basis, include an amount equal to
the expense incurred by the Company for allocated Spalding expenses. See
footnote 4.
(3) In fiscal 1997, the nine months ended June 30, 1997 and the nine months
ended June 30, 1998, the Company incurred $9.6 million, $0.4 million and
$1.4 million, respectively, of restructuring costs to relocate the Gerry
Colorado administrative and manufacturing operations to Evenflo's Ohio and
Georgia locations. See Note F of the Notes to the Consolidated Financial
Statements appearing elsewhere in this Prospectus.
(4) Represents an allocation from Spalding (based on the Company's net sales as
a percentage of those of Spalding) of administrative expenses for assistance
provided in the areas of accounting, auditing, employee relations,
insurance, legal, planning, tax and treasury and $0.8 million in allocated
out-of-pocket expenses relating to acquisition activity incurred by Spalding
on behalf of the Company in fiscal 1997. After the Transactions, the Company
will incur expenses pursuant to the Transition Services Agreement with
Spalding at the cost of providing such services for the continuation of such
services during the period in which the Company develops its internal
capabilities. Such costs will be reflected as a selling, general and
administrative expense. After the termination of the Transition Services
Agreement, the Company expects to incur $3.0 million of expense on an annual
basis to replace such services. The Transition Services Agreement terminates
with respect to the majority of such services on September 30, 1998.
(5) Represents $0.1 million and $2.6 million of compensation expense for fiscal
1995 and 1996, respectively, related to the increase in the value of common
stock of Spalding held by certain members of Company management through the
1994 Management Stock Ownership Plan and to the settlement of such plan in
the Recapitalization.
(6) Includes currency translation adjustments net of tax expense (benefits) of
$0.12 million, $(0.07) million, $(0.43) million, $(0.15) million, $(0.17)
million, $(0.06) million and $(0.29) million.
(7) For purposes of determining the ratio of earnings (loss) to fixed charges,
earnings are defined as earnings (loss) before income taxes and
extraordinary loss and before other comprehensive earnings (loss) plus fixed
charges (net of capitalized interest). Fixed charges consist of interest
expense on all indebtedness, whether expensed or capitalized, amortization
of deferred financing costs and one-third of rental expense on operating
leases, representing that portion of rental expense deemed by the Company to
be attributable to interest.
(8) The deficiency of earnings to fixed charges for fiscal 1997 and the nine
months ended June 30, 1998 was approximately $11.2 million and $9.4 million,
respectively.
(9) "EBITDA", as defined, represents earnings (loss) before interest expense,
income taxes, depreciation, amortization, extraordinary items and
restructuring costs. "Adjusted EBITDA" represents EBITDA before unusual
costs. The Company believes that EBITDA and Adjusted EBITDA provide useful
information regarding the Company's ability to service its debt, and the
Company understands that such information is considered by certain investors
to be an additional basis for evaluating the Company's ability to pay
interest and repay debt. EBITDA and Adjusted EBITDA do not, however,
represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as a substitute for net
earnings as an indicator of the Company's operating performance or cash flow
as a measure of liquidity. Because EBITDA and Adjusted EBITDA are not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies. EBITDA, as
defined, has been presented before giving effect to restructuring costs for
fiscal 1997, the nine months ended June 30, 1997 and the nine months ended
June 30, 1998. After giving effect to such restructuring costs, earnings
(loss) before interest expense, income taxes, depreciation, amortization and
extraordinary items for such periods are
40
<PAGE>
$5.4 million, $12.3 million and $9.4 million, respectively. See the
Company's consolidated financial statements, and related notes thereto,
included elsewhere in this Prospectus. The components of EBITDA and Adjusted
EBITDA are as follows:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
----------------------------------------------------- ---------
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- ---------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes and
extraordinary loss..................................... $ 6.3 $ 7.6 $ 3.2 $ 6.2 $ (11.2) $ 0.7
Interest expense......................................... 0.9 1.2 4.3 4.1 7.2 4.6
Depreciation and amortization............................ 5.4 5.6 5.5 6.5 9.3 7.1
Restructuring costs(a)................................... -- -- -- -- 9.6 0.4
--------- --------- --------- --------- --------- ---------
EBITDA................................................... 12.5 14.4 13.0 16.8 15.0 12.7
Unusual costs(a):
Project Discovery...................................... -- -- -- -- 2.7 1.5
Combining feeding and furniture operations............. -- -- -- 1.3 2.6 1.0
Gerry integration...................................... -- -- -- -- 4.4 1.3
Other.................................................. 2.8 -- -- 2.3 -- --
--------- --------- --------- --------- --------- ---------
Adjusted EBITDA.......................................... $ 15.3 $ 14.4 $ 13.0 $ 20.5 $ 24.7 $ 16.6
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
1998
---------
<S> <C>
Earnings (loss) before income taxes and
extraordinary loss..................................... $ (9.4)
Interest expense......................................... 8.1
Depreciation and amortization............................ 10.8
Restructuring costs(a)................................... 1.4
---------
EBITDA................................................... 10.9
Unusual costs(a):
Project Discovery...................................... 0.2
Combining feeding and furniture operations............. --
Gerry integration...................................... 0.2
Other.................................................. 0.5
---------
Adjusted EBITDA.......................................... $ 11.8
---------
---------
</TABLE>
- ------------------------
(a) For a more complete description of such items, see footnotes (1), (2) and
(3) above.
The Company estimates fiscal 1998 total restructuring and other unusual
costs may approximate $2.6 million in the aggregate.
(10) Cash interest expense is defined as interest expense paid exclusive of
amortization of deferred financing costs.
(11) Working capital excludes cash and cash equivalents.
(12) Total debt includes long-term debt and payable to Spalding.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Evenflo, with pro forma net sales of $358 million in fiscal 1997, is a
leader in the $2.0 billion U.S. juvenile products industry, as well as a market
leader in such products in several international markets. The Company's products
fall into four principal categories, representing the daily activities in which
the products are used: (i) On The Go products, including car seats, strollers,
travel systems and carriers, (ii) Play Time products, including stationary
activity products, swings, gates and doorway jumpers, (iii) Bed and Bath
products, including cribs, portable play yards, monitors, mattresses, bath items
and toilet trainers and (iv) Feeding Time products, including reusable and
disposable nurser systems, breastfeeding aids, high chairs, oral development
items such as teethers and pacifiers, bibs and other feeding accessories.
A substantial portion of the Company's net sales growth since April 1997 is
the result of the acquisition of certain net assets of Gerry, which was
accounted for under the purchase method of accounting. Gerry's product lines,
which include gates, booster car seats, bath products, monitors and toilet
trainers, are lower margin items than the Company's traditional strengths in car
seats and stationary activity products. As a result, the Company's historical
consolidated results of operations are not directly comparable for the periods
discussed below. Since the acquisition of Gerry, the Company has eliminated
Gerry's manufacturing and distribution operations at Thornton, Colorado and
integrated them into the Company's Piqua, Ohio and Canton, Georgia facilities.
During fiscal 1997 and the nine months ended June 30, 1998, Evenflo invested
approximately $103 million to improve its operations, expand its product lines
and support the growth of its base business. The following chart outlines these
expenditures:
<TABLE>
<CAPTION>
TWENTY-ONE
NINE MONTHS ENDED MONTHS ENDED
FISCAL 1997 JUNE 30, 1998 JUNE 30, 1998
------------------- ----------------- ---------------
<S> <C> <C> <C>
(DOLLAR AMOUNTS IN MILLIONS)
Gerry Acquisition............................................ $ 68.7 -- $ 68.7
Capital expenditures:
Project Discovery(1)....................................... 12.2 $ 0.5 12.7
Integration of Gerry....................................... 0.1 6.7 6.9
Other capital expenditures................................. 8.6 5.9 14.5
----- ----- ------
Total........................................................ $ 89.6 $ 13.1 $ 102.7
----- ----- ------
----- ----- ------
</TABLE>
- ------------------------
(1) In addition, the Company invested $3.1 million in fiscal 1996 for Project
Discovery.
Net sales are gross sales net of returns, allowances, trade discounts,
freight on goods sold and royalties paid on third-party trademarks used on the
Company's products. Evenflo's products are distributed through mass merchants
(such as Wal-Mart, Kmart and Target), national accounts (such as Toys "R" Us and
Sears), grocery and drugstores, as well as other retail outlets.
Gross profit is net sales less cost of sales which includes the costs
necessary to make the Company's products, including the costs of raw materials,
production, warehousing and procurement. The principal elements of the Company's
cost of sales are raw materials and packaging supplies, labor, manufacturing
overhead and purchased product costs. Raw materials, among other things, consist
of plastic resins, fabrics, wood and paper products, the overall costs of which
have remained relatively stable during the periods discussed below, despite
susceptibility to significant price fluctuations. Labor costs consist primarily
of hourly wages plus employee fringe benefits. Manufacturing overhead generally
includes indirect labor, plant costs and manufacturing supplies. See "Risk
Factors--Cost and Availability of Certain Materials."
42
<PAGE>
Selling, general and administrative expenses include the costs necessary to
sell the Company's products and the general and administrative costs of managing
the business, including salaries and related benefits, commissions, advertising
and promotion expenses, bad debts, travel, amortization of intangible assets,
insurance and product liability costs, corrective action and product recall
costs and professional fees.
Allocated Spalding expenses represent an allocation from Spalding (based on
the Company's net sales as a percentage of those of Spalding) of expenses for
assistance provided in the areas of accounting, auditing, employee relations,
insurance, legal, planning, tax and treasury as well as $0.8 million in
allocated out-of-pocket expenses relating to acquisition activity incurred by
Spalding on behalf of the Company in fiscal 1997, including $0.6 million for the
nine months ended June 30, 1997. Allocated Spalding expenses may increase or
decrease depending on the total corporate expenses incurred by Spalding and on
the level of acquisition activity benefiting the Company. Pursuant to the
Transition Services Agreement, Spalding has agreed to continue to provide many
of these services for six months after the Closing Date at the cost of providing
such services, after which time the Company will be required to provide for such
services either internally or through third parties, with such expenses being
accounted for as SG&A. After the termination of the Transition Services
Agreement, the Company expects to incur $3.0 million of expense on an annual
basis for such services. The Transition Services Agreement terminates with
respect to the majority of such services on September 30, 1998. See "Risk
Factors--No Prior Operations as an Independent Company" and "--Dependence on
Management; Need for Additonal Personnel."
SEPARATION FROM SPALDING
Prior to the Transactions, the Company operated as a wholly-owned subsidiary
of Spalding. During this period, Spalding provided assistance to the Company in
the areas of accounting, auditing, employee relations, insurance, legal,
planning, tax and treasury. For these services, the Company paid Spalding an
allocated charge based on the Company's net sales as a percentage of those of
Spalding as well as allocated out-of-pocket expenses relating to acquisition
activity incurred by Spalding on behalf of the Company, which are set forth on
the historical income statements as allocated Spalding expenses. Under the
Transition Services Agreement entered into on the Closing Date, Spalding
continues to provide these services at negotiated rates. During the
effectiveness of the Transition Services Agreement, the Company will develop its
internal capabilities to provide these services or enter into arrangements with
third parties for the provision of such services at costs consistent with the
fees to be charged by Spalding under the Transition Services Agreement (which
are estimated to be $3.0 million annually). However, there can be no assurance
that after the termination of the Transition Services Agreement that the Company
will be able to replace Spalding's services under the Transition Services
Agreement for the fees charged by Spalding or that the provision of such
services during the transition period after the termination of the Transition
Services Agreement will be performed without interruption or delay due to
unanticipated circumstances.
EFFECTS OF GERRY INTEGRATION; FACTORS AFFECTING FISCAL 1998 PERFORMANCE
The integration of Gerry to date has been more difficult than the Company
originally contemplated and, as a result, the Company's results for fiscal 1998
will not reflect the manufacturing and distribution efficiencies previously
anticipated. The Company expects that these efficiencies will be realized in
fiscal 1999 from the investments made in Project Discovery and the integration
of Gerry into the Company's manufacturing and distribution infrastructure. For
the first nine months of fiscal 1998, and to a lesser extent for the remainder
of fiscal 1998, the integration process has resulted in higher costs for
indirect and non-standard labor, product testing, scrap, freight, inventory
obsolescence and delays in product introductions which more than offset the cost
savings achieved by the Company's capital expenditure program. In addition, the
demands of the integration process have resulted in the delayed introduction of
new Gerry products and reduced levels of customer service as the Company
redesigned certain Gerry products, each of which negatively impacted net sales
and costs of production per unit. Other factors which have adversely
43
<PAGE>
affected the Company's results in fiscal 1998 include inventory reductions by
Toys "R" Us, the effects of product recalls and corrective actions and product
introductions by competitors and declines in international sales due to lower
net sales in Canada and Malaysia and the effect of weaker currencies compared to
the U.S. dollar. In the fourth quarter of fiscal 1998, the Company expects to
implement a program to evaluate its product platforms and SKUs to eliminate low
volume, low profit products to improve the margin mix of the Company's product
lines. While the SKU reduction program is expected to enhance the Company's
gross margin percentage in fiscal 1999, during fiscal 1998 the Company's gross
margin will be affected by a change in mix of sales as the Company expedites the
sale of certain slower moving inventory as part of the SKU reduction program. In
addition, in September 1998, Toys "R" Us announced additional measures to
restructure its business.
RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations of the
Company covers periods before completion of the Transactions. Accordingly, the
discussion and analysis of such periods does not reflect the significant impact
that the Transactions will have on the Company. In addition, the Gerry
Acquisition had a significant impact on the Company's results of operations. As
a result, the Company's historical consolidated results of operations are not
directly comparable for the periods discussed below. See "Risk Factors," and the
discussion below under "--Liquidity and Capital Resources" for further
discussion relating to the impact that the Transactions may have on the Company.
In addition, see "Pro Forma Condensed Consolidated Financial Statements" for
management's discussion and analysis of pro forma results of operations for the
nine months ended June 30, 1998 compared to the nine months ended June 30, 1997.
The following table sets forth operating results of the Company expressed as
a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Net sales................................................................. 100.0% 100.0%
Cost of sales............................................................. 78.3 80.4
--------- ---------
Gross profit.............................................................. 21.7 19.6
Selling, general and administrative expenses.............................. 17.8 18.5
Restructuring costs....................................................... 0.2 0.6
Allocated Spalding expenses............................................... 1.1 0.9
--------- ---------
Income from operations.................................................... 2.6 (0.4)
Interest expense, net..................................................... 2.2 3.3
Currency loss, net........................................................ 0.0 0.2
--------- ---------
Earnings (loss) before income taxes....................................... 0.4 (3.9)
Income taxes (benefit).................................................... 0.2 (1.5)
--------- ---------
Net earnings (loss)....................................................... 0.2 (2.4)
Other comprehensive earnings (loss)--currency translation adjustment net
of tax benefit of $55,000 and $294,000.................................. (0.1) (0.3)
--------- ---------
Comprehensive earnings (loss)............................................. 0.1% (2.7)%
--------- ---------
--------- ---------
</TABLE>
44
<PAGE>
NINE MONTHS ENDED JUNE 30, 1998 ("1998 NINE MONTHS") COMPARED TO THE NINE MONTHS
ENDED JUNE 30, 1997 ("1997 NINE MONTHS")
NET SALES. The Company's net sales increased to $245.2 million in the 1998
nine months from $205.7 million in the 1997 nine months, an increase of $39.5
million or 19.2%. The net sales increase was principally due to the inclusion of
Gerry net sales in the 1998 nine months compared to the inclusion of Gerry net
sales for approximately two months in 1997 as a result of the April 1997
acquisition of Gerry. The increase in net sales was partially offset by (i)
lower net sales of play yards due to the expiration of a patent license for the
manufacture of play yards and a nine-month delay in introducing the PLAY CRIB,
the Company's newest entrant in the play yard product category, which began to
be shipped to retailers in February 1998, (ii) the discontinuance of certain
Gerry products that did not fit with the Company's product line strategies,
(iii) the withdrawal of certain Gerry products from the marketplace to
re-engineer such products to meet Evenflo's standards, (iv) the effect of
certain product safety campaigns and (v) increased levels of returns of breast
pumps, monitors and strollers. See "Business--Legal Proceedings." International
net sales were down $0.9 million compared to the 1997 nine months due primarily
to lower net sales in Canada and Malaysia and the effect of weaker currencies
compared to the U.S. dollar, partially offset by higher net sales in Mexico and
France. While net sales to Toys "R" Us have increased for the comparable nine
month periods, Toys "R" Us has recently announced a plan to reduce its inventory
levels. The Company, as a result of this action, recorded lower net sales to
Toys "R" Us in the third quarter of fiscal 1998 than in the comparable period of
the prior year.
GROSS PROFIT. The Company's gross profit increased to $48.1 million in the
1998 nine months from $44.6 million in the 1997 nine months, an increase of $3.5
million or 7.8%. However, the Company's gross margin decreased to 19.6% in the
1998 nine months from 21.7% in the 1997 nine months principally due to (i) the
addition of lower margin products such as gates, booster car seats, bath
products, monitors and toilet trainers acquired in the Gerry Acquisition, (ii)
the impact of the factors discussed in "--Effects of Gerry Integration; Factors
Affecting Fiscal 1998 Performance," partially offset by operating efficiencies
attributable to Project Discovery, (iii) an increased level of returns of breast
pumps, monitors and strollers, (iv) an increase in distribution costs and (v) a
less favorable international sales mix due to the strength of the U.S. dollar
versus certain international currencies.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES. The Company's SG&A
expenses increased to $45.4 million in the 1998 nine months from $36.7 million
in the 1997 nine months. As a percentage of net sales, SG&A expenses increased
to 18.5% in the 1998 nine months from 17.8% in the 1997 nine months. The
Company's $8.7 million increase in SG&A expenses was principally due to (i) an
increased number of selling and administrative personnel during the Gerry
integration, (ii) increased product development and engineering efforts relating
to a number of the Company's product lines, (iii) $3.4 million higher safety
campaign and corrective action costs relating to the HAPPY CAMPER play yard, the
ON MY WAY infant car seat, the TWO-IN-ONE booster car seat and the Canadian
ULTARA car seat and (iv) higher advertising and promotional costs, partially
offset by (i) lower product liability expenses compared to the 1997 nine months,
(ii) $1.2 million of royalty income settlements on play yards and strollers and
(iii) lower costs from the elimination of certain redundant functions as part of
the Gerry integration.
RESTRUCTURING COSTS. In the 1998 nine months and the 1997 nine months, the
Company incurred $1.4 million and $0.4 million, respectively, of restructuring
costs to relocate the Gerry Colorado administrative and manufacturing operations
to Evenflo's Ohio and Georgia locations. See "--Liquidity and Capital Resources"
and "--EBITDA."
ALLOCATED SPALDING EXPENSES. In the 1998 nine months, allocated Spalding
expenses were $2.1 million, compared to $2.2 million in the 1997 nine months.
45
<PAGE>
INTEREST EXPENSE. Interest expense increased to $8.1 million in the 1998
nine months from $4.6 million in the 1997 nine months, an increase of $3.5
million. The increase was primarily due to the Company's issuance of a $49.1
million note to Spalding as a result of the Gerry Acquisition.
CURRENCY LOSS. The currency loss of $0.5 million was $0.4 million higher in
the 1998 nine months than in the 1997 nine months. See "--Liquidity and Capital
Resources."
INCOME TAXES. Evenflo had a tax benefit of $3.7 million for the 1998 nine
months, which represents an effective tax rate of 39% in relation to a loss
before income taxes of $9.4 million. The effective tax rate consists of a U.S.
federal statutory rate of 35% and a 4% effective state income tax rate. The
effective tax rate for the comparable nine months in the prior year was 44%.
NET LOSS. The Company had a net loss of $5.7 million for the 1998 nine
months compared to net earnings of $0.4 million for the 1997 nine months. The
$6.1 million decrease in earnings was a result of a $6.2 million decrease in
earnings from operations, $3.5 million higher interest expense and $0.4 million
higher currency loss, partially offset by a $4.0 million higher income tax
benefit.
The following table sets forth operating results of the Company expressed as
a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales............................................................ 100.0% 100.0% 100.0%
Cost of sales........................................................ 75.0 75.4 79.5
--------- --------- ---------
Gross profit......................................................... 25.0 24.6 20.5
Selling, general and administrative expenses......................... 19.8 18.0 17.6
Restructuring costs.................................................. 0.0 0.0 3.2
Allocated Spalding expenses.......................................... 1.2 1.1 1.0
1994 Management Stock Ownership Plan expense......................... 0.1 1.1 0.0
--------- --------- ---------
Income (loss) from operations........................................ 3.9 4.4 (1.3)
Interest expense, net................................................ 2.0 1.7 2.4
Currency loss, net................................................... 0.4 0.1 0.1
--------- --------- ---------
Earnings (loss) before income taxes and extraordinary loss........... 1.5 2.6 (3.8)
Income taxes (benefit)............................................... 0.5 1.3 (1.7)
--------- --------- ---------
Earnings (loss) before extraordinary loss............................ 1.0 1.3 (2.1)
Extraordinary loss on early extinguishment of debt, net of $360,000
tax benefit........................................................ 0.0 0.3 0.0
--------- --------- ---------
Net earnings (loss).................................................. 1.0 1.0 (2.1)
Other comprehensive earnings (loss)--currency translation adjustment
net of tax benefit of $431,000, $150,000 and $174,000.............. (0.2) (0.1) (0.1)
--------- --------- ---------
Comprehensive earnings (loss)........................................ 0.8% 0.9% (2.2)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED SEPTEMBER 30, 1997 ("FISCAL 1997") COMPARED TO YEAR ENDED SEPTEMBER
30, 1996 ("FISCAL 1996")
NET SALES. The Company's net sales increased to $296.7 million for fiscal
1997 from $237.2 million for fiscal 1996, an increase of $59.5 million or 25.1%.
When compared to fiscal 1996, Evenflo net sales were flat after excluding the
April 1997 Gerry Acquisition which contributed $60.3 million in net sales for
the
46
<PAGE>
final five months of fiscal 1997. Evenflo's net sales of car seats and
stationary activity products decreased from fiscal 1996 levels, principally due
to shortages of fabric pads and competitive pricing. Evenflo's net sales of play
yards decreased from fiscal 1996 levels principally due to the expiration of a
patent license for the manufacture of play yards and safety campaigns.
Offsetting the decreases were 1997 net sales of strollers and high chairs which
were up 74% and 27%, respectively, over the fiscal 1996 comparable period.
International net sales were up $4.7 million compared to fiscal 1996 due
primarily to higher net sales in Canada, Mexico and certain other export
markets.
GROSS PROFIT. The Company's gross profit grew to $60.8 million in fiscal
1997 from $58.4 million in fiscal 1996, an increase of $2.4 million or 4.1%. The
Company's gross margin decreased to 20.5% in fiscal 1997 from 24.6% in fiscal
1996 principally due to (i) the addition of lower margin products, such as
gates, booster car seats, bath products, monitors and toilet trainers acquired
in the Gerry Acquisition, (ii) a shift to increased sales of strollers and high
chairs which have lower margins than car seats and stationary activity products,
(iii) $2.8 million in unusual costs associated with the manufacturing and
warehouse reconfiguration at Piqua, Ohio, (iv) $3.1 million in inventory
write-downs resulting from a decision to discontinue the sale of certain Gerry
products as a result of the integration of Gerry into the Company and (v) $1.3
million as a result of expensing the increase to fair value of Gerry's inventory
as such inventory was sold, such increase resulting from the application of
purchase accounting in the Gerry Acquisition.
SG&A EXPENSES. The Company's SG&A expenses increased to $52.2 million
during fiscal 1997 from $42.8 million in fiscal 1996, an increase of $9.4
million or 22.0%. However, as a percentage of net sales, SG&A expenses decreased
to 17.6% for fiscal 1997 from 18.0% for fiscal 1996. The fiscal 1997 $9.4
million increase in SG&A expenses over fiscal 1996 is principally due to (i)
$6.5 million for five months of Gerry expenses (excluding promotion costs) in
fiscal 1997, (ii) $3.6 million in higher corrective action costs (in fiscal
1997, Evenflo incurred $4.4 million on four corrective actions on certain car
seats and play yards), (iii) $2.9 million in higher promotion costs and (iv)
$1.3 million in higher unusual costs to combine Evenflo's feeding and furniture
operations which were previously managed separately, partially offset by (i)
$2.7 million lower product liability expenses from a lower number of claims,
(ii) $1.6 million in transaction bonuses from the Recapitalization and (iii)
$0.6 million in other costs.
RESTRUCTURING COSTS. In fiscal 1997, the Company incurred $9.6 million of
restructuring costs to relocate the Gerry Colorado administrative and
manufacturing operations to Evenflo's Ohio and Georgia locations. See
"--Liquidity and Capital Resources" and "--EBITDA."
ALLOCATED SPALDING EXPENSES. In fiscal 1997, allocated Spalding expenses
were $2.9 million, an increase of $0.4 million from fiscal 1996. Evenflo's
increased allocation of Spalding resources was due primarily to $0.8 million of
allocated out-of-pocket expenses relating to acquisition activity, partially
offset by lower SG&A expenses at Spalding to be allocated to Evenflo.
INTEREST EXPENSE. Interest expense increased to $7.2 million in fiscal 1997
from $4.1 million in fiscal 1996, an increase of $3.1 million. The increase was
primarily due to higher interest expense related to allocated indebtedness from
Spalding as a result of Spalding's higher average borrowings and a higher
average borrowing rate after the Recapitalization, as well as the Company's
issuance of a $49.1 million note to Spalding as a result of the Gerry
Acquisition.
CURRENCY LOSS. The Company incurred an insignificant currency loss in
fiscal 1997 compared to a currency loss of $0.2 million in fiscal 1996. See
"--Liquidity and Capital Resources."
INCOME TAXES. The Company had a tax benefit of $4.9 million for fiscal
1997, which represents an effective tax rate of 44% in relation to a loss before
income taxes of $11.2 million. The effective tax rate varied from a U.S. federal
and state statutory rate of 39% due to utilization of non-U.S. net operating
losses. The effective tax rate for the prior year of 52% varied from the
statutory rate due primarily to the
47
<PAGE>
effect of the 1994 Management Stock Ownership Plan expense which was not
deductible on the Company's income tax return.
NET LOSS. The Company had a net loss of $6.3 million for fiscal 1997
compared to net earnings of $2.4 million for fiscal 1996. The $8.7 million
decrease in earnings was a result of a $14.4 million decrease in earnings from
operations and $3.1 million higher interest expense, partially offset by $8.1
million higher income tax benefit, $0.1 million lower currency loss and $0.6
million in fiscal 1996 extraordinary loss on early extinguishment of debt, net
of a $0.4 million tax benefit.
YEAR ENDED SEPTEMBER 30, 1996 ("FISCAL 1996") COMPARED TO YEAR ENDED SEPTEMBER
30, 1995 ("FISCAL 1995")
NET SALES. The Company's net sales increased to $237.2 million for fiscal
1996 from $210.0 million for fiscal 1995, an increase of $27.2 million or 13.0%.
The net sales increase was principally due to a 22.7% increase in U.S. net sales
of car seats when compared to fiscal 1995, as well as the impact of new product
introductions, including the ON MY WAY TRAVEL SYSTEM, the PHASES high chair and
the angled reusable nurser. EXERSAUCER net sales decreased due to increased
competition and lower production caused by manufacturing downtime to modify
tooling for new EXERSAUCER versions. Evenflo's international net sales were down
$1.0 million compared to fiscal 1995 due primarily to increased car seat
competition in Canada and lower net sales in the Philippines.
GROSS PROFIT. The Company's gross profit increased to $58.4 million in
fiscal 1996 from $52.4 million in fiscal 1995, an increase of $6.0 million or
11.5%. The Company's gross margin declined to 24.6% in fiscal 1996 as compared
with 25.0% in fiscal 1995 as a result of (i) lower selling prices of EXERSAUCERS
and disposable nursers, (ii) lower international sales (which typically have
higher gross margins) and (iii) a less favorable sales mix within the car seat
line due to production tool repairs.
SG&A EXPENSES. The Company's SG&A expenses increased to $42.8 million for
fiscal 1996 from $41.5 million for fiscal 1995, an increase of $1.3 million or
3.1%. However, as a percentage of net sales, SG&A expenses decreased to 18.0%
for fiscal 1996 from 19.8% for fiscal 1995. The Company's $1.3 million increase
in SG&A expenses was due primarily to (i) a $2.3 million increase in accounts
receivable charge-offs as a result of the bankruptcy of two of its customers,
(ii) $1.6 million in transaction bonuses from the Recapitalization, (iii) $1.3
million in unusual costs to combine Evenflo's feeding and furniture operations
which were previously managed separately and (iv) $0.4 million higher
advertising, promotion and other costs. These expense increases were partially
offset by (i) a $2.0 million decrease in product liability costs, (ii) $1.2
million of lower corrective action expenses in fiscal 1996 and (iii) $1.1
million of lower expenses in Mexico and Canada due to reduced marketing
activities in those countries.
ALLOCATED SPALDING EXPENSES. Evenflo's allocated Spalding expenses were
$2.5 million in both fiscal 1995 and fiscal 1996.
1994 MANAGEMENT STOCK OWNERSHIP PLAN. Expenses related to the Company's
1994 Management Stock Ownership Plan increased to $2.6 million for fiscal 1996
from $0.1 million for fiscal 1995, an increase of $2.5 million. 1994 Management
Stock Ownership Plan expense represents compensation expense related to the
increase in the fair value of common stock of a wholly-owned subsidiary of
Spalding held by a member of senior management of the Company which was
purchased by the Company in connection with the Recapitalization.
INTEREST EXPENSE. Interest expense decreased to $4.1 million in fiscal 1996
from $4.3 million in fiscal 1995, a decrease of $0.2 million. The decrease in
interest expense, which related to allocated indebtedness from Spalding, was the
result of a decrease in Spalding's average borrowing rate, partially offset by
an increase in average borrowings.
48
<PAGE>
CURRENCY LOSS. Currency loss of $0.2 million was $0.6 million lower in
fiscal 1996 than in fiscal 1995. See "--Liquidity and Capital Resources."
INCOME TAXES. Income taxes were $3.2 million for fiscal 1996, which
represents an effective tax rate of 52% in relation to earnings before income
taxes and extraordinary loss of $6.2 million. The effective tax rate varied from
a U.S. federal and state statutory rate of 39% due to the effect of the 1994
Management Stock Ownership Plan expense which was not deductible on the
Company's income tax return. The effective tax rate for the prior year of 33%
varied from the statutory rate due primarily to utilization of non-U.S. net
operating losses.
EXTRAORDINARY LOSS. The extraordinary loss on early extinguishment of debt
relates to a $0.9 million pre-tax ($0.6 million after-tax) write-off of
unamortized deferred financing costs relating to Spalding's previous U.S.
secured credit agreement which was repaid and cancelled in connection with the
Recapitalization.
NET EARNINGS. Net earnings were $2.4 million for fiscal 1996 compared to
net earnings of $2.1 million for fiscal 1995. The $0.3 million increase in
earnings was a result of a $2.2 million increase in earnings from operations,
$0.2 million lower interest expense and a $0.6 million lower currency loss,
partially offset by $2.1 million higher income tax expense and a $0.6 million
extraordinary loss on early extinguishment of debt, net of $0.4 million tax
benefit.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company currently believes that cash flow from operating
activities, together with borrowings available under the Credit Facility, will
be sufficient to fund the Company's currently anticipated working capital,
capital expenditures, interest payments and other liquidity needs. Any future
acquisitions, joint ventures or other similar transactions will likely require
additional capital and there can be no assurance that any such capital will be
available to the Company on acceptable terms or at all. There can be no
assurance, however, that the Company's business will continue to generate
sufficient cash flow from operations in the future to service its debt, make
necessary capital expenditures or meet its other cash needs. If unable to do so,
the Company may be required to refinance all or a portion of its existing debt,
including the Notes, to sell assets or to obtain additional financing. There can
be no assurance that any such refinancing would be possible or that any such
sales of assets or additional financing could be achieved on terms reasonably
favorable to the Company.
The Company incurred substantial indebtedness in connection with the
Transactions. As of June 30, 1998, after giving pro forma effect to the
Transactions, the Company would have had $120.0 million of combined indebtedness
and a common shareholders' equity of $26.5 million. Following the Transactions,
the Company's liquidity requirements have been significantly increased,
primarily due to increased interest expense obligations. Had the Transactions
been consummated on October 1, 1996, interest expense (net) incurred in fiscal
1997 associated with indebtedness under the Notes and the Credit Facility would
have been $15.3 million, compared with the $7.2 million of interest expense
(net) actually incurred. In addition, on a pro forma basis after giving effect
to the Transactions, for fiscal 1997 and the nine months ended June 30, 1998,
the Company would have had noncash preferred stock dividends of $5.6 million and
$4.2 million, respectively. See "Pro Forma Condensed Consolidated Financial
Statements." The Credit Facility and the Indenture permit the Company to incur
or guarantee certain additional indebtedness, subject to certain limitations.
See "Description of the Credit Facility" and "Description of the Exchange
Notes."
On the Closing Date, the Company entered into the Credit Facility, which
provides for $100.0 million of commitments. The obligations of the Company under
the Credit Facility are secured by certain assets of the Company and its
subsidiaries and are guaranteed by certain subsidiaries of the Company. On the
Closing Date, the Company borrowed $10.0 million under the Credit Facility and
applied approximately
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<PAGE>
$42.0 million of the commitments to support outstanding letters of credit and
bankers' acceptances. The remaining commitments under the Credit Facility are
available to fund the working capital, capital expenditures, general corporate
and other cash needs of the Company. Borrowings under the Credit Facility bear
interest at a rate per annum equal (at the Company's option) to a margin over
either a base rate or a "eurodollar rate." All outstanding revolving credit
borrowings under the Credit Facility will become due on the date that is seven
years after the Closing Date. The Company expects that its working capital needs
and other cash requirements will require it to obtain replacement revolving
credit facilities at that time. No assurance can be given that any such
replacement can be successfully obtained. See "Description of the Credit
Facility."
The Exchange Notes will mature in 2006. The obligations of the Company under
the Exchange Notes and the Indenture will not be guaranteed by subsidiaries of
the Company on the issuance date of the Exchange Notes and will not be secured
by any assets of the Company or any of its subsidiaries. The Credit Facility and
the Indenture contain numerous financial and operating covenants that limit the
discretion of the Company's management with respect to certain business matters.
These covenants place significant restrictions on, among other things, the
ability of the Company to incur additional indebtedness, pay dividends and other
distributions, prepay subordinated indebtedness, enter into sale and leaseback
transactions, create liens or other encumbrances, make capital expenditures,
make certain investments or acquisitions, engage in certain transactions with
affiliates, sell or otherwise dispose of assets and merge or consolidate with
other entities and otherwise restrict corporate activities. The Credit Facility
also requires the Company to meet certain financial ratios and tests. The Credit
Facility and the Indenture contain customary events of default. See "Description
of the Credit Facility" and "Description of the Exchange Notes."
CASH FLOWS
1998 NINE MONTHS. For the 1998 nine months, the Company used $27.5 million
in cash before financing activities to fund $14.4 million in operating
activities and invest $13.1 million in capital expenditures. Cash used in
operating and investing activities in the 1998 nine months was funded from $29.7
million of financing activities with Spalding, resulting in a $2.2 million
increase in cash.
Net cash flow used by operating activities for the 1998 nine months was
$14.4 million compared to $13.4 million for the 1997 nine months. The $1.0
million higher use of cash for operating activities when compared to the 1997
nine months was due to a $6.1 million decrease in net earnings and a $1.4
million increase in the use of cash for working capital, partially offset by
$3.7 million higher depreciation and amortization and a $2.8 million increase in
deferred taxes. The use of cash for working capital in the 1998 nine months
compared unfavorably to the 1997 nine months due to a $6.3 million decrease in
cash provided by payables and other accounts, partially offset by a $4.7 million
decrease in the use of cash for receivables and a $0.2 million decrease in the
use of cash for inventories.
Capital expenditures were $13.1 million for the 1998 nine months compared to
$14.9 million in the 1997 nine months. Capital expenditures for the 1998 nine
months were $1.8 million lower than the comparable 1997 nine months, with the
Company investing $0.5 million to complete Project Discovery and $6.7 million to
complete the expansion of its warehousing and shipping facilities in Piqua, Ohio
and Canton, Georgia in order to improve efficiency and accommodate the
consolidation of Gerry's Colorado operations and $1.8 million on computer
hardware and software to unify and upgrade its management information systems to
achieve Year 2000 compliance. The Company also incurred $4.1 million in other
capital expenditures for the 1998 nine months. Management estimates that the
Company will make an additional $4.9 million in capital expenditures during the
remainder of fiscal 1998. Furthermore, the Company anticipates an additional
$4.7 million of capital expenditures to be expended over the next nine months on
computer hardware and software to unify and upgrade its management information
systems and to achieve Year 2000 compliance. See "Business--Information
Technology" and "--Year 2000
50
<PAGE>
Compliance." In fiscal 1999, the Company expects to make $12.5 million of
capital expenditures, $4.4 million of which will represent maintenance capital
expenditures.
FISCAL 1997 COMPARED TO FISCAL 1996. For fiscal 1997, the Company used
$90.5 million in cash before financing activities to invest $20.9 million in
capital expenditures, $68.7 million in the acquisition of Gerry, and $0.9
million in cash used by operating activities. Cash used in operating and
investing activities in fiscal 1997 was funded from $87.5 million of financing
activities with Spalding, $68.7 million of which related to the Gerry
Acquisition, offset by a $0.2 million reduction in non-U.S debt, which in the
aggregate resulted in a $3.2 million decrease in cash.
Net cash flow used in operating activities for fiscal 1997 was $0.9 million
compared to $24.3 million generated by operating activities in fiscal 1996. The
$25.2 million lower generation of cash by operating activities when compared to
fiscal 1996 was due to $8.7 million lower net earnings, a $10.5 million increase
in the use of cash for working capital and an $8.8 million decrease in deferred
taxes and other non-cash items; partially offset by $2.8 million higher
depreciation and amortization. The use of cash for working capital in fiscal
1997 compared unfavorably to fiscal 1996 due to a $7.9 million decrease in cash
provided by payables and other accounts, plus a $4.2 million increase in the use
of cash for inventories, partially offset by a $1.6 million decrease in the use
of cash for receivables.
Capital expenditures for fiscal 1997 were $20.9 million compared with $9.4
million in fiscal 1996. The Company's fiscal 1997 capital expenditures of $20.9
million included $12.2 million to expand and upgrade its warehousing and
shipping facilities, modernize distribution systems and reconfigure assembly
operations at its Piqua, Ohio operations as part of Project Discovery and $0.1
million to integrate Gerry's operations into the Company's Ohio and Georgia
plants. The other capital expenditures of $8.6 million were used primarily for
new product introductions and to upgrade existing production equipment.
FISCAL 1996 COMPARED TO FISCAL 1995. For fiscal 1996, the Company generated
$14.5 million in cash before financing activities, as the Company generated
$24.3 million from operating activities and invested $9.4 million in capital
expenditures and $0.4 million in the acquisition of intangible assets. Net cash
of $14.5 million generated from operating and investing activities was used to
pay down $12.2 million of financing activities with Spalding and to increase
cash by $2.3 million.
Net cash flow generated by operating activities for fiscal 1996 was $24.3
million compared to $1.4 for fiscal 1995. The $22.9 million higher generation of
cash by operating activities when compared to fiscal 1995 was due to $0.3
million higher net earnings, $1.0 million higher depreciation and amortization,
a $5.6 million increase in deferred taxes and other non-cash items and $16.0
million lower use of cash for working capital. The decrease in the use of cash
for working capital in fiscal 1996 compared to fiscal 1995 was due to a $13.3
million increase in cash provided by payables and other accounts, plus a $2.1
million decrease in the use of cash for receivables and a $0.6 million decrease
in the use of cash for inventories.
Capital expenditures for fiscal 1996 were $9.4 million compared with $6.5
million in fiscal 1995. Capital expenditures increased to support the Company's
growth and were used primarily for new product introductions and to upgrade
existing production equipment.
The Company's ability to fund its working capital needs, planned capital
expenditures, scheduled debt payments, lease payments and other cash payments to
continue its business strategy and to comply with all of the financial covenants
under its debt agreements, depends on its future operating performance and cash
flow, which in turn are subject to prevailing economic conditions and to
financial, business and other factors, some of which are beyond the Company's
control. See "Risk Factors."
EBITDA
EBITDA, as defined (earnings before interest expense, income taxes,
depreciation, amortization, extraordinary items and restructuring costs), is
included as a basis upon which the Company assesses its
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<PAGE>
financial performance, and certain covenants in the Company's borrowing
arrangements are tied to similar measures. The following sets forth certain
information regarding the Company's EBITDA and other net cash flow items for
fiscal 1996, fiscal 1997 and the 1997 nine months and 1998 nine months:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED JUNE
SEPTEMBER 30 30,
-------------------- ------------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- ----------- -----------
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
EBITDA............................................................ $ 16,808 $ 14,952 $ 12,743 $ 10,901
Other items affecting EBITDA...................................... 3,642 9,758 3,840 934
Historical cash flow net cash provided by (used in)
Operating activities............................................ 24,287 (942) (13,429) (14,354)
Investing activities............................................ (9,740) (89,579) (83,517) (13,112)
Financing activities............................................ (12,244) 87,312 97,047 29,686
</TABLE>
The Company's fiscal 1997 EBITDA was adversely affected by $9.8 million of
unusual costs consisting of (i) $7.1 million in cost of sales unusual charges
for the following items: (a) $2.7 million attributable to the manufacturing and
warehouse reconfiguration at Piqua, Ohio, (b) a $3.1 million inventory
write-down resulting from a decision to discontinue the sale of certain Gerry
products as a result of the integration of Gerry into the Company and (c) $1.3
million as a result of expensing the increase to fair value of Gerry's inventory
as such inventory was sold, such increase resulting from the application of
purchase accounting in the Gerry Acquisition and (ii) $2.6 million of selling,
general and administrative expenses unusual charges for costs to combine
Evenflo's feeding and furniture operations which were previously managed
separately.
The Company's fiscal 1996 EBITDA was adversely affected by $3.6 million of
selling, general and administrative expenses unusual costs consisting of $2.3
million of accounts receivable charge-offs, as a result of the bankruptcy of two
of its customers and $1.3 million of costs to combine Evenflo's feeding and
furniture operations.
The Company's EBITDA for the 1998 nine months was adversely affected by $0.9
million of other unusual costs consisting of (i) $0.4 million in cost of sales
unusual costs, $0.2 million of which were due to expenses to relocate the Gerry
Colorado warehouse operations to Evenflo's Ohio and Georgia locations and $0.2
million of which were attributable to the manufacturing and warehouse
reconfiguration at Piqua, Ohio and (ii) $0.5 million of selling, general and
administrative expenses relating to Year 2000 conversion costs. The Company
estimates fiscal 1998 total restructuring and other unusual costs may
approximate $2.6 million in the aggregate.
The Company's EBITDA for the 1997 nine months was adversely affected by $3.8
million of unusual costs consisting of (i) $1.5 million of cost of sales unusual
costs attributable to the manufacturing and warehouse reconfiguration of Piqua,
Ohio, (ii) $1.0 million of selling, general and administrative expenses unusual
costs to combine Evenflo's feeding and furniture operations which were
previously managed separately and (iii) $1.3 million of cost of sales unusual
costs to expense an increase to fair market value for Gerry's inventory as such
inventory was sold, such increase resulting from the application of purchase
accounting in the Gerry Acquisition.
CURRENCY HEDGING
In fiscal 1997, approximately 10% of the total Company net sales were
generated in non-U.S. currencies. Fluctuations in the value of these currencies
relative to the U.S. dollar could have a material effect on the Company's
results of operations. The Company's costs could be adversely affected if the
Chinese Renminbi appreciates significantly relative to the U.S. dollar. Although
the Company generally
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<PAGE>
pays for its products in U.S. dollars, the cost of such products fluctuates with
the value of the Chinese Renminbi.
INFLATION
Inflation has not been material to the Company's operations within the
periods presented.
YEAR 2000 COMPLIANCE
Many computer software and hardware systems currently are not able to read,
calculate or output correctly using dates after 1999, and such systems will
require significant modifications in order to be "Year 2000 compliant." The
Company has reviewed its computer hardware and software systems and has recently
begun to identify those systems that are not Year 2000 compliant. The existing
systems will be upgraded through either modification or replacement. The Company
currently anticipates these upgrades to be completed by December 1999 with the
upgrades required for Year 2000 compliance to be completed by December 1998. The
Company is currently developing alternative plans in the event that critical
system upgrades are not completed on time. The Company will complete the
development of such contingency plans by January 31, 1999. Contingency plans
will exist in each of the business units to correct and upgrade those existing
systems where potential failures could occur should the targeted implementation
dates of the new systems not be met or if the implementation dates are after the
end of the century. The Company expects to spend approximately $6.5 million by
December 1999 to unify and upgrade the Company's information systems, to improve
the Company's electronic data interchange ("EDI") capabilities and to resolve
the Company's Year 2000 compliance issues, $1.8 million of which was invested in
the aggregate in the three months ended June 30, 1998. All costs associated with
Year 2000 compliance will be expensed as incurred, other than acquisition of new
software or hardware, which will be capitalized.
A Corporate Oversight Committee ("COC") has been formed to deal with both
non-information technology ("non-IT") and information technology ("IT") issues.
Its members will coordinate with all major functional areas within the Company.
The COC has developed an initial Year 2000 Concerns list, conducted strategic
planning sessions, launched a Corporate Year 2000 awareness program and is in
the process of corresponding with suppliers requesting Year 2000 certification.
Efforts with major customers are planned for the near future to discuss,
identify, test and remediate, if required, potential issues. The COC is working
with each business unit to identify potential impacts on both IT and non-IT
systems at their specific location, prioritizing each risk, and developing and
implementing remediation plans where necessary.
Although the Company is not aware of any material operational impediments
associated with upgrading its computer hardware and software systems to be Year
2000 compliant, the Company cannot make any assurances that the upgrade of the
Company's computer systems will be completed on schedule, that the upgraded
systems will be free of defects, or that the Company's alternative plans will
meet the Company's needs. If any such risks materialize, the Company could
experience material adverse consequences, material costs or both.
Year 2000 compliance issues may also adversely affect the operations and
financial performance of the Company indirectly by affecting the operations of
any one or more of the Company's suppliers or customers. The Company is
currently contacting its significant suppliers and customers in an attempt to
identify any potential Year 2000 compliance issues with them. The Company is
currently unable to anticipate the magnitude of the operational or financial
impact on the Company of Year 2000 compliance issues with its suppliers and
customers. See "Business--Information Technology."
FOURTH QUARTER CHARGES
Certain adjustments relating to the Transactions which are reflected as
charges to shareholders' equity or against retained earnings in the Unaudited
Pro Forma Condensed Consolidated Balance Sheet (and not
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<PAGE>
as an adjustment to the Unaudited Pro Forma Condensed Statement of Consolidated
Earnings (Loss)) will be reflected as an expense in the Company's fourth quarter
of fiscal 1998. Such adjustments are as follows: (i) unamortized deferred
financing costs of $2.1 million related to the allocated long-term debt of
Spalding, which debt was repaid with the proceeds of the Transactions; and (ii)
$4.0 million of the $10.0 million of transaction fees and expenses incurred in
connection with the Transactions.
SEASONALITY
The Company's business is seasonal based on the juvenile product buying
patterns of Evenflo's major customers. For fiscal 1997, quarterly pro forma net
sales as a percentage of pro forma total sales were approximately 20%, 27%, 28%,
and 25%, respectively, for the first through the fourth quarters of the fiscal
year. The Company's need for cash historically has been greater in its first and
second quarters when cash generated from operating activities coupled with
drawdowns from bank lines have been invested in receivables and inventories.
EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 requires
public entities to report certain information about operating segments, their
products and services, the geographic areas in which they operate, and their
major customers, in complete financial statements and in condensed interim
financial statements issued to shareholders. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. This standard addresses
disclosure issues and therefore will not affect the Company's financial position
or results of operations.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits" ("SFAS No. 132"). SFAS No. 132
revises employers' disclosures about pension and other post-retirement benefit
plans. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. The adoption of SFAS No. 132 is not expected to have a material effect on
the Company's consolidated financial statements. This standard addresses
disclosure issues and therefore will not affect the Company's financial position
or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company has
not evaluated whether this standard will have a material effect on its financial
position or results of operations.
54
<PAGE>
BUSINESS
GENERAL
Evenflo is one of the largest manufacturers and marketers of juvenile
products in the United States as well as a leader in several international
markets based on pro forma net sales in 1997. Established in 1920, Evenflo is
one of the oldest and most recognized names in the juvenile products industry,
with a 97% brand awareness for infant feeding products among new mothers in the
United States. The Company believes it is a leading supplier of juvenile
products to such key national retailers as Toys "R" Us, Wal-Mart, Sears, Kmart
and Target.
Evenflo distinguishes itself from its competitors by developing innovative,
high quality products which have sometimes redefined their product categories.
For example, the 1994 introduction of the EXERSAUCER redefined the activity
product category. Evenflo followed this success with the introduction of the ON
MY WAY TRAVEL SYSTEM in 1996, which was, according to NPD, the single largest
selling product in the juvenile products industry by dollar volume in 1997. The
Company further distinguishes itself from its competitors through its co-branded
product offerings with other national brands such as OSHKOSH
B'GOSH-Registered Trademark- and SERTA-Registered Trademark-. For the twelve
months ended June 30, 1998, the Company had net sales of $336.3 million and
Adjusted EBITDA of $20.0 million.
The Company's products fall into four principal categories, representing the
daily activities in which the products are used: (i) "On The Go" products,
including car seats, strollers, travel systems and carriers, (ii) "Play Time"
products, including stationary activity products, swings, gates and doorway
jumpers, (iii) "Bed and Bath" products, including cribs, portable play yards,
monitors, mattresses, bath items and toilet trainers and (iv) "Feeding Time"
products, including reusable and disposable nurser systems, breastfeeding aids,
high chairs, oral development items such as teethers and pacifiers, bibs and
other feeding accessories.
During fiscal 1997 and the nine months ended June 30, 1998, Evenflo invested
an aggregate of approximately $103 million to improve its operations, expand its
product lines and support the growth of its base business. In March 1998,
Evenflo completed Project Discovery to improve productivity and increase
capacity levels by reengineering its Piqua, Ohio assembly lines and
reconfiguring its principal warehouse at a cost of $15.8 million ($12.7 million
of which was invested in the twenty-one months ended June 30, 1998) and in April
1997, Evenflo completed the Gerry Acquisition for a purchase price of $68.7
million. The Gerry Acquisition provided Evenflo with additional market leading
products in categories such as gates, monitors, infant carriers and baths, which
complemented the Company's traditional strengths in juvenile furniture and
infant feeding products. To realize the manufacturing efficiencies achievable
through the Gerry Acquisition, Evenflo invested an additional $6.9 million to
integrate the Gerry operations into the Company's Piqua, Ohio and Canton,
Georgia plants. The Company anticipates that significant production efficiencies
will be realized in fiscal 1999 from Project Discovery and the integration of
Gerry. In addition, the Company is developing a SKU rationalization program
aimed at discontinuing a substantial number of SKUs it produces in order to
eliminate certain low margin SKUs and to decrease the manufacturing burden of
producing the current number of product variations. The Company believes that
this effort will contribute to a reduction in inventory levels and an
improvement in margins.
BUSINESS STRATEGY
The Company's primary business objective is to increase net sales and
improve cash flow by increasing worldwide market share and improving operating
efficiencies. Evenflo seeks to achieve this objective by
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<PAGE>
leveraging its leading market positions, strong brand recognition and innovative
product development efforts in the pursuit of the following strategies:
ATTAIN LEADING MARKET SHARE IN ADDITIONAL KEY PRODUCT AREAS. In 1997,
Evenflo was the largest domestic manufacturer of juvenile products measured by
total pro forma dollar sales, with products competing in ten of the fifteen
highest dollar volume product categories for juvenile products. Evenflo has the
number one or number two market share (by dollars based on pro forma net sales
in 1997) in many of its key product categories as demonstrated by the following
table.
<TABLE>
<CAPTION>
1997 U.S.
1997 1997 RETAIL MARKET
U.S. MARKET U.S. MARKET SIZE
PRODUCT CATEGORY(1) SHARE RANK (MILLIONS)
- ------------------------------------------------------------- ----------------- ----------------- -------------
<S> <C> <C> <C>
ON THE GO
Infant Car Seats........................................... 45% 1 $ 46.0
Convertible Car Seats...................................... 47% 1 $ 113.9
Stroller Travel Systems.................................... 43% 1 $ 58.0
Soft Infant Carriers....................................... 62% 1 $ 15.2
Frame Infant Carriers...................................... 99% 1 $ 4.0
PLAY TIME
Gates...................................................... 58% 1 $ 50.7
Stationary Activity Products (excluding walkers)........... 51% 1 $ 31.8
BED AND BATH
Baby Baths................................................. 40% 1 $ 15.7
Play Yards................................................. 14% 2 $ 82.2
Baby Monitors.............................................. 23% 2 $ 38.5
FEEDING TIME
Breastfeeding Products..................................... 48% 1 $ 39.9
Reusable Nurser Systems.................................... 26% 2 $ 110.8
High Chairs................................................ 27% 2 $ 55.9
</TABLE>
- ------------------------
Source: NPD and ACNielsen sales data.
(1) The Company has defined its four principal categories to include "On The Go"
products, "Play Time" products, "Bed and Bath" products and "Feeding Time"
products and has presented market share and other data on the basis of such
product categories, although industry sources do not similarly divide the
juvenile products industry. The above chart includes market share
information for selected products in each of these categories and such
products do not represent the entirety of the Company's product line in each
such category. In addition, the Company does not compete in every product
line it includes in its definitions of On The Go, Play Time, Bed and Bath
and Feeding Time.
In 1997, Evenflo held leading market share positions (number one or number
two) in products that generated 78% of its pro forma net sales and 85% of its
pro forma gross profit. Evenflo believes that its strong market shares are
attributable to its dedication to products that appeal to parents' desires for
safe, convenient and fashionable products. The Company intends to focus its
marketing and product development resources on product categories in which the
Company believes it can achieve either a number one or a number two market
share. The Company believes that a number one or number two market share for a
product category is an important factor in achieving a desirable level of shelf
space with its key mass merchant and national accounts.
CONTINUE TO FOCUS ON PRODUCT DEVELOPMENT AND INNOVATION. The Company
believes that it is one of the leading innovators in the juvenile products
industry, with frequent introductions of innovative products and refinements
that improve a product's design and appeal. Throughout its long history, Evenflo
has developed innovative juvenile products, from its introduction of the first
fully integrated baby bottle system in 1935, to its successful 1994 introduction
of the EXERSAUCER stationary activity product, a safer alternative to infant
walkers. Also introduced in 1994 was the ON MY WAY car seat, with its
innovative, ergonomically
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<PAGE>
correct CARRY RIGHT handle. The ON MY WAY car seat was the best selling infant
car seat in U.S. dollar sales in 1997 (Evenflo's ULTARA I was the best selling
convertible car seat in U.S. dollar sales in 1997). In 1995, the Company
introduced the PHASES multi-use high chair, which converts from an infant
feeding seat to a booster seat to a play table and chair. In 1997, the PHASES
line was the second best selling line of high chairs in U.S. dollar sales. In
1996, Evenflo achieved incremental growth opportunities in strollers by
designing a stroller that integrates with the ON MY WAY car seat to form the new
ON MY WAY TRAVEL SYSTEM, the best selling travel system in U.S. dollar sales in
1997. The Company plans to continue its tradition of product development and
innovation by introducing new products to serve each of its four principal
product categories with over twenty new products expected to be introduced in
the next twelve months.
CAPITALIZE ON STRONG BRAND IDENTITY. The Company believes that the strength
and 78 year history of its brand name creates a significant competitive
advantage. Evenflo is one of the most widely recognized names in the juvenile
products industry and benefits from a 97% brand awareness for infant feeding
products among new mothers in the United States. Evenflo believes that its long
history of developing safety-tested, high quality, innovative products is
responsible for the high levels of brand loyalty achieved by its products.
Evenflo's strength in core products such as car seats and high chairs (required
products for most families with infants and juveniles) contributes to customers
recognizing Evenflo as a brand name associated with high quality consumer
products. By capitalizing on its strong brand identity, Evenflo is able to
introduce new lines and related products, such as Evenflo's car seat/stroller
combination, or product innovations, such as the EXERSAUCER.
The Company is implementing measures to improve the appeal of its product
line through an increased emphasis on fashionable patterns and fabrics for
products such as strollers and play yards. In order to further distinguish its
products, the Company has arrangements with other national brands such as Serta,
Disney, Warner Bros. and OshKosh in co-branded product offerings such as new
infant mattresses by SERTA-Registered Trademark-, Play Time products decorated
with BABY LOONEY TUNES-REGISTERED TRADEMARK- characters and Feeding Time
products decorated with DISNEY BABIES-Registered Trademark- characters. As part
of its co-branding strategy, Evenflo recently introduced a line of OSHKOSH
B'GOSH-Registered Trademark- by Evenflo products, including car seats,
strollers, play yards and carriers, which the Company believes is the first
product grouping with an integrated look of this kind in the industry. The
Company intends to pursue additional opportunities to improve the design appeal
of its products through co-branding arrangements in the future.
IMPROVE CUSTOMER SERVICE AND SUPPORT. Evenflo's customer service strategy
is premised on management's belief that Evenflo has two customer audiences: the
retail merchant and the end-user of its products. To improve service to its
retail customers, Evenflo has made significant investments as part of Project
Discovery to improve its distribution and warehousing facilities as well as
increase the flexibility of its manufacturing operations to satisfy the "just in
time" needs of many of its largest customers. In addition, Evenflo is in the
process of implementing a $6.5 million information technology program designed
to enhance the Company's information systems, EDI capabilities and data
processing capabilities pursuant to which the Company spent $1.8 million in the
aggregate in the three months ended June 30, 1998. The Company's improved EDI
system will lower order placement costs and increase the accuracy and timeliness
of order processing while enabling the customer to manage inventory levels more
efficiently. In addition, the enhanced information capabilities will permit
improved analyses of orders, sales, customer service levels and inventory and
more readily permit the identification of trends in these items. To improve
customer service levels to end-users, in the past twelve months the Company
completed construction of a consumer service center in Ohio which is staffed
with 36 service representatives. In addition, Evenflo has launched its own
website (www.evenflo.com) and has formed alliances with Lamaze and the SAFE KIDS
CAMPAIGN-Registered Trademark-, a childrens safety advocacy group, to provide
safety-related educational materials to new parents. Further, Evenflo has
recently launched a marketing and education program targeting Hispanic child
birth educators and expectant parents in order to serve the Hispanic community,
one of the fastest growing demographic groups in the United States.
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INCREASE INTERNATIONAL PENETRATION. The Company intends to be a global
leader in juvenile products and to significantly increase international net
sales and cash flow. The Company believes that higher birth rates, increasing
income levels, the lowering of trade barriers and the standardization of
juvenile product regulations in certain world markets present significant growth
opportunities. The Company's international sales have historically been made
primarily through its Canadian, Mexican and Philippine operations, as well as
through independent distributors selling to customers in 63 foreign countries.
Recently, the Company has begun to develop additional sales and marketing
capabilities in targeted markets. For example, in May 1998, the Company entered
the European market on a direct basis with a line of locally manufactured
products sold through its own sales and marketing group. The Company is
exploring similar opportunities in Southeast Asia.
REALIZE BENEFITS OF PROJECT DISCOVERY AND GERRY INTEGRATION. During fiscal
1997 and the nine months ended June 30, 1998, Evenflo invested an aggregate of
approximately $88.2 million in capital expenditures to expand its product line
(through the Gerry Acquisition), improve its operations and integrate the
operations of Gerry into its manufacturing and distribution infrastructure.
Evenflo has begun to realize operating efficiencies from these investments,
although the challenges posed by the integration of Gerry's operations have
resulted in increased costs during fiscal 1998 for indirect and non-standard
labor, product testing, scrap, freight, inventory obsolescence and delays in
product introductions which have more than offset the cost savings achieved
through these investments. The Company expects that the process of integrating
the manufacture and distribution of Gerry product lines at the Company's
facilities will be substantially completed by the end of fiscal 1998. In fiscal
1999, the Company believes that its investments in improved manufacturing and
distribution facilities and the increased experience of its workforce in
manufacturing and distributing Gerry products will result in significant
production efficiencies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effects of Gerry Integration; Factors
Affecting Fiscal 1998 Performance." In an effort to improve customer service and
operating efficiencies, Evenflo is developing a program to discontinue a
substantial number of SKUs it produces in order to eliminate certain low margin
SKUs and to decrease its manufacturing burden.
BUSINESS DESCRIPTION
ON THE GO (43.7% of Fiscal 1997 Pro Forma Net Sales)
The Company is a leader in the $488 million United States wholesale market
for products in the On The Go category. Evenflo's On The Go products, which
include car seats, strollers, travel systems and carriers generated fiscal 1997
pro forma net sales of $156.4 million and represent its strongest performing
product category.
Evenflo sold more juvenile car seats in the United States in 1997 (in
dollars) than any other company. The U.S. juvenile car seat market consists of
infant car seats (for children under twenty pounds), convertible (infant to
toddler) car seats and booster car seats. With $104.2 million of pro forma net
car seat sales in fiscal 1997, Evenflo had the number one market position in
both the infant and convertible car seat categories, and the number three
position in booster car seats in 1997. Evenflo's ON MY WAY car seat was the best
selling infant car seat (retail price of approximately $60), and the Company's
ULTARA I car seat was the best selling convertible car seat (retail price of
approximately $80) in 1997. The Company also offers other innovative products,
such as the DISCOVERY car seat introduced in January 1998 (retail price of
approximately $50), which was the second best selling infant car seat in the
United States in June 1998 behind the ON MY WAY car seat. Evenflo also markets
infant car seats under the TRAVEL TANDEM and FIRST CHOICE model names and
convertible car seats under the MEDALLION, HORIZON, CHAMPION, TROOPER and SCOUT
model names. Evenflo's car seats (depending on the model) offer features such as
detachable bases, five-point harness systems, adjustable shields, removable pad
and pillow inserts and the exclusive CARRY RIGHT handle which incorporates a
uniquely curved shape designed for ease of carrying.
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In addition to pro forma net sales of $10.4 million in fiscal 1997 in the
standard stroller category, Evenflo has achieved success in the travel system
product category with pro forma net sales of $24.7 million in the product
category with its ON MY WAY TRAVEL SYSTEM, which is designed to integrate the
popular ON MY WAY car seat with a stroller to form a car seat/stroller
combination product. In 1998, Evenflo introduced the DISCOVERY TRAVEL SYSTEM,
which combines the DISCOVERY car seat and the TRENDSETTER stroller. The Company
believes its travel systems have provided Evenflo with a substantial opportunity
by leveraging its leadership position in car seats into a competitive advantage
in strollers. As a result, Evenflo has a number one market position in this
innovative product category.
Additionally, Evenflo's SNUGLI brand is the leading soft infant carrier
product with a 62% market share in 1997. Carrier product offerings include soft
or frame carriers in face-in, face-out, hip or back-pack styles and accounted
for $17.0 million in pro forma net sales in fiscal 1997.
PLAY TIME (16.0% of Fiscal 1997 Pro Forma Net Sales)
The Company is a leading competitor in the $424 million U.S. wholesale
market for products in the Play Time product category, which includes activity
products, swings, toys, gates, bouncers and doorway jumpers. Evenflo's Play Time
products, which include the Company's leading line of EXERSAUCER stationary
activity products, swings, gates and doorway jumpers, generated fiscal 1997 pro
forma net sales of $57.1 million. The EXERSAUCER generated fiscal 1997 net sales
of $16.1 million in the United States, capturing 21% of the overall U.S.
activity products category (which includes walkers, a product line that the
Company does not produce). The EXERSAUCER offers an innovative exercise and
entertainment format which enables a child to play, spin, rock and bounce in
place, making the product a desirable alternative to walkers. The EXERSAUCER
features a patented saucer base which provides rocking action in all directions
and stationary feet which pull down to stop the rocking action when desired. The
EXERSAUCER product line covers lower, medium and high price points with such
products as the SUPERSAUCER which features a more elaborate play tray than the
standard line.
The Company has the number one market position in safety gates, which
accounted for $29.9 million in pro forma net sales in fiscal 1997. The Company's
gates are designed with features to make them both child-resistant and
adult-friendly and are offered in a wide variety of models, such as plastic
mesh, wood, soft and wire mesh.
In 1998, Evenflo will introduce a line of battery operated swings with
wheels, soothing "car ride" vibration options and removable play trays. In
addition, Evenflo offers a line of doorway jumpers for infants. In the Company's
EVENFLO TO GROW product line, the Company offers a variety of innovative
electronic TEACH ME TOYS products which promote the development of tactile,
auditory, creative thinking and visual skills.
BED AND BATH (18.7% of Fiscal 1997 Pro Forma Net Sales)
The Company is a leading competitor in the $726 million U.S. wholesale
market for Bed and Bath products, which includes cribs, play yards, monitors,
mattresses, bath items and toilet trainers (as well as a variety of soft goods
for the nursery that the Company does not produce). For fiscal 1997, Evenflo's
Bed and Bath products generated $67.1 million in pro forma net sales in the
United States. The Company's product offerings in the Bed and Bath category
include juvenile furniture products such as cribs, portable play yards,
monitors, mattresses, bath items and toilet trainers. Evenflo recently obtained
a license to use the SERTA-Registered Trademark- brand on its juvenile
mattresses in a co-branded product offering. The Company recently reentered the
play yard product category with its PLAY CRIB, with a patented locking hinge
design that folds into a convenient container. The Company is also a market
leader in the sale of monitors.
In 1997, the Company was the leader in bath items, offering infant to
toddler tubs, splash seats and a wide range of bath toys and accessories. Other
baby health products in this category include digital fever thermometers,
toothbrushes, humidifiers, vaporizers, medicine droppers and infant manicure
sets.
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FEEDING TIME (21.6% of Fiscal 1997 Pro Forma Net Sales)
Evenflo is a leading competitor in the $366 million U.S. wholesale Feeding
Time category, with $77.5 million in fiscal 1997 pro forma net sales. In this
category, Evenflo offers reusable and disposable nurser systems, breastfeeding
aids, high chairs, oral development items such as teethers and pacifiers, bibs
and other feeding accessories. Evenflo benefits from the right to use Disney's
DISNEY BABIES-Registered Trademark- licensed characters on many of its most
important feeding products.
Evenflo's reusable nurser system was the number two selling brand in the
United States in 1997 with $27.0 million in pro forma net sales, with a full
line of nursers, nipples and accessories at all price points. Evenflo also
markets an entire line of disposable bottle-feeding items, including disposable
bottle liners, nipples, holders and kits. In 1997, Evenflo maintained its number
one market position in breastfeeding products, offering a complete line of
breast pumps, including manual pumps as well as battery and electric operated
pumps for reusable and disposable nursers. Evenflo also markets washable and
disposable nursing pads. The Company anticipates significant growth in sales of
breastfeeding products, as recent research in the lactation field demonstrating
the benefits of breastfeeding is more widely disseminated.
Evenflo ranks second in the U.S. high chair market with a 27% market share
in 1997, with pro forma net sales of $18.3 million in fiscal 1997. In recent
years, Evenflo has gained substantial market share in high chairs, largely as a
result of the 1995 introduction of its PHASES multi-use high chairs, which
convert from an infant feeding seat to booster seat to play table and chair.
INTERNATIONAL
Evenflo believes that higher birth rates, the adoption of mandatory
automobile child restraint laws, increasing income levels, the lowering of trade
barriers and the standardization of regulations in certain world markets present
significant growth opportunities. Evenflo has had an international presence for
over 50 years, selling its products in 63 foreign countries, with established
operations in Canada, Mexico and the Philippines. In a number of international
markets, Evenflo has focused largely on Feeding Time products. The Company
believes it can opportunistically leverage its strength in Feeding Time products
to gain sales in other product categories. International sales represented $49
million, or 14% of Evenflo's pro forma net sales in fiscal 1997. See "Risk
Factors--Risks Associated with International Markets; Dependence on Foreign
Manufacturing."
DISTRIBUTION AND SALES
For fiscal 1997, the five largest customers of Evenflo represented
approximately 59% of Evenflo's pro forma net sales with Toys "R" Us, Wal-Mart
and Sears representing 20%, 17% and 8%, respectively, of pro forma net sales for
such period. For fiscal 1996, the five largest customers of Evenflo represented
approximately 51% of Evenflo's net sales with Toys "R" Us, Wal-Mart and Sears
representing 19%, 15% and 8%, respectively, of net sales for such period. No
other customer accounted for more than 10% of Evenflo's worldwide net sales. The
Company has strong, long-standing relationships with many of its largest
customers. As is customary in the industry, the Company's products are generally
purchased by means of purchase orders. The Company's products are sold in the
United States and in 63 foreign countries. The Company's sales organization in
the United States is divided into national accounts, non-national accounts and
food and drug accounts. A national account manager is designated for each of
Toys "R" Us, Wal-Mart, Sears, Target and Kmart. For non-national accounts, a
vice president coordinates the selling efforts of 5 independent manufacturer's
representatives. For food and drug accounts, a vice president and five regional
managers oversee 55 food brokers which carry Evenflo's merchandise. A separate
account services manager is responsible for customer service and order
processing. A business development manager and a forecasting manager report to
the senior vice president in charge of sales.
The Company's international sales have historically been made primarily
through its Canadian, Mexican and Philippine operations and independent
distributors selling to customers in 63 foreign
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countries. Recently, the Company has begun to develop additional sales and
marketing capabilities in targeted markets. For example, in May 1998, the
Company entered the European market on a direct basis with a line of locally
manufactured products sold through its own sales and marketing group. The
Company is exploring similar opportunities in Southeast Asia and will continue
to examine opportunities in overseas markets for establishing sales and
marketing offices in the future. See "Risk Factors-- Dependence on Certain
Customers."
MARKETING
Evenflo's marketing efforts are focused on building brand identity through
broad advertising and packaging programs as well as emphasizing product
innovation and customer service. The Company conducts extensive research on
juvenile products industry trends, including consumer buying trends and
focus-group research with parents and children. The Company uses this data in
making determinations with respect to product offerings and new product
introductions to respond to consumer demands.
In order to further distinguish its products, the Company has arrangements
with other national brands such as Serta, Disney, Warner Bros. and OshKosh in
co-branded product offerings such as new infant mattresses by
SERTA-Registered Trademark-, Play Time products decorated with BABY LOONEY
TUNES-Registered Trademark- characters and Feeding Time products decorated with
DISNEY BABIES-Registered Trademark- characters. As part of its co-branding
strategy, Evenflo recently introduced a line of OSHKOSH
B'GOSH-Registered Trademark- by Evenflo products, including car seats,
strollers, play yards and carriers, which the Company believes is the first
product grouping with an integrated look of this kind in the industry. The
Company intends to pursue additional opportunities to improve the design appeal
of its products through co-branding arrangements in the future.
Marketing programs are national in scope and primarily consist of print
advertising, trade and consumer promotions and targeted sampling. The Company
collaborates with significant accounts to develop shelf space allocations for
the Company's products in upcoming selling seasons. For key accounts, the
Company also designs and sets up in-store promotional displays for products,
including new product introductions. Advertising and promotion expenditures
amounted to approximately 6% of Evenflo's net sales in fiscal 1995, 1996 and
1997.
In addition to traditional advertising and promotion efforts, the Company is
allocating resources to public relations and grass-roots efforts, including
promotions with Lamaze and the SAFE KIDS CAMPAIGN-Registered Trademark-.
Marketing is supported at the consumer level through the Company's Internet site
(www. evenflo.com) and through a toll-free consumer hotline staffed by 36
service representatives to address questions on products and safety. Further,
Evenflo has recently launched a marketing and education program targeting
Hispanic child birth educators and expectant parents in order to serve the
Hispanic community, one of the fastest growing demographic groups in the United
States.
RESEARCH & DEVELOPMENT
Evenflo dedicates substantial resources to its product development efforts,
including 22 professionals at July 31, 1998 in research and development. As of
July 31, 1998, Evenflo's research and development group has developed over 249
U.S. patents and 127 foreign patents. Evenflo has developed a number of
innovative infant and juvenile products, including the first fully transparent
baby bottle, the first decorated nurser, the first convertible (infant to
toddler) car seat to pass applicable federal testing standards and the first
juvenile stationary activity product. Evenflo strives to consistently introduce
innovative new products. For example, the Company introduced the HORIZON
convertible car seat and the DISCOVERY infant car seat in 1998. In addition, by
designing a car seat that attaches to a stroller to form a new travel system,
Evenflo has created incremental growth opportunities in the stroller category
and expects to introduce a higher-end travel system in 1999. Each new product
Evenflo develops is subjected to extensive evaluation for quality and safety. At
July 31, 1998, Evenflo had 62 patents pending at the U.S. Patent and Trademark
Office.
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In addition to Evenflo's in-house professionals, outside sources are used
for research and development, including individual designers/inventors, design
houses, universities and engineering services. As a leader in the U.S. car seat
market, Evenflo dedicates significant resources to the design and testing of its
car seat product line. In addition, the Company has completed the construction
of a quality control laboratory at is Piqua, Ohio, facility and implemented a
formal hazard analysis process for product testing which will enable the Company
to improve the safety and quality of its products.
MANUFACTURING AND DISTRIBUTION FACILITIES, PROCUREMENT AND RAW MATERIALS
Evenflo maintains six manufacturing and assembly plants located in Ohio,
Georgia, Alabama, Wisconsin and two in Mexico. Evenflo also operates
distribution centers in Canada and the Philippines and has entered into a joint
manufacturing arrangement with a French corporation for the manufacture and
distribution of ON MY WAY car seats and the EXERSAUCER in European markets.
Evenflo manufactures bottles and nipples and assembles certain infant feeding
and baby care products primarily at its facilities in Canton, Georgia and Mexico
City. Car seats, high chairs, mattresses and stationary activity products are
assembled at Evenflo's plant in Piqua, Ohio. Jasper, Alabama serves as a soft
goods manufacturing feeder plant for the final assembly operations in Ohio.
Evenflo's cribs are manufactured and assembled at a facility in Tijuana, Mexico,
while wood products (primarily gates) are produced at its plant in Suring,
Wisconsin. The Company recently completed the elimination of Gerry's
manufacturing and distribution operations at Thornton, Colorado and the
integration of those operations into the Company's Piqua, Ohio and Canton,
Georgia facilities and closed the Thornton facility. In addition to the
integration of Gerry into the Company's operations, the Company recently
completed the reengineering of the Piqua assembly lines to improve productivity
and capacity, including the installation of large-piece injection molding
equipment. As part of this project, the Company also redesigned the Piqua and
Canton warehouses, installed computer-controlled fabric cutting systems in
Jasper and centralized the Company's administrative offices in Vandalia, Ohio.
As a result of Project Discovery, Evenflo is the only major U.S. juvenile
products manufacturer with ISO 9000 registration status.
Evenflo's sourced products are manufactured according to its specifications
by third-party manufacturers located within the United States and abroad,
primarily in China, Thailand, Taiwan, Hong Kong and other Southeast Asian
countries. Products representing 26% of Evenflo's pro forma net sales in fiscal
1997 were produced by foreign third party manufacturers and only one supplier
accounted for products representing more than 10% of Evenflo's fiscal 1997 pro
forma net sales (Lordship accounted for products representing approximately 17%
of Evenflo's fiscal 1997 pro forma net sales). Evenflo continually monitors its
sourced products with a staff headquartered in Hong Kong to improve the quality
of its sourced products. Evenflo believes it has alternative sources of supply
for nearly all of the products currently produced by third party manufacturers;
however, any interruption in the supply of such goods or increase in price or
decline in quality could have a material adverse effect on the Company's results
of operations. See "Risk Factors--Risks Associated with International Markets;
Dependence on Foreign Manufacturing."
The principal raw materials used by Evenflo in the manufacture of its
products include various plastic resins, natural and synthetic rubbers, wood,
textiles and paper products, all of which are normally readily available. While
all raw materials are purchased from outside sources, Evenflo is not dependent
upon a single supplier in any of its operations for any material essential to
its business or not otherwise commercially available to Evenflo. Evenflo does
not anticipate any significant material shortages or price movements in its
inputs. Plastic resins prices may fluctuate as a result of changes in natural
gas and crude oil prices and the capacity, supply and demand for resins and the
petrochemical intermediates from which they are produced. See "Risk
Factors--Cost and Availability of Certain Materials."
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COMPETITION
The juvenile product industry is highly competitive and is characterized by
frequent introductions of new products, often accompanied by advertising and
promotional programs. Evenflo competes with numerous national and international
companies which manufacture and distribute infant and juvenile products, a
number of which have greater financial and other resources at their disposal.
Evenflo's principal competitors include Century, Graco, Cosco, First Years,
Fisher-Price, Gerber, Johnson & Johnson, Kolcraft, Playtex and Safety 1st.
A number of factors affect competition in the juvenile products manufactured
and/or sold by the Company, including quality, price competition from
competitors and price points parameters established by the Company's customers.
Shelf space is a key factor in determining retail sales of juvenile care
products. A competitor that is able to maintain or increase the amount of retail
space allocated to its product may gain a competitive advantage for that
product. The allocation of retail space is influenced by many factors, including
brand name recognition, quality and price of the product, level of service by
the manufacturer and promotions.
In addition, new product introductions are an important factor in the
categories in which the Company's products compete. Other important competitive
factors are brand identification, style, design, packaging and the level of
service provided to customers. The importance of these competitive factors
varies from customer to customer and from product to product. See "--Product
Innovation." There can be no assurance that the Company will be able to compete
successfully against current and future sources of competition or that the
current and future competitive pressures faced by the Company will not adversely
affect its profitability or financial performance. See "Risk Factors--Potential
for Increased Competition."
In the On The Go product category, Graco has recently entered the monitor
and travel system markets, which has resulted in an increase in competition in
these markets.
PROPERTIES
The Company's manufacturing and distribution facilities and U.S. sales
operations are generally located on owned or leased premises. The Company
conducts a significant portion of its international sales operations on leased
premises, which have remaining terms generally ranging from two to three years.
Substantially all leases contain renewal options pursuant to which the Company
may extend the lease terms in increments of three to five years. The Company
does not anticipate any difficulties in renewing its leases as they expire. The
Company believes that its facilities are suitable for their present and intended
purposes and are adequate for the Company's current and expected levels of
operations.
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The following table sets forth information as of June 30, 1998 with respect
to the manufacturing, warehousing and office facilities used by the Company in
its businesses:
<TABLE>
<CAPTION>
OWNED/ SQUARE
LOCATION DESCRIPTION LEASED FOOTAGE
- ---------------------------------------------------- -------------------------------------- --------- ---------
<S> <C> <C> <C>
Canton, Georgia..................................... Manufacturing/Warehousing/Office Owned 373,400
Piqua, Ohio......................................... Manufacturing/Warehousing/Office Owned 347,400
Piqua, Ohio......................................... Warehousing Leased 97,000
Piqua, Ohio......................................... Warehousing Owned 155,000
Sidney, Ohio........................................ Warehousing Leased 65,000
Sidney, Ohio........................................ Warehousing Leased 15,000
Vandalia, Ohio...................................... Office Leased 24,500
Shawano, Wisconsin.................................. Warehousing Leased 5,000
Suring, Wisconsin................................... Manufacturing/Warehousing/Office Owned 139,984
Suring, Wisconsin................................... Warehousing Leased 3,200
Suring, Wisconsin................................... Warehousing Leased 2,100
Suring, Wisconsin................................... Warehousing Leased 7,000
Thornton, Colorado(1)............................... Manufacturing/Warehousing/Office Leased 381,006
Jasper, Alabama..................................... Manufacturing/Office Owned 103,000
Jasper, Alabama..................................... Warehousing Leased 73,000
Mexico City, Mexico................................. Manufacturing/Warehousing/Office Owned 76,308
Tijuana, Mexico..................................... Manufacturing Owned 50,061
Oakville, Ontario................................... Warehousing/Office Leased 26,780
Philippines......................................... Office Leased 2,422
Hong Kong........................................... Office Leased 1,730
France.............................................. Office Leased 900
Taiwan.............................................. Office Leased 700
</TABLE>
- ------------------------
(1) The Company has closed this former Gerry facility and cancelled the lease
effective July 10, 1998.
TRADEMARKS AND PATENTS
Evenflo has proprietary rights to a number of trademarks that are important
to its business, including EVENFLO, GERRY and SNUGLI. In addition the Company
has non-exclusive licenses to use DISNEY BABIES-Registered Trademark- and BABY
LOONEY TUNES-Registered Trademark- characters on many of its products in the
United States and certain international markets, exclusive licenses to use the
OSHKOSH B'GOSH-Registered Trademark- brand on car seats, carriers, play yards
and strollers in the United States and Canada and a non-exclusive license to use
the SERTA-Registered Trademark- brand on its juvenile mattresses in the United
States.
The policy of the Company is to protect proprietary products by obtaining
patents for such products when practicable. At July 31, 1998, Evenflo owned 249
patents and 196 trademarks and had 62 patent applications and 86 trademarks
pending at the U.S. Patent and Trademark Office. In addition, the Company also
maintains patent protection for certain of its products in other countries and
has a number of patent applications pending in foreign countries. In addition to
its patent portfolio, the Company possesses a wide array of unpatented
proprietary technology and know-how. The Company believes that its patents,
trademarks, trade names, service marks and other proprietary rights are
important to the development and conduct of its business and the marketing of
its products. As such, the Company vigorously protects its intellectual property
rights. In some cases, litigation or other proceedings may be necessary to
defend against or assert claims of infringement, to enforce patents issued to
the Company or its licensors, to protect trade secrets, know-how or other
intellectual property rights owned by the Company, or to determine the scope and
validity of the proprietary rights of the Company or of third parties. On April
22, 1998, the Company sued Graco for patent infringement relating to the
Company's CARRY RIGHT patent. Graco has filed an answer and a counterclaim
alleging infringement by Evenflo of three
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different patents relating to stroller technology. In addition, on August 7,
1998, Century filed suit against both Evenflo and Spalding alleging the
infringement of two patents relating to the design of the storage compartment
and base of certain of the Company's car seats. The Company intends to
vigorously defend this action and believes that an adverse outcome would not
materially adversely affect the Company. There can be no assurance that the
Company will prevail in either of these suits or in similar litigation.
See "--Legal Proceedings." Although the Company believes that, collectively, its
patents are important to its business, the loss of any one patent would not have
a material adverse effect on the Company's business and results of operations.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, and local
Environmental Laws that continue to be adopted and amended. These Environmental
Laws regulate, among other things, air and water emissions and discharges at the
Company's manufacturing facilities; the generation, storage, treatment,
transportation and disposal of solid and hazardous waste by the Company; the
remediation of environmental contamination; the release of toxic substances,
pollutants and contaminants into the environment at properties operated by the
Company and at other sites; and, in some circumstances, the environmental
condition of property prior to a transfer or sale (including certain facilities
previously owned or operated by the Company). Risks of significant costs and
liabilities are inherent in the Company's operations and facilities, as they are
with other companies engaged in like businesses. The Company believes, however,
that its operations are in substantial compliance with all applicable
Environmental Laws as currently interpreted.
While historically the costs of environmental compliance have not had a
material adverse effect on the consolidated financial condition, results of
operations or cash flows of the Company, the Company cannot predict with
certainty its future costs of environmental compliance because of continually
changing compliance standards and technology. Compliance with such requirements
may make it necessary, at costs which may be substantial, to retrofit existing
facilities with additional pollution-control equipment and to undertake new
measures in connection with the storage, transportation, treatment and disposal
of by-products and wastes. See "Risk Factors--Environmental Matters."
PRODUCT REGULATION
The Company's products are subject to the provisions of the Safety Acts and
the regulations promulgated thereunder. The Safety Acts authorize the CPSC to
protect the public from products which present a substantial risk of injury. The
Highway Safety Act of 1970 authorizes the NHTSA to protect the public from risks
of injury from motor vehicles and motor vehicle equipment. The CPSC, the NHTSA
and the FTC can initiate litigation requesting that a manufacturer be required
to remedy, repurchase or recall articles which fail to comply with federal
regulations, which contain a safety related defect or which present a
substantial risk of inquiry to users. They may also impose fines or penalties on
the manufacturer. Similar laws exist in some states and in other countries in
which the Company markets its products. Any recall of its products could have a
material adverse effect on the Company. In 1997, the CPSC announced 55 recalls
of seven million juvenile products. See "Risk Factors--Product Regulation;
Product Recalls" for a discussion of certain recent recalls and corrective
actions undertaken by the Company.
The Company invests considerable resources in the development of
well-designed, safe products, and it is a core value of Evenflo to subject new
products to extensive testing and safety analyses and to continue to improve its
products and safety features. The Company recently entered into a consulting
agreement with Intertek Testing Services NA, Inc. ("Intertek"), a risk and
hazard analysis company which specializes in the safe design of products.
Intertek's staff of engineers and safety experts will provide additional support
from the product design stage through product distribution to improve the
Company's safety profile. In addition, the Company has completed the
construction of a quality control laboratory at its Piqua, Ohio, facility and
has implemented a formal hazard analysis process for product testing which will
enable the Company to improve the safety and quality of its products.
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LEGAL PROCEEDINGS
Due to the nature of its products, the Company has been engaged in, and will
continue to be engaged in, the defense of product liability claims related to
its products, particularly with respect to juvenile car seats and play yards.
Such claims have caused the Company to incur material litigation and insurance
expenses. Since 1988, approximately 280 product liability claims have been
brought against the Company, 188 of which related to juvenile car seats.
From April 1, 1988 to June 30, 1998, out-of-pocket indemnities and expenses
(exclusive of payments by insurers and insurance premiums) for car seat claims
(including damage awards, settlements, attorneys' fees and other related
expenses) have averaged approximately $1.6 million per year, when allocated to
the policy periods when the related injuries occurred, while the total
out-of-pocket indemnities and expenses (exclusive of payments by insurers and
insurance premiums) for all product liability claims have averaged approximately
$2.0 million per year, on a similar basis. From fiscal 1993 through fiscal 1997,
the Company has incurred average costs for out-of-pocket indemnities and
expenses (exclusive of payments by insurers and insurance premiums) for all
product liability claims of approximately $2.7 million per year when allocated
to the policy periods when the related injuries accurred. The increase in
average costs for product liability claims from $2.0 million per year for the
ten-year average to $2.7 million per year for the five-year average is due to an
increase in Spalding's insurance policy deductibles. Prior to the Transactions,
the Company's insurance was purchased on a consolidated basis by Spalding.
Spalding increased the size of its insurance deductibles due to industry wide
increases in insurance premiums. As described below, Spalding purchased separate
additional indemnity insurance in 1995 to reduce the size of its insurance
deductibles. The Company anticipates that it will continue to incur average
product liability claims of levels similar to the five-year average for the next
several years.
Spalding, on behalf of the Company, currently carries substantial insurance
(at a cost to the Company in fiscal 1997 of $1.3 million) and the Company
maintains reserves for potential claims. Based on its experience with product
liability claims, the amount of reserves established for product liability
claims against it and the levels of insurance that it maintains, the Company
believes that there are no product liability claims pending which, if adversely
determined, would have a material adverse effect on its consolidated financial
position, results of operations or cash flows. However, due to the inherent
uncertainty of litigation, it is possible that the Company may be subject to
adverse judgments which, singly or in the aggregate, could be substantial in
amount and may not be covered by insurance or reserves. In addition, no
assurance can be given that in the future a claim will not be brought against
the Company which would have a material adverse effect on the Company. In
addition, in any product liability claim, a judgment against the Company may
include the imposition of punitive damages, the award of which, pursuant to
certain state laws, may not be covered by insurance. In addition, because there
may be a lapse of time between a product recall or corrective action and the
filing of lawsuits against the Company relating to alleged defects, the Company
may experience, due to the occurrence of a number of recent recalls and
corrective actions, an increase in the number of product liability claims in
future periods.
Prior to the Transactions, the Company's insurance was purchased on a
consolidated basis by Spalding. Spalding product liability insurance coverage
has been established on policy years beginning April 1 of each year. Spalding's
primary insurance per occurrence deductible for 1998 is $2.0 million and the
corresponding policy aggregate deductible is $4.5 million. Spalding purchases
separate additional indemnity insurance to effectively reduce the per occurrence
deductible from $2.0 million to $0.5 million and to reduce the policy year
aggregate deductible from $4.5 million to $3.0 million. Spalding's lead umbrella
insurance carrier provides for $5.0 million of insurance coverage above the
deductible amount of $2.0 million per occurrence and $4.5 million in the
aggregate. Commencing in 1992, Spalding purchased a total of $75 million in
umbrella coverage for each policy year. The Company believes that, for periods
prior to the Transactions, its reserve levels for out-of-pocket indemnities and
expenses for product liability claims are adequate. The Company is currently in
the process of implementing an insurance program with substantially the same
coverage and deductibles for slightly increased premiums.
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The Gerry Acquisition did not impact insurance coverage or materially impact
product liability premium costs. The Company is indemnified by Huffy pursuant to
the Gerry Acquisition purchase agreement for any liability arising out of claims
with respect to products shipped prior to the date of the Gerry Acquisition.
There have not been any known significant claims with respect to Gerry products
since the date of the Gerry Acquisition. See "Risk Factors--Product Liability
Litigation."
In addition to the defense of product liability claims, the Company has
recalled certain of its products, in response to consumer complaints and
following internal Company testing, identified product safety problems or
manufacturing defects. Product recalls have been primarily in the juvenile car
seat and play yard categories. Remedial measures have included increasing
notices to consumers on the product itself and improving design. See "--Product
Regulation."
From time to time the Company also is involved in patent infringement
actions. The Company believes that it is not presently a defendant or plaintiff
in any patent infringement action, the outcome of which would have a material
adverse effect on its consolidated financial position, results of operations or
cash flows. The Company filed a patent infringement action on April 22, 1998 in
the U.S. District Court for the Northern District of Ohio against Graco relating
to the Company's CARRY RIGHT handle used on Evenflo's line of car seats. On May
6, 1998, Graco filed an answer and counterclaim alleging infringement by Evenflo
of three different patents relating to stroller technology. In addition, on
August 7, 1998, Century filed suit in U.S. District Court for the Northern
District of Ohio against both Evenflo and Spalding alleging the infringement of
two patents relating to the design of the storage compartment and base of
certain of the Company's car seats. There can be no assurance as to the outcome
of either such litigation.
In 1989, Evenflo entered into a license agreement for the design of the
HAPPY CAMPER play yard. The license agreement was cancelled in April 1997 by the
licensor, and on July 18, 1997 Evenflo filed suit for breach of contract. The
licensor has filed a claim charging Evenflo with patent infringement and breach
of contract. It is anticipated that the consolidated case will go to trial in
late 1998. There can be no assurance as to the outcome of such litigation. The
loss of the license required the Company to design a new play yard, which
interrupted shipments to customers for a nine-month period. However, the Company
has recently re-entered the play yard product category with the PLAY CRIB.
In addition to such product liability and patent infringement claims, the
Company is a party to various lawsuits arising in the ordinary course of
business. None of these other lawsuits is believed to be material with respect
to the business, assets and continuing operations of the Company.
Spalding is in disagreement with the Internal Revenue Service (the "IRS")
regarding the valuation of trademarks purchased from an Abarco affiliate in
1994. The IRS has completed the field audit for the year in which the
transactions occurred, and has preliminarily indicated that a portion of the
original purchase price may be recharacterized as a dividend distribution, and
that a portion of the deferred tax asset relating to the amortization of certain
of Evenflo's trademarks $2.9 million at June 30, 1998) may be disallowed.
Because the Company was a subsidiary of Spalding at the time of the disputed
transaction, the Company is jointly and severally liable for any additional tax
liability (and interest and penalty, if any, thereon) that is assessed against
Spalding. Spalding has informed the Company that it intends to vigorously
contest any assessment from the IRS. Under the terms of indemnity provisions
contained in the recapitalization agreement pursuant to which Spalding was
acquired by Strata, Spalding and the Company believe that any resulting
liability related to years prior to the Recapitalization (fiscal 1996 and
periods prior thereto) would be indemnified by Abarco, the selling entity. With
respect to the 1997 tax year, the Company believes that its maximum liability,
if any, will not exceed $0.2 million, including interest and penalties. In
addition, under the Indemnification Agreement, Spalding agreed to indemnify the
Company for any liabilities from this matter relating to the valuation of
trademarks used in the Spalding business.
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<PAGE>
EMPLOYEES
The Company's worldwide workforce consisted of approximately 2,291 employees
(full- and part-time) as of June 30, 1998.
At the Company's facilities, approximately 512 of the Company's employees
are represented under collective bargaining agreements, which agreements expire
from January 1999 through September 2001. The Company does not anticipate
difficulty in extending or negotiating these agreements as they expire. The
Company believes that its labor relations are good and no material labor cost
increases, other than in the ordinary course of business are expected.
INFORMATION TECHNOLOGY
Following the Gerry Acquisition, the Company has operated its information
systems utilizing three different software systems operating on three different
hardware platforms. As part of the integration of Gerry's operations and the
unification of the Company's Ohio and Georgia operations, the Company is in the
process of a $6.5 million information technology program, of which $1.8 million
was spent in the aggregate in the three months ended June 30, 1998, designed to
enhance the Company's information systems, EDI capabilities and data processing
capabilities and to resolve the Company's Year 2000 compliance issues. The new
system will replace roughly 90% of the Company's current information systems and
will be implemented in three phases scheduled to be completed in December 1999.
See "--Year 2000 Compliance."
The Company's improved EDI system will allow less costly order placement and
increase the accuracy and timeliness of order processing while enabling the
customer to decrease inventory levels. The enhanced information capabilities
will reduce the complexity of information gathering, permit improved analyses of
orders, sales, customer service levels and inventory and more readily permit the
identification of trends in these items.
YEAR 2000 COMPLIANCE
Many computer software and hardware systems currently are not able to read,
calculate or output correctly using dates after 1999, and such systems will
require significant modifications in order to be "Year 2000 compliant." The
Company has reviewed its computer hardware and software systems and has recently
begun to identify those systems that are not Year 2000 compliant. The existing
systems will be upgraded through either modification or replacement. The Company
currently anticipates these upgrades to be completed by December 1999, with the
upgrades required for Year 2000 compliance to be completed by December 1998. The
Company is currently developing alternative plans in the event that critical
system upgrades are not completed on time. The Company will complete the
development of such contingency plans by January 31, 1999. Contingency plans
will exist in each of the business units to correct and upgrade those existing
systems where potential failures could occur should the targeted implementation
dates of the new systems not be met or if the implementation dates are after the
end of the century. The Company expects to spend approximately $6.5 million by
December 1999 to unify and upgrade its information systems and to resolve the
Company's Year 2000 compliance issues with $1.8 million in the aggregate of this
amount spent in the three months ended June 30, 1998. All costs associated with
Year 2000 compliance will be expensed as incurred, other than acquisition of new
software or hardware, which will be capitalized.
A Corporate Oversight Committee ("COC") has been formed to deal with both
non-information technology ("non-IT") and information technology ("IT") issues.
Its members will coordinate with all major functional areas within the Company.
The COC has developed an initial Year 2000 Concerns list, conducted strategic
planning sessions, launched a Corporate Year 2000 awareness program and is in
the process of corresponding with suppliers requesting Year 2000 certificaiton.
Efforts with major customers are planned for the near future to discuss,
identify, test and remediate, if required, potential issues. The COC is working
with each business unit to identify potential impacts on both IT and non-IT
systems at
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their specific location, prioritizing each risk, and developing and implementing
remediation plans where necessary.
Although the Company is not aware of any material operational impediments
associated with upgrading its computer hardware and software systems to be Year
2000 compliant, the Company cannot make any assurances that the upgrade of the
Company's computer systems will be completed on schedule, that the upgraded
systems will be free of defects, or that the Company's alternative plans will
meet the Company's needs. If any such risks materialize, the Company could
experience material adverse consequences, material costs or both.
Year 2000 compliance issues may also adversely affect the operations and
financial performance of the Company indirectly by affecting the operations of
any one or more of the Company's suppliers or customers. The Company is
currently contacting its significant suppliers and customers in an attempt to
identify any potential Year 2000 compliance issues with them. The Company is
currently unable to anticipate the magnitude of the operational or financial
impact on the Company of Year 2000 compliance issues with its suppliers and
customers.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are the directors and executive officers of the
Company following the Transactions:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- -----------------------------------------------
<S> <C> <C>
Richard W. Frank..................... 54 Chairman of the Board of Directors and Chief
Executive Officer
George A. Harris..................... 51 President
Michael L. Johnson................... 40 Senior Vice President--Operations
Daryle A. Lovett..................... 48 Senior Vice President--Finance
Richard F. Schaub, Jr................ 38 Senior Vice President--Marketing
Allen E. Seymour..................... 61 Senior Vice President--Sales
John D. Dupps........................ 41 Vice President--Human Resources
Bachar El Zein....................... 42 Vice President--International
Edwin L. Artzt....................... 68 Director
Henry R. Kravis...................... 53 Director
George R. Roberts.................... 53 Director
Michael T. Tokarz.................... 47 Director
Marc S. Lipschultz................... 29 Director
</TABLE>
RICHARD W. FRANK--Mr. Frank has been Chairman of the Board of Directors of the
Company (the "Board of Directors") and Chief Executive Officer of the Company
since June 1998. Prior to joining the Company, Mr. Frank served as
President--USA, Consumer OTC Healthcare, a division of Bayer Corporation, which
he joined in 1995. He was Vice President--Consumer Marketing of Helene Curtis
prior to 1995. Mr. Frank also held a variety of marketing positions during his
eleven year tenure with The Procter & Gamble Company ("P&G").
GEORGE A. HARRIS--Mr. Harris has been the President of the Company since October
1995. Mr. Harris joined Evenflo Juvenile Furniture Company, Inc., a subsidiary
of Spalding, as President in November 1990 and was named President of Evenflo
companies in May 1995. He was Vice President--Sales and Marketing, of the
Coleman Company, Inc., Outdoor Products Division, prior to October 1990.
MICHAEL L. JOHNSON--Mr. Johnson has been the Senior Vice President--Operations
of the Company since March 1996. Mr. Johnson joined the Company in January 1993
as Vice President--Operations. Prior to joining the Company, Mr. Johnson was
employed by General Electric Company as the Operations Manager of the Aerospace
Operations Division in Daytona Beach, Florida and served as Production
Engineering Manager and Manager of Advanced Manufacturing Engineering.
DARYLE A. LOVETT--Mr. Lovett has been the Senior Vice President--Finance of the
Company since he joined the Company in April 1997. From January 1995 to April
1997, Mr. Lovett served as President of Gerry, and from 1981 to January 1995 he
served in the capacities of Vice President--Operations and Vice
President--Finance for Gerry.
RICHARD F. SCHAUB, JR.--Mr. Schaub has been the Senior Vice President--Marketing
of the Company since joining the Company in August 1997. From 1994 to August
1997, Mr. Schaub served as President of Priss Prints, and from 1991 to 1994, he
served as Vice President--Sales and Marketing for Dolly, Inc. He also held a
variety of merchandising and marketing positions at Child World, Inc..
ALLEN E. SEYMOUR--Mr. Seymour has been the Senior Vice President--Sales of the
Company since October 1995. Mr. Seymour joined Company in 1973 and since 1993
has served as Vice President--Sales and National Sales Manager.
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JOHN D. DUPPS--Mr. Dupps has been the Vice President--Human Resources of the
Company since he joined the Company in March 1996. From 1992 to March 1996, Mr.
Dupps was employed by Emerson Electric Company as Vice President--Human
Resources for its Wiegand and Fusite Divisions.
BACHAR EL ZEIN--Mr. El Zein has been Vice President-International of the Company
since 1993. Mr. El Zein joined the Company in February 1982. Mr. El Zein served
in various financial and sales capacities at the Company prior to becoming Vice
President-International.
EDWIN L. ARTZT--Mr. Artzt became a director of the Company on September 22,
1998. He is the former chairman and Chief Executive Officer of P&G, and is
currently a director and Chairman of the Executive Committee of the Board of
Directors of P&G. Mr. Artzt is also a director of American Express Company, GTE
Corporation, Delta Airlines and the Barilia Company of Parma, Italy. He is also
a member of the boards of University of Pennsylvania's Wharton School of
Business, UCLA's Andersen School of Business and Emory Graduate School of
Business. He has also served on President Clinton's Advisory Committee on Trade
Policy and Negotiations, the Committee for Economic Development and the Business
Roundtable.
HENRY R. KRAVIS--Mr. Kravis became a director of the Company on the Closing
Date. He is a managing member of KKR & Co. L.L.C., the limited liability company
which serves as the general partner of KKR. He is also a director of Accuride
Corporation, Amphenol Corporation, Borden, Inc., The Boyds Collection, Ltd.,
Bruno's, Inc., The Gillette Company, IDEX Corporation, KinderCare Learning
Centers, Inc., KSL Recreation Group, Inc., Newsquest Capital plc,
Owens-Illinois, Inc., Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food
Markets, Inc., Regal Cinemas, Inc., Safeway Inc., Sotheby's Holdings Inc.,
Spalding and Union Texas Petroleum Holdings, Inc.
GEORGE R. ROBERTS--Mr. Roberts became a director of the Company on the Closing
Date. He is a managing member of KKR & Co. L.L.C., the limited liability company
which serves as the general partner of KKR. He is also a director of Accuride
Corporation, Amphenol Corporation, Borden, Inc., The Boyds Collection, Ltd.,
Bruno's, Inc., IDEX Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Group, Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc.,
PRIMEDIA, Inc., Randall's Food Markets, Inc., Regal Cinemas, Inc., Safeway Inc.,
Spalding and Union Texas Petroleum Holdings, Inc.
MICHAEL T. TOKARZ--Mr. Tokarz became a director of the Company on the Closing
Date. He is a member of KKR & Co. L.L.C., the limited liability company which
serves as the general partner of KKR. He is also a director of IDEX Corporation,
KSL Recreation Group, Inc., PRIMEDIA, Inc., Safeway Inc., Spalding and Walter
Industries, Inc.
MARC S. LIPSCHULTZ--Mr. Lipschultz became a director of the Company on the
Closing Date. He has been an executive at KKR since 1995. Prior thereto, he was
an investment banker with Goldman, Sachs & Co. He is also a director of Amphenol
Corporation, The Boyds Collection, Ltd. and Spalding.
Messrs. Kravis and Roberts are first cousins.
The business address of Messrs. Kravis, Tokarz and Lipschultz is 9 West 57th
Street, New York, New York 10019 and of Mr. Roberts is 2800 Sand Hill Road,
Suite 200, Menlo Park, California 94025.
COMPENSATION OF DIRECTORS
All directors are reimbursed for their usual and customary expenses incurred
in attending all board and committee meetings. Each director who is not an
employee of the Company receives an aggregate annual fee of $25,000, payable in
quarterly installments. Directors who are also employees of the Company will
receive no remuneration for serving as directors.
SUMMARY COMPENSATION TABLE FOR 1997
The following table sets forth the compensation paid, accrued or awarded by
the Company for the account of each of the president and the four most highly
compensated executive officers (the "Named
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Executive Officers") for their services in all capacities to the Company during
the fiscal year ended September 30, 1997. All references in the following tables
to stock and stock options relate to awards of, and options to purchase, the
common stock of Spalding.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
----------------------- -----------------------
<S> <C> <C> <C> <C> <C>
AWARDS PAYOUTS
----------- ----------
<CAPTION>
SECURITIES
UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUSES(1) OPTIONS(#) PAYOUTS COMPENSATION(2)
- --------------------------------------------- ---------- ----------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
George A. Harris, President.................. $ 288,110 -- 855,414 $ 134,150 $ 4,940
Daryle A. Lovett, Senior Vice
President-Finance.......................... 169,000(3) $ 14,870 77,778 -- 4,750
Allen E. Seymour, Senior Vice
President-Sales............................ 133,580 -- 81,324 335,380 4,010
Michael L. Johnson, Senior Vice
President-Operations....................... 122,230 -- 97,588 110,780 3,670
Bachar El Zein, Vice President-
International.............................. 102,170 -- 65,058 53,860 3,070
</TABLE>
- ------------------------------
(1) Bonus awarded under the Management Incentive Bonus Plan.
(2) Company matching contributions to the Savings Plus Plan.
(3) Includes compensation received by Mr. Lovett prior to the acquisition of
Gerry.
STOCK OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
-------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED(1) IN 1997 ($/SHARE) DATE 5% ($) 10% ($)
- ------------------------------------------- ----------- --------------- ------------- ----------- ---------- ------------
George A. Harris........................... 818,119 12.7% 5.00 2/11/07 6,659,489 10,611,003
37,295 0.6% 5.00 9/29/07 303,581 483,716
Daryle A. Lovett(3)........................ 77,778 1.2% 5.00 11/20/07 633,113 1,008,781
Allen E. Seymour........................... 77,778 1.2% 5.00 2/11/07 633,113 1,008,781
3,546 0.1% 5.00 9/29/07 28,864 45,992
Michael L. Johnson......................... 93,333 1.5% 5.00 2/11/07 759,731 1,210,529
4,255 0.1% 5.00 9/29/07 34,636 55,187
Bachar El Zein............................. 62,222 1.0% 5.00 2/11/07 506,487 807,019
2,836 0.04% 5.00 9/29/07 23,085 36,783
</TABLE>
- ------------------------
(1) All of these options, which were granted pursuant to the 1996 Employee Stock
Ownership Plan (as defined) were non-qualified, were granted at fair market
value on the date of grant, vest ratably over a five-year period, and have a
term of ten years. Any outstanding options will become immediately
exercisable upon certain transactions that have the effect of a change in
control of Spalding.
(2) We recommend caution in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted by
the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the Commission. They
assume the value of Spalding stock appreciates 5% or 10% each year,
compounded annually, for ten years (the life of each option). They are not
intended to forecast possible future appreciation, if any, of such stock
price or to establish a present value of options. Also, if appreciation does
occur at the 5% or 10% per year rate, the amounts shown would not be
realized by the recipients until the year 2007. Depending on inflation
rates, these amounts may be worth significantly less in 2007, in real terms,
than their value today.
(3) Mr. Lovett's stock option grants were issued on November 20, 1997.
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<PAGE>
MANAGEMENT INCENTIVE BONUS PLAN
Spalding maintains a Management Incentive Bonus Plan ("MIBP") for certain
identified key executives of Spalding, including department managers and
executives senior thereto, including the Named Executive Officers, pursuant to
which eligible employees are awarded bonuses based on each such employee's
performance and that of his or her respective business unit (as determined in
accordance with general accepted accounting principles) as compared with a
target established prior to the beginning of the year. Awards under the MIBP
range within a guideline of 15% to 80% of annual salary payments, depending upon
a participant's position and commensurate responsibility. If the annual results
do not meet the pre-established objectives, no bonus is earned. If annual
results exceed the pre-established objectives, the bonus paid is increased
proportionally, up to a maximum of 210% of the employee's guideline bonus
percentage.
1996 EMPLOYEE STOCK OWNERSHIP PLAN
The 1996 Stock Purchase and Option Plan for Key Employees of Evenflo &
Spalding Holdings Corporation and Subsidiaries (the "1996 Employee Stock
Ownership Plan") provides for the issuance of shares of authorized but unissued
or reacquired shares of Spalding common stock, subject to adjustment to reflect
certain events such as stock dividends, stock splits, recapitalizations, mergers
or reorganizations of or by the Company. The 1996 Employee Stock Ownership Plan
is intended to assist Spalding in attracting and retaining employees of
outstanding ability and to promote the identification of their interests with
those of the stockholders of Spalding. The 1996 Employee Stock Ownership Plan
permits the issuance of Spalding common stock and the grant of non-qualified
stock options and incentive options to purchase shares of Spalding common stock
and other stock-based awards. Following the consummation of the Transactions,
Spalding canceled the 1996 Employee Stock Ownership Plan with respect to
Evenflo's employees and all unexercised options were canceled. The Company
intends to adopt the 1998 Stock Purchase and Option Plan for Key Employees of
Evenflo Company, Inc., as described below.
LONG-TERM INCENTIVE PLAN
In connection with the 1996 Employee Stock Ownership Plan, Spalding canceled
the Long-Term Incentive Plan ("LTIP") and paid the total outstanding awards in
the 1997 fiscal year.
The LTIP's provided certain key employees with cash awards based upon the
attainment of established financial goals for a predefined period, generally
three years. Each participant made an election at the beginning of each program
period to receive full payments upon vesting or to defer partial or total
payment up to seven years. This cash payout was based upon the value of a unit,
which was determined by a net earnings formula set forth in the LTIP and
calculated as of the September 30 preceding the payment. The LTIP had been in
effect since 1985. Most participants elected to defer all or a portion of their
cash award at the end of each cycle. The value of units for which payment was
deferred was based on the net earnings formula set forth in the LTIP.
RETIREMENT PLANS
SPALDING & EVENFLO RETIREMENT ACCOUNT PLAN ("SERA"). Spalding sponsors
SERA, a cash balance defined benefit pension plan qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), for substantially
all U.S. salaried employees. This plan includes U.S. salaried employees of
Evenflo, except the Suring, Wisconsin location, and non-union hourly employees
at the Piqua, Ohio location. SERA covers all eligible full-time employees who
are over age 20 and have at least one year of service. Annually, an addition is
made to each participant's account based on a percentage of the participant's
salary for that year up to a maximum salary of $160,000. The percentage ranges
from 2% of pay for employees under age 25 to 9% of pay for employees age 60 and
over. The accounts are credited with interest at a rate determined annually
based on an average of 30 year treasury bonds.
SUPPLEMENTAL RETIREMENT PLAN ("SRP"). As a supplement to the SERA, Spalding
sponsors the non-qualified SRP which covers highly compensated employees whose
benefits are limited by compensation and benefit limitations under the Code. For
employees with a salary in excess of $160,000, an addition is made to each
participant's account based on a percentage of the participant's salary for that
year. The
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percentage ranges from 2% of pay for employees under age 25 to 9% of pay for
employees age 60 and over. The accounts are credited with interest at a rate
determined annually based on an average of 30 year treasury bonds.
The estimated annual benefits payable under SERA and SRP upon retirement at
normal retirement age for each of the Named Executive Officers are as follows:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
BENEFIT IF RETIRES
YEAR ATTAINS AT NORMAL RETIREMENT
NAME AGE 65 AGE (1)
- ---------------------------------------------------------- ------------- --------------------
<S> <C> <C>
George A. Harris.......................................... 2012 $ 59,465
Daryle A. Lovett.......................................... 2015 24,234
Allen E. Seymour.......................................... 2001 30,843
Michael L. Johnson........................................ 2023 51,295
Bachar El Zein............................................ 2021 42,815
</TABLE>
- ------------------------
(1) Under SERA and SRP the normal retirement age is 65. The plans allow
benefits to be paid as a lump sum payment. The estimated annual benefits
shown above are in the form of a single life annuity which is the
equivalent of the individual's projected cash balance account. Benefits
have been determined assuming no increase in 1997 compensation levels and
an annual interest credit of 6.5%, which is the 1998 rate for the interest
credit. Benefits are computed without reference to limitations on
compensation and benefits to which the SERA is subject under the Code
because any benefits for the Named Executive Officers that are affected by
such limitations are made up under Spalding's SRP.
SAVINGS PLUS PLAN. Spalding sponsors a defined contribution plan qualified
under the Code, commonly referred to as a 401(k) plan, for substantially all
U.S. salaried employees (the "Savings Plus Plan" and, together with SERA and
SRP, the "Retirement Plans"). This plan includes all U.S. Evenflo employees
except employees covered by a collective bargaining agreement, Piqua, Ohio
non-union factory hourly employees and Suring, Wisconsin employees. Participants
may make pre-tax contributions up to 15% of their aggregate annual salaries.
Spalding makes a 50% matching contribution on the first 6% of participant
contributions. Spalding does not match participant contributions in excess of
6%.
The Company anticipates that the Company and Spalding will equitably
allocate the assets and liabilities of the Retirement Plans and that the Company
will establish new plans which are substantially similar to the Retirement Plans
on behalf of the Company's employees and will assume all liabilities and
obligations with respect to the Company's employees.
1998 STOCK PLAN
The Company intends to adopt the 1998 Stock Purchase and Option Plan for Key
Employees of Evenflo Company, Inc. (the "1998 Stock Plan") providing for the
issuance of shares of authorized but unissued or reacquired shares of Common
Stock, subject to adjustment to reflect certain events such as stock dividends,
stock splits, recapitalizations, mergers or reorganizations of or by the
Company. The 1998 Stock Plan is intended to assist the Company in attracting and
retaining employees of outstanding ability and to promote the identification of
their interests with those of the stockholders of the Company. The 1998 Stock
Plan will permit the issuance of Common Stock (the "Purchase Stock") and the
grant of Non-Qualified Stock Options and Incentive Stock Options (the "Options")
to purchase shares of Common Stock and other stock-based awards (the issuance of
Purchase Stock and the grant of Options and other stock-based awards pursuant to
the 1998 Stock Plan being a "Grant"). Unless sooner terminated by the Company's
Board of Directors, the 1998 Stock Plan will expire ten years after its approval
by the Company's stockholders. Such termination will not affect the validity of
any Grant outstanding on the date of termination.
The Compensation Committee of the Board of Directors of the Company will
administer the 1998 Stock Plan, including, without limitation, the determination
of the employees to whom Grants will be made, the number of shares of Common
Stock subject to each Grant, and the various terms of such Grants. The
Compensation Committee of the Board of Directors may from time to time amend the
terms of any Grant, but, except for adjustments made upon a change in the Common
Stock of the Company by reason of a stock split, spin-off, stock dividend, stock
combination or reclassification, recapitalization, reorganization,
consolidation, change of control, or similar event, such action shall not
adversely affect the
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rights of any participant under the 1998 Stock Plan with respect to the Purchase
Stock and the Options without such participant's consent. The Board of Directors
will retain the right to amend, suspend or terminate the 1998 Stock Plan.
MANAGEMENT STOCKHOLDERS' AGREEMENTS
In connection with the 1998 Stock Plan, the Company and each employee who
has received a Grant will enter into a management stockholders' agreement and a
stock option agreement. The management stockholders' agreement and related sale
participation agreement will (i) place restrictions on each such employee's
ability to transfer shares of Common Stock, including a right of first refusal
in favor of the Company, (ii) provide each such employee the right to
participate pro rata in certain sales of Common Stock by KKR 1996 Fund L.P. or
its affiliates and (iii) provide KKR 1996 Fund L.P. and its affiliates the right
to require each such employee to participate pro rata in certain sales of Common
Stock by KKR 1996 Fund L.P. or its affiliates. The management stockholders'
agreements will also grant "piggyback" registration rights to each such employee
pursuant to the Fund Registration Rights Agreement. In addition, the management
stockholders' agreement will give the Company the right to purchase shares and
options held by each such employee upon termination of employment for any reason
and will permit each such employee to sell stock and options to the Company, and
the Company will be required to purchase such stock upon the occurrence of
certain events.
CHANGE IN CONTROL SEVERANCE AGREEMENT
Spalding maintains Change In Control Severance Agreements (the "Severance
Contracts") for certain executives of Evenflo pursuant to which these executives
will be compensated and will receive severance benefits when terminated by the
Company without cause or by such executive with good reason upon a change in
control or potential change in control of Spalding. The Recapitalization
constituted a change of control under the Severance Contracts. All but one of
these agreements terminated on September 25, 1998. One such agreement will
terminate on September 25, 1999.
The Severance Contracts generally permit an eligible employee to receive
severance payments for a period of 24 or 35 months, as the case may be,
consisting of (a) monthly payments equal to 1/12 of such person's highest annual
base salary during the 36 months immediately prior to September 1, 1996, (b)
annual bonus for each fiscal year of the Company within such 24 or 35 month
period and (c) continued perquisites and life, disability, accident and health
insurance benefits (in lieu of such person's COBRA benefits). In addition, the
executives shall become 100% vested in their accrued benefit and/or account
balance under any non-qualified deferred compensation plan and will receive an
additional lump-sum payment of 50% or 100% of the amount by which the employee's
benefits under their tax-qualified retirement plans maintained by Spalding or
one of its subsidiaries would have been increased if contributions and/or
benefit accruals under such plans had continued during the period of continued
benefits. These executives shall also be entitled to receive a gross-up payment
such that the net benefit retained by such executives, after taking account of
the excise tax imposed under Section 4999 of the Code and any federal, state and
local income tax, shall be equal to the benefit to which he or she is entitled
under any arrangement in connection with a change of control or termination of
employment.
SEVERANCE AGREEMENT
In addition to the Severance Contracts maintained by Spalding, Evenflo
maintains a severance agreement for Daryle A. Lovett pursuant to which Mr.
Lovett will be compensated and will receive severance benefits if terminated
without cause or upon his resignation at any time on or prior to October 1,
1998.
DEFERRED COMPENSATION PLAN
Prior to the Gerry Acquisition, Gerry maintained on behalf of certain of its
executives a Deferred Compensation Plan (the "Deferred Compensation Plan")
pursuant to which such employees could elect to have a designated percentage of
their salary deferred. Pursuant to the Gerry Acquisition, the Company assumed
the obligations with respect to the Deferred Compensation Plan; however, no
additional deferrals may be made subsequent to the Gerry Acquisition. Currently,
Daryle A. Lovett and one other employee of the Company are participants in the
Deferred Compensation Plan.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
KKR 1996 GP LLC beneficially owns 51% of the Company's outstanding shares of
Common Stock. KKR 1996 GP LLC also beneficially owns approximately 9% of the
outstanding shares of Spalding, which holds 42.4% of the outstanding Common
Stock. The managing members of KKR 1996 GP LLC are Messrs. Henry R. Kravis and
George R. Roberts and the other members of which are Messrs. Robert I.
MacDonnell, Paul E. Raether, Michael W. Michelson, Michael T. Tokarz, James H.
Greene, Jr., Perry Golkin, Clifton S. Robbins, Scott M. Stuart and Edward A.
Gilhuly. Messrs. Kravis, Roberts and Tokarz are also directors of the Company,
as is Mr. Marc S. Lipschultz, who is an executive of KKR. Each of the members of
KKR 1996 GP LLC is also a member of KKR & Co. L.L.C., which serves as the
general partner of KKR. KKR assisted the Company in negotiating the Transactions
and arranging the financing therefor, and was reimbursed for its expenses in
connection therewith, and from time to time in the future, KKR may receive
customary investment banking fees for services rendered to the Company in
connection with divestitures, acquisitions, and certain other transactions. In
addition, KKR has agreed to render management, consulting and financial services
to the Company for an annual fee of $300,000. See "Management--Directors and
Executive Officers" and "Principal Stockholders."
Strata L.L.C. beneficially owns 42.4% of the Company's outstanding shares of
Common Stock. Shares of Common Stock shown as beneficially owned by Strata
L.L.C. are beneficially owned by Strata Associates L.P. ("Strata") through its
investment in Spalding. The members of Strata L.L.C. are Messrs. Henry R.
Kravis, George R. Roberts, Robert I. MacDonnell, Paul E. Raether, Michael W.
Michelson, Michael T. Tokarz, James H. Greene, Jr., Perry Golkin, Clifton S.
Robbins, Scott M. Stuart and Edward A. Gilhuly. Messrs. Kravis and Roberts are
members of the Executive Committee of Strata L.L.C. Messrs. Kravis, Roberts and
Tokarz are also directors of the Company, as is Mr. Marc S. Lipschultz who is a
limited partner of KKR Associates (Strata). Each of the members of Strata L.L.C.
is also a member of the limited liability company which serves as the general
partner of KKR and Mr. Lipschultz is an executive of KKR. See
"Management--Directors and Executive Officers," "--Compensation of Directors"
and "Principal Stockholders."
Strata L.L.C. is the general partner of KKR Associates (Strata) a Delaware
limited partnership, of which certain past and present employees of KKR and
partnerships and trusts for the benefit of the families of such past and present
employees and a former partner of KKR are the limited partners. KKR Associates
(Strata) is the general partner of Strata, which beneficially owns 42.4% of the
outstanding Common Stock.
Great Star holds 6.6% of the outstanding Common Stock and an affiliate,
Abarco, holds approximately 7% of the outstanding shares of Spalding. Spalding
holds 42.4% of the outstanding Common Stock. A trust for the benefit of the
family of Mr. Gustavo Cisneros and a trust for the benefit of the family of Mr.
Ricardo Cisneros each owns a 50% indirect beneficial ownership interest in each
of Great Star and Abarco.
TRANSITION SERVICES AGREEMENT
On the Closing Date, Spalding and the Company entered into the Transition
Services Agreement pursuant to which, for a period of up to six months, Spalding
will provide certain financial, accounting and other corporate related services
to the Company for the costs associated with providing such services. The
Company will also reimburse Spalding for its out-of-pocket expenses incurred in
rendering such services. The Transition Services Agreement terminates with
respect to the majority of such services on September 30, 1998.
INDEMNIFICATION AGREEMENT
On the Closing Date, Spalding and the Company entered into the
Indemnification Agreement pursuant to which Spalding agreed to indemnify the
Company for all losses and liabilities of any kind
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relating to any non-Evenflo related matters and the Company will agree to
indemnify Spalding for all losses and liabilities of any kind relating to the
Evenflo business. In addition, Spalding agreed to indemnify the Company for the
expense of product recalls and corrective actions relating to products
manufactured prior to the Closing Date.
STOCKHOLDERS AGREEMENTS
On the Closing Date, the Company, KKR 1996 Fund L.P. and Lisco entered into
the KKR Stockholders Agreement pursuant to which Lisco has the right to
participate pro rata in certain sales of Common Stock by KKR 1996 Fund L.P. and
affiliates through a Tag Along and KKR 1996 Fund L.P. has the right to require
Lisco to participate pro rata in certain sales of Common Stock by KKR 1996 Fund
L.P. and affiliates through a Drag Along. The KKR Stockholders Agreement
provides Lisco with "piggyback" registration rights and two demand registration
rights and provides for certain restrictions and rights regarding the transfer
of Common Stock by Lisco. The KKR Stockholders Agreement also grants Lisco the
right to appoint one member of the Company's Board of Directors, subject to
maintaining specified ownership thresholds.
On the Closing Date, the Company, KKR 1996 Fund L.P. and Great Star entered
into the Great Star Stockholders Agreement pursuant to which Great Star has a
Tag Along right with respect to sales of Common Stock by KKR 1996 Fund L.P. and
KKR 1996 Fund L.P. has a Drag Along right to require Great Star to participate
in certain sales of Common Stock by KKR 1996 Fund L.P. The Great Star
Stockholders Agreement also provides Great Star certain "piggyback" registration
rights and provides for certain restrictions and rights regarding the transfer
of Common Stock held by Great Star.
REGISTRATION RIGHTS AGREEMENT
KKR 1996 Fund L.P. has the right, under certain circumstances and subject to
certain conditions, to require the Company to register under the Securities Act
shares of Common Stock held by it pursuant to the Fund Registration Rights
Agreement. Such registration rights are generally available to KKR 1996 Fund
L.P. until registration under the Securities Act is no longer required to enable
it to resell the Common Stock owned by it. The Fund Registration Rights
Agreement provides, among other things, that the Company will pay all expenses
in connection with the first six demand registrations requested by KKR 1996 Fund
L.P. and in connection with any registration commenced by the Company as a
primary offering in which KKR 1996 Fund L.P. participates through "piggyback"
registration rights granted under such agreement. See "Transactions."
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning beneficial
ownership of shares of Common Stock by: (i) persons known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock; (ii) each
person who is a director of the Company; (iii) each person who is a Named
Executive Officer; and (iv) all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP PERCENTAGE OF CLASS
NAME OF BENEFICIAL OWNER OF COMMON STOCK OUTSTANDING(A)
- ------------------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
KKR 1996 GP LLC(b)
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, NY 10019..................................................... 5,100,000 51.0%
Strata L.L.C.(c)
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, NY 10019..................................................... 4,240,000 42.4%
Henry R. Kravis(b)(c).................................................... -- --
George R. Roberts(b)(c).................................................. -- --
Michael T. Tokarz(b)(c).................................................. -- --
Marc S. Lipschultz(b)(c)................................................. -- --
Great Star Corporation(d)
c/o ABN Trustcompany
(Curacao N.V.)
P.O. Box 224
15 Pietermaai
Curacao, Netherlands Antilles.......................................... 660,000 6.6%
Edwin L. Artzt........................................................... -- --
Richard W. Frank(e)...................................................... -- --
George A. Harris(e)...................................................... -- --
Daryle A. Lovett(e)...................................................... -- --
Allen E. Seymour(e)...................................................... -- --
Michael L. Johnson(e).................................................... -- --
Bachar El Zein(e)........................................................ -- --
All directors and executive officers as group (b)(c)(e).................. -- --
</TABLE>
- ------------------------
(a) The amounts and percentage of Common Stock beneficially owned are reported
on the basis of regulations of the Commission governing the determination of
beneficial ownership of securities. Under the rules of the Commission, a
person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed a beneficial owner of the same securities
and a person may be deemed to be a beneficial owner of securities as to
which he or she has no economic interest. The percentage of class
outstanding is based on 10,000,000 shares of Common Stock outstanding after
giving effect to a 5,000 to 1 stock split effected in connection with the
Transactions.
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(b) Shares of Common Stock shown as beneficially owned by KKR 1996 GP LLC are
held by KKR 1996 Fund L.P. KKR 1996 GP LLC is the sole general partner of
KKR Associates 1996 L.P., a Delaware limited partnership. KKR Associates
1996 L.P. is the sole general partner of KKR 1996 Fund L.P. KKR 1996 GP LLC
is a Delaware limited liability company, the managing members of which are
Messrs. Henry R. Kravis and George R. Roberts and the other members of which
are Messrs. Robert I. MacDonnell, Paul E. Raether, Michael W. Michelson,
Michael T. Tokarz, James H. Greene, Jr., Perry Golkin, Clifton S. Robbins,
Scott M. Stuart and Edward A. Gilhuly. Messrs. Kravis, Roberts and Tokarz
became directors of the Company on the Closing Date. Each of Messrs. Kravis,
Roberts, MacDonnell, Raether, Michelson, Tokarz, Greene, Golkin, Robbins,
Stuart and Gilhuly may be deemed to share beneficial ownership of the shares
shown as beneficially owned by KKR 1996 GP LLC. Each of such individuals
disclaims beneficial ownership of such shares. Mr. Marc S. Lipschultz became
a director of the Company on the Closing Date and is also an executive of
KKR and a limited partner of KKR Associates 1996 L.P. Mr. Lipschultz
disclaims that he is the beneficial owner of any shares beneficially owned
by KKR Associates 1996 L.P. KKR 1996 GP LLC is also the beneficial owner of
approximately 9% of the outstanding shares of Spalding on a fully diluted
basis.
(c) Shares of Common Stock shown as beneficially owned by Strata L.L.C. are
beneficially held by Strata through its investment in Spalding. Strata
L.L.C. is the sole general partner of KKR Associates (Strata). KKR
Associates (Strata), a Delaware a limited partnership, is the sole general
partner of Strata. Strata L.L.C. is a Delaware limited liability company the
members of which are Messrs. Kravis, Roberts, MacDonnell, Raether,
Michelson, Tokarz, Greene, Golkin, Robbins, Stuart and Gilhuly. Messrs.
Kravis and Roberts are members of the Executive Committee of Strata L.L.C.
Messrs. Kravis, Roberts and Tokarz became directors of the Company on the
Closing Date. Each of Messrs. Kravis, Roberts, MacDonnell, Raether,
Michelson, Tokarz, Greene, Golkin, Robins, Stuart and Gilhuly may be deemed
to share beneficial ownership of the shares shown as beneficially owned by
Strata L.L.C. Each of such individuals disclaim beneficial ownership of such
shares. Mr. Lipschultz became a director of the Company on the Closing Date
and is also an executive of KKR and a limited partner of KKR Associates
(Strata). Mr. Lipschultz disclaims that he is the beneficial owner of any
shares beneficially owned by KKR Associates (Strata).
(d) A trust for the benefit of the family of Mr. Gustavo Cisneros and a trust
for the benefit of the family of Mr. Ricardo Cisneros each owns a 50%
indirect beneficial ownership interest in Great Star. The trustees of both
trusts are Dr. Peter Marxer and Protec Trust Management Establishment, each
with the address Postfach 484, Heiligkreuz 6, F1 9490 Vaduz, Liechtenstein.
Messrs. Gustavo and Ricardo Cisneros each may be deemed to have beneficial
ownership of the shares beneficially owned by the trusts created by them.
Messrs. Gustavo and Ricardo Cisneros each may also be deemed the beneficial
owner of approximately 7% of the outstanding shares of Spalding held by
Abarco. Messrs. Gustavo and Ricardo Cisneros each disclaims beneficial
ownership of such shares.
(e) The Company intends to adopt the 1998 Stock Plan. Awards to individuals have
not yet been determined.
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DESCRIPTION OF THE CREDIT FACILITY
The Credit Facility is provided by a syndicate of banks and other financial
institutions led by Merrill Lynch Capital Corporation as lead arranger and
syndication agent, Bank of America National Trust and Savings Association as
administrative agent ("Administrative Agent") and DLJ Capital Funding, Inc. as
documentation agent. The Credit Facility provides for $100 million of
commitments for revolving credit loans (the "Revolving Credit Loans"), letters
of credit and bankers' acceptances. The Credit Facility includes borrowing
capacity available for letters of credit and bankers' acceptances, and for
borrowings on same-day notice ("Swingline Loans"). The Credit Facility
terminates seven years after the Closing Date.
The Revolving Credit Loans bear interest, at the Company's option, at
either: (a) a "base rate" equal to the higher of (i) the federal funds rate plus
0.50% per annum or (ii) the Administrative Agent's prime rate, plus, in each
case, an additional margin ranging from 1.25% to 0% per annum depending on the
then current ratio of total debt to EBITDA, or (b) a "eurodollar rate" plus an
additional margin ranging from 2.50% to 1.0% per annum depending on the then
current ratio of total debt to EBITDA (the "eurodollar margin"). Swingline Loans
may only be made as base rate loans.
The Company will pay a commitment fee which will be equal to 0.50% to 0.30%
per annum depending on the then current ratio of total debt to EBITDA. Such fee
will be payable quarterly in arrears and upon termination of the Credit
Facility.
The Company will pay fees for letters of credit and bankers' acceptances at
a rate per annum equal to the then applicable eurodollar margin less 0.125% on
all outstanding letters of credit and unmatured acceptances, plus a fronting fee
of 0.125% per annum of the stated amount of each letter of credit. Such fees
will be payable quarterly in arrears and upon termination of the Credit
Facility. In addition, the Company will pay customary transaction charges in
connection with any letter of credit or bankers' acceptance.
The Credit Facility prohibits the Company from repurchasing any Notes or
Preferred Stock, subject to limited exceptions. The Company's obligations under
the Credit Facility are secured by a pledge of the stock of its material direct
domestic subsidiaries and 65% of the stock of its material direct foreign
subsidiaries, with certain exceptions, as well as accounts receivable, inventory
and certain intangible assets, including intellectual property, with certain
exceptions. In addition, indebtedness under the Credit Facility is guaranteed by
the domestic subsidiaries of the Company, with certain exceptions. See "Risk
Factors-- Effective Structural Subordination" and "--Encumbrances on Assets to
Secure Credit Facility."
The Credit Facility contains customary covenants and restrictions on the
Company's ability to engage in certain activities. In addition, the Credit
Facility provides that the Company must comply with a minimum EBITDA to cash
interest covenant (requiring an EBITDA to cash interest ratio of at least
1.1:1.0, increasing to 1.25:1.0 in June 1999 and to 1.50:1.0 in December 1999,
with additional increases in such required ratio thereafter to a final ratio of
2.5:1.0 in September 2002) and a maximum total debt to EBITDA covenant
(requiring a maximum total debt to EBITDA ratio of 6.95:1.0, decreasing to
6.50:1.0 in June 1999 and to 5.50:1.0 in September 1999, with additional
decreases in such required ratio thereafter to a final ratio of 4.0:1.0 in
September 2002) and must not exceed an annual capital expenditures limit.
The Credit Facility includes customary events of default.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The certificate of incorporation of the Company authorizes 25,000,000 shares
of Common Stock, of which 10,000,000 shares are outstanding, and 10,000,000
shares of preferred stock, par value $.01 per share, issuable in series by
resolution of the Board of Directors of the Company.
COMMON STOCK
The certificate of incorporation of the Company authorizes 20,000,000 shares
of Common Stock designated as the "Class A Common Stock" and 5,000,000 shares of
non-voting Common Stock designated as the "Class B Common Stock." As of
September 15, 1998, 10,000,000 shares of Class A Common Stock were outstanding
and no shares of Class B Common Stock were outstanding. The holders of Class A
Common Stock are entitled to one vote per share for each share held of record on
all matters submitted to a vote of stockholders. The Class B Common Stock is
identical in all respects to the Class A Common Stock except that holders of
Class B Common Stock do not have any voting rights with the exception of those
described below. Subject to preferential rights with respect to any series of
preferred stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors on the Common Stock out
of funds legally available therefor, and in the event of a liquidation,
dissolution or winding-up of the affairs of the Company, are entitled to share
equally and ratably in all remaining assets and funds of the Company. The
holders of Common Stock have no preemptive rights, cumulative voting rights, or
rights to convert shares of Common Stock into any other securities and are not
subject to future calls or assessments by the Company. All outstanding shares of
Common Stock are fully paid and nonassessable.
Under Delaware law, holders of Class B Common Stock are entitled to vote as
a class upon a proposed amendment to the certificate of incorporation, whether
or not entitled to vote thereon by the certificate of incorporation, if the
amendment would increase or decrease the par value of the shares of such class,
increase or decrease the aggregate number of authorized shares of such class or
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely.
PREFERRED STOCK
The Board of Directors of the Company, in its sole discretion, may designate
and issue one or more series of preferred stock from the authorized and unissued
shares of preferred stock, subject to limitations imposed by law or the
Company's certificate of incorporation. The Board of Directors is empowered to
determine the designation of and the number of shares constituting a series of
preferred stock; the dividend rate for the series; the terms and conditions of
any voting, conversion and exchange rights for the series; the amounts payable
on the series upon redemption or the Company's liquidation, dissolution or
winding-up; the provisions of any sinking fund for the redemption of purchase of
shares of any series; and the preferences and relative rights among the series
of preferred stock.
CUMULATIVE PREFERRED STOCK
The summary contained herein of certain provisions of the Cumulative
Preferred Stock does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Company's certificate of incorporation.
GENERAL. On the Closing Date, the Company issued 400,000 shares of
Cumulative Preferred Stock which were distributed to Lisco in the Preferred
Stock Distribution and purchased by KKR 1996 Fund L.P. in the Preferred Stock
Investment. The Company filed a restated certificate of incorporation containing
the terms of the Cumulative Preferred Stock with the Secretary of State of the
State of Delaware as required by Delaware law. The Cumulative Preferred Stock
ranks junior in right of payment to all
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liabilities and obligations (whether or not for borrowed money) of the Company
(other than Common Stock and any preferred stock of the Company which by its
terms is junior to, or on parity with, the Cumulative Preferred Stock). In
addition, creditors and stockholders of the Company's subsidiaries also have
priority over the Cumulative Preferred Stock with respect to claims on the
assets of such subsidiaries. The Cumulative Preferred Stock is fully paid and
nonassessable, and the holders thereof have no subscription or preemptive rights
related thereto.
RANKING. The Cumulative Preferred Stock, with respect to dividend rights
and rights on liquidation, winding-up and dissolution of the Company, ranks
senior to all classes of common stock and each other class of Capital Stock or
series of preferred stock (collectively referred to as "Junior Securities");
provided that the holders of the Cumulative Preferred Stock representing a
majority of the liquidation preference may approve the issuance of preferred
stock of the Company senior to, or on a parity with, the Cumulative Preferred
Stock.
DIVIDENDS. Holders of Cumulative Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors, dividends on each
outstanding share of the Cumulative Preferred Stock, at a variable rate based on
the ten-year treasury rate, based on the then effective liquidation preference
per share of Cumulative Preferred Stock. Dividends on the Cumulative Preferred
Stock are payable quarterly in arrears on August 15, November 15, February 15
and May 15 of each year, commencing on November 15, 1998. The initial dividend
rate with respect to the Cumulative Preferred Stock is 14% per annum. The right
to dividends on the Cumulative Preferred Stock is cumulative and dividends
accrue (whether or not declared), without interest, from the date of issuance of
the Cumulative Preferred Stock.
No dividends or distributions may be paid or set apart for such payment on
Junior Securities (except dividends or distributions on Junior Securities in
additional shares of Junior Securities), and no Junior Securities may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid in cash on
the Cumulative Preferred Stock.
OPTIONAL REDEMPTION. The Company at its option may, but shall not be
required to, redeem, at any time, for cash (subject to contractual and other
restrictions with respect thereto and to the legal availability of funds
therefor), in whole or in part, any or all of the shares of Cumulative Preferred
Stock at a redemption price equal to 100% of the aggregate liquidation
preference of such shares, together with all accumulated and unpaid dividends to
the redemption date (including an amount equal to a prorated dividend for the
period from the dividend payment date immediately prior to the redemption date
to the redemption date). In the event of partial redemptions of Cumulative
Preferred Stock, the shares to be redeemed will be determined PRO RATA according
to the number of shares held by each holder of Cumulative Preferred Stock.
CHANGE OF CONTROL. The certificate of incorporation provides that, upon the
occurrence of a Change of Control, the Company will be required to make an offer
to purchase the Cumulative Preferred Stock for cash at a purchase price of 101%
of the liquidation preference thereof, together with all accumulated and unpaid
dividends to the date of purchase. The definition of "Change of Control" in the
certificate of incorporation has substantially the same meaning as set forth
under "Description of the Exchange Notes-- Certain Definitions--Change of
Control."
PROCEDURE FOR REDEMPTION. On and after a redemption date, unless the
Company defaults in the payment of the applicable redemption price, dividends
will cease to accrue on shares of Cumulative Preferred Stock called for
redemption, and all rights of holders of such shares will terminate except for
the right to receive the redemption price. The Company will send a written
notice of redemption by first class mail to each holder of record of shares of
Cumulative Preferred Stock, not fewer than 10 days nor more than 20 days prior
to the date fixed for such redemption. Shares of Cumulative Preferred Stock
issued and reacquired will, upon compliance with the applicable requirements of
Delaware law, have the status of authorized but unissued shares of preferred
stock of the Company undesignated as to series and may, with
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any and all other authorized but unissued shares of preferred stock of the
Company, be designated or redesignated and issued or reissued, as the case may
be, as part of any series of preferred stock of the Company, except that any
issuance or reissuance of shares of Cumulative Preferred Stock must be in
compliance with the certificate of incorporation.
LIQUIDATION PREFERENCE. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, holders of Cumulative Preferred Stock
will be entitled to be paid out of the assets of the Company available for
distribution $100 per share, plus an amount in cash equal to all accumulated and
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up of the Company (including an amount equal to a prorated dividend from
the last dividend payment date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on any Junior Securities,
including, without limitation, on any Common Stock. After payment of the full
amount of the liquidation preferences and accumulated and unpaid dividends to
which they are entitled, the holders of shares of Cumulative Preferred Stock
will not be entitled to any further participation in any distribution of assets
of the Company. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company nor the consolidation
or merger of the Company with or into one or more corporations shall be deemed
to be a liquidation, dissolution or winding-up of the Company.
The certificate of incorporation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Cumulative
Preferred Stock, although such liquidation preference is substantially in excess
of the par value of such shares of Cumulative Preferred Stock. In addition, the
Company is not aware of any provision of Delaware law or any controlling
decision of the courts of the State of Delaware (the state of incorporation of
the Company) that requires a restriction upon the surplus of the Company solely
because the liquidation preference of the Cumulative Preferred Stock exceeds its
par value. Consequently, there will be no restriction upon any surplus of the
Company solely because the liquidation preference of the Cumulative Preferred
Stock exceeds the par value, and there will be no remedies available to holders
of the Cumulative Preferred Stock before or after the payment of any dividend,
other than in connection with the liquidation of the Company, solely by reason
of the fact that such dividend would reduce the surplus of the Company to an
amount less than the difference between the liquidation preference of the
Cumulative Preferred Stock and its par value.
VOTING RIGHTS. Holders of the Cumulative Preferred Stock have no voting
rights with respect to general corporate matters except as provided by law or as
set forth in the certificate of incorporation. The certificate of incorporation
provides that: (a) two additional members will be added to the Company's Board
of Directors and holders of the Cumulative Preferred Stock, voting separately as
a class, will have the right to elect two directors of the expanded Board of
Directors if dividends on the Cumulative Preferred Stock are in arrears and
unpaid for six consecutive quarterly periods; and (b) holders of the Cumulative
Preferred Stock have the right to approve any amendment of the certificate of
incorporation adverse to the holders of the Cumulative Preferred Stock. The
voting rights set forth in (a) above will continue until such time as all
dividends in arrears on the Cumulative Preferred Stock are paid in full, at
which time the term of the directors elected pursuant to the provisions of this
paragraph shall terminate.
Any vacancy occurring in the office of the director elected by holders of
the Cumulative Preferred Stock may be filled by the remaining directors elected
by such holders unless and until such vacancy shall be filled by such holders.
The certificate of incorporation also provides that (a) the creation,
authorization or issuance of any shares of Junior Securities or (b) the increase
or decrease in the amount of authorized Capital Stock of any class, including
any preferred stock, shall not require the consent of the holders of Cumulative
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of holders of shares of Cumulative
Preferred Stock.
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Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment to the certificate of incorporation, whether or
not entitled to vote thereon by the certificate of incorporation, if the
amendment would increase or decrease the par value of the shares of such class,
increase or decrease the aggregate number of authorized shares of such class or
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely.
TRANSFER AGENT AND REGISTRAR. Marine Midland Bank is the transfer agent and
registrar for the Cumulative Preferred Stock.
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THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $110.0 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Old Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Old Notes.
As of the date of this Prospectus, $110.0 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "--Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were issued on August 20, 1998, in a transaction exempt from
the registration requirements of the Securities Act. Accordingly, the Old Notes
may not be reoffered, resold, or otherwise transferred unless so registered or
unless an applicable exemption from the registration and prospectus delivery
requirements of the Securities Act is available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the Commission a registration statement relating to the Exchange Offer
not later than 135 days after the date of issuance of the Old Notes; and to use
its best efforts to cause the registration statement relating to the Exchange
Offer to become effective under the Securities Act not later than 240 days after
the date of issuance of the Old Notes and, unless the Exchange Offer would not
be permitted by applicable law or Commission policy, the Company will commence
the Exchange Offer and use its best efforts to issue on or prior to 30 business
days after the date on which the registration statement relating to the Exchange
Offer was declared effective by the Commission, Exchange Notes in exchange for
Old Notes tendered prior thereto in the Exchange Offer. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company ("DTC"). Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the Staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further
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compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such Holder's business and that such Holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such Exchange Notes.
See "--Resale of Exchange Notes." Each broker-dealer that receives Exchange
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 Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the Staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Instead, based on an interpretation by the Staff of the
Commission set forth in a series of no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is a broker-dealer or is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such
Exchange Notes. Since the Commission has not considered the Exchange Offer in
the context of a no-action letter, there can be no assurance that the Staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Any holder who is an affiliate of the Company or who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely on such interpretation by the Staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Exchange Notes. Each broker-dealer that
receives Exchange 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 Exchange Notes. A broker-dealer
may not participate in the Exchange Offer with respect to Old Notes acquired
other than as a result of market-making activities or other trading activities.
See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Notes, from August 20, 1998.
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Tendering holders of the Old Notes shall 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 the Old Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date"). The Expiration Date
will be at least 20 business days after the commencement of the Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer unless properly withdrawn. The Company does not anticipate
extending the Expiration Date.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Old Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "--Certain Conditions to the Exchange Offer" which have not been waived by
the Company and (ii) amend the terms of the Exchange Offer in any manner which,
in its good faith judgment, is advantageous to the holders of the Old Notes,
whether before or after any tender of the Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other documents required by the Letter of Transmittal, to the Exchange
Agent at its address set forth below on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY.
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If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC (also referred to as a "book-entry transfer facility")
whose name appears on a security listing as the owner of Old Notes), the
signature of such signer need not be guaranteed. In any other case, the tendered
Old Notes must be endorsed or accompanied by written instruments of transfer in
form satisfactory to the Company and duly executed by the registered holder, and
the signature on the endorsement or instrument of transfer must be guaranteed by
a bank, broker, dealer, credit union, savings association, clearing agency or
other institution (each an "Eligible Institution") that is a member of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Exchange Act. If the Exchange Notes and/or Old Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Old Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is 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 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 with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Old Notes are registered and, if possible, the certificate numbers of the
Old Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date, the 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), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of the notice of guaranteed delivery ("Notice of Guaranteed
Delivery") which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by
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an Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable.
Each broker-dealer that receives Exchange 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 Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges, assigns
and transfers the Old Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver
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any additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Old Notes or transfer ownership of such Old Notes on the account books
maintained by a book-entry transfer facility. The Transferor further agrees that
acceptance of any tendered Old Notes by the Company and the issuance of Exchange
Notes in exchange therefor shall constitute performance in full by the Company
of certain of its obligations under the Registration Rights Agreement. All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. Each holder, other than
a broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of Exchange Notes. Each Transferor which is a
broker-dealer receiving Exchange Notes for its own account must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
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. The Company will, for a period of 90 days after the Expiration Date,
make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
facsimile transmission (receipt confirmed by telephone) or letter must be
received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Notes to be withdrawn, (iv) include a statement that such holder is
withdrawing his election to have such Old Notes exchanged, (v) 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 or as otherwise described above (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee under the Indenture register the transfer of such
Old Notes into the name of the person withdrawing the tender and (vi) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. The Exchange Agent will return the properly withdrawn Old
Notes promptly following receipt of notice of withdrawal. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company and such determination will be final and binding on
all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may
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be retendered by following one of the procedures described under "Procedures for
Tendering Old Notes" above at any time on or prior to the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes promptly after such acceptance. See
"--Certain Conditions to the Exchange Offer" below. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old Notes
for exchange when, as and if the Company has given oral or written notice
thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely book-entry
confirmation of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Old Notes will be credited to an account
maintained with such book-entry transfer facility) as promptly as practicable
after the expiration of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Old Notes and may terminate or
amend the Exchange Offer (by oral or written notice to the Exchange Agent or by
a timely press release) if at any time before the acceptance of such Old Notes
for exchange or the exchange of the Exchange Notes for such Old Notes, any of
the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued 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 have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Company; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes or that may materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of the
Exchange Offer; or
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(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or have
a material adverse effect on the contemplated benefits of the Exchange Offer
to the Company; or
(f) there shall occur a change in the current interpretation by the
Staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any governmental agency or authority
which may adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States (whether or not
mandatory), (iv) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the United
States, (v) any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of affecting,
the extension of credit by banks or other leading institutions in the United
States, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Exchange Offer, a material acceleration or worsening
thereof.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth above occur. Moreover, regardless of whether any
of such conditions has occurred, the Company may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the Old
Notes.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Exchange Offer for a minimum
of five business days from the date that the Company first gives notice, by
public announcement or otherwise, of such waiver or amendment, if the Exchange
Offer would otherwise expire within such five business-day period. Any
determination by the Company concerning the events described above will be final
and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
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The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
Marine Midland Bank (insured or registered recommended)
140 Broadway, Level A Marine Midland Bank
New York, New York 10005-1180 140 Broadway Level A
Attention: Paulette Shaw New York, New York 10005-1180
Attention: Paulette Shaw
BY OVERNIGHT COURIER: BY FACSIMILE:
Marine Midland Bank (212) 658-2292
140 Broadway, Level A (For Eligible Institutions Only)
New York, New York 10005-1180 BY TELEPHONE:
Attention: Paulette Shaw (212) 658-5931
</TABLE>
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL,
OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE
ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
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
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the Old
Notes and in handling forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $200,000, which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the
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Company may, at its discretion, take such action as it may deem necessary to
make the Exchange Offer in any such jurisdiction and extend the Exchange Offer
to holders of Old Notes in such jurisdiction. In any jurisdiction in which the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
the Company by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange 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. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. All untendered Old Notes will continue to be subject to the
restrictions on transfer set forth in the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or
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otherwise. The Company has no present plan to acquire any Old Notes which are
not tendered in the Exchange Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the Staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and that such
Holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any Holder who is an "affiliate" of the
Company or who has an arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
(i) could not rely on the applicable interpretations of the Staff and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act. A broker-dealer who holds Old Notes that were acquired for its
own account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Exchange Notes. Each such broker-dealer that
receives Exchange 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 in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
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DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Old Notes were issued, and the Exchange Notes offered hereby will be
issued, pursuant to an Indenture (the "INDENTURE") between the Company and
Marine Midland Bank, as trustee (the "TRUSTEE"). The terms of the Exchange Notes
include those stated in the Indenture as well as those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TRUST INDENTURE ACT"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summarizes the material provisions of the Indenture and
is qualified in its entirety by reference to the provisions of the Indenture,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under
"--Certain Definitions." The Indenture is an exhibit to the Registration
Statement of which this Prospectus is a part. For purposes of this summary, the
term "Company" refers only to Evenflo Company, Inc. and not to any of its
Subsidiaries.
On August 20, 1998, the Company issued $110.0 million aggregate principal
amount of Old Notes under the Indenture. The terms of the Exchange Notes are
identical in all material respects to the Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Old Notes for Exchange Notes. The Trustee will authenticate and deliver Exchange
Notes for original issue only in exchange for a like principal amount of Old
Notes. Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with the Exchange Notes, will be treated as a single
class of securities under the Indenture. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Exchange
Notes shall be deemed to mean, at any time after the Exchange Offer is
consummated, such percentage in aggregate principal amount of the Old Notes and
Exchange Notes then outstanding.
The Notes will be senior unsecured obligations of the Company and will rank
PARI PASSU in right of payment to all existing and future senior Indebtedness of
the Company, including Indebtedness pursuant to the Senior Credit Facility. The
Notes will be effectively subordinated to all existing and future senior secured
Indebtedness of the Company to the extent of the value of the assets securing
such Indebtedness and will be effectively subordinated to all obligations of the
Subsidiaries of the Company. As of June 30, 1998, on a pro forma basis after
giving effect to the Transactions, the aggregate principal amount of the
Company's outstanding Indebtedness would have been approximately $120.0 million
(excluding $48.0 million of availability under the Senior Credit Facility after
giving effect to $42.0 million of outstanding letters of credit and bankers'
acceptances), $10.0 million of which would have been senior secured Indebtedness
under the Senior Credit Facility. The Indenture permits the Company to incur
additional indebtedness, including senior secured Indebtedness, subject to
certain limitations. As of June 30, 1998, on the same pro forma basis, the
Exchange Notes would not have been senior to any Indebtedness of the Company.
See "Risk Factors--Effective Structural Subordination" and "--Encumbrances on
Assets to Secure Credit Facility" and "Description of the Credit Facility."
As of June 30, 1998, on a pro forma basis after giving effect to the
Transactions, the aggregate principal amount of the outstanding indebtedness and
other liabilities and commitments of the Subsidiaries of the Company would have
been $2.8 million (excluding guarantees in respect of the Senior Credit
Facility). Holders of indebtedness of, and trade creditors of, Subsidiaries of
the Company would generally be entitled to payment of their claims from the
assets of the affected Subsidiaries before such assets were made available for
distribution to the Company. The Indenture permits the incurrence of substantial
indebtedness by the Company's Subsidiaries and permits significant investments
by the Company in Subsidiaries, including Restricted Subsidiaries. In the event
of bankruptcy, liquidation or reorganization of a Subsidiary, holders of any
such Subsidiary's indebtedness will have a claim to the assets of the Subsidiary
that is prior to the Company's interest in those assets. See "Risk
Factors--Effective Structural Subordination."
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Under certain circumstances, the Company will be able to designate future
Subsidiaries as Unrestricted Subsidiaries or Restricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes were initially issued in an aggregate principal amount of $110.0
million and will mature on August 15, 2006. The Indenture for the Notes provides
that the aggregate principal amount of the Notes outstanding at any one time
will be limited to $200.0 million, PROVIDED that any increase in the aggregate
principal amount outstanding after the Offering will be subject to the
compliance with all of the covenants under the Indenture. Interest on the Notes
will accrue at the rate of 11 3/4% per annum and will be payable semi-annually
in arrears on August 15 and February 15, commencing on February 15, 1999, to
Holders of record on the immediately preceding August 1 and February 1. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal of, premium if any, Liquidated Damages, if any, and
interest on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or at such
office or agency of the Company as may be maintained for such purpose or, at the
option of the Company, payment of Liquidated Damages, if any, or interest may be
made by check mailed to the Holders of the Notes at their respective addresses
set forth in the register of Holders; PROVIDED that all payments of principal,
premium, if any, Liquidated Damages, 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; PROVIDED further that all payments in
respect of Notes represented by one or more permanent global Notes registered in
the name of or held by The Depository Trust Company or its nominee will be made
by wire transfer of immediately available funds to the accounts specified by the
Holders or 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.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at the Company's
option prior to August 15, 2002. From and after August 15, 2002, the Notes will
be subject to redemption at any time at the option of the Company, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date (subject to the rights of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on August 15 of each
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2002............................................................................. 105.875%
2003............................................................................. 103.917%
2004............................................................................. 101.958%
2005 and thereafter.............................................................. 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to August 15,
2001, the Company may, at its option, redeem up to 35.0% of the aggregate
principal amount of Notes originally issued under the
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Indenture on the Issuance Date at a redemption price equal to 111.75% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date (subject to the
rights of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), with the net cash proceeds of one or
more Equity Offerings; PROVIDED that at least 65.0% of the aggregate principal
amount of Notes originally issued under the Indenture on the Issuance Date
remains outstanding immediately after the occurrence of each such redemption;
PROVIDED FURTHER that each such redemption occurs within 60 days of the date of
closing of each such Equity Offering. The Trustee shall select the Notes to be
purchased in the manner described under "Repurchase at the Option of
Holders--Selection and Notice."
At any time on or prior to August 15, 2002, the Notes may also be redeemed,
in whole but not in part, at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days prior notice (but
in no event more than 90 days after the occurrence of such Change of Control)
mailed by first-class mail to each Holder's registered address, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
as of, and accrued and unpaid interest and Liquidated Damages, if any, to the
date of redemption (the "REDEMPTION DATE") (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date).
"APPLICABLE PREMIUM" means, with respect to any Note on any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such Redemption Date of (1) the redemption price of
such Note at August 15, 2002 (such redemption price being set forth in the table
above) plus (2) all required interest payments due on such Note through August
15, 2002 (excluding accrued but unpaid interest), computed using a discount rate
equal to the Treasury Rate on such Redemption Date plus 50 basis points over (B)
the principal amount of such Note.
"TREASURY RATE" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of U.S. Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) that has become publicly available at least two Business Days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
period from the Redemption Date to August 15, 2002; PROVIDED, HOWEVER, that if
the period from the Redemption Date to August 15, 2002 is less than one year,
the weekly average yield on actually traded U.S. Treasury securities adjusted to
a constant maturity of one year shall be used.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. The Indenture provides that, upon the occurrence of a
Change of Control, unless the Company has elected to redeem the Notes in
connection with such Change of Control, the Company will make an offer to
purchase all or any part (equal to $1,000 or an integral multiple thereof) of
the Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER")
at a price in cash (the "CHANGE OF CONTROL PAYMENT") equal to 101.0% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase (subject to the rights of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date). The Indenture provides that within 30 days
following any Change of Control, the Company will mail a notice to each Holder
of Notes issued under the Indenture, with a copy to the Trustee, with the
following information: (1) a Change of Control Offer is being made pursuant to
the covenant entitled "Change of Control," and that all Notes properly tendered
pursuant to such Change of Control Offer will be accepted for payment; (2) the
purchase price and the purchase date, which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed, except as may be
otherwise required by applicable law (the "CHANGE OF CONTROL PAYMENT DATE"); (3)
any Note not properly tendered will remain outstanding and continue to accrue
interest; (4) unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control Payment
Date; (5) Holders electing to have any Notes purchased pursuant to a Change
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of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the paying agent specified in the notice at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date; (6) Holders will be entitled to withdraw their tendered
Notes and their election to require the Company to purchase such Notes, PROVIDED
that the paying agent receives, not later than the close of business on the last
day of the Offer Period (as defined in the Indenture), a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes tendered for purchase, and a statement that such
Holder is withdrawing his or her tendered Notes and his or her election to have
such Notes purchased; and (7) that Holders whose Notes are being purchased only
in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay all outstanding obligations under the Senior Credit
Facility or obtain the requisite consents thereunder to permit the purchase of
the Notes required by this covenant.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the Indenture, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
The Indenture provides that on the Change of Control Payment Date, the
Company will, to the extent permitted by law, (1) accept for payment all Notes
or portions thereof properly tendered pursuant to the Change of Control Offer,
(2) deposit with the paying agent an amount equal to the aggregate Change of
Control Payment in respect of all Notes or portions thereof so tendered and (3)
deliver, or cause to be delivered, to the Trustee for cancellation the Notes so
accepted together with an Officers' Certificate stating that such Notes or
portions thereof have been tendered to and purchased by the Company. The
Indenture provides that the paying agent will promptly mail to each Holder of
Notes 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 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.
With certain exceptions, the Senior Credit Facility does, and future credit
agreements or other agreements relating to Indebtedness to which the Company
becomes a party may, prohibit the Company from purchasing any Notes as a result
of a Change of Control and/or provide that certain change of control events with
respect to the Company would constitute a default thereunder. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing the Notes, the Company could seek the consent of its lenders to the
purchase of the Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing the 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 an event
of default under the Senior Credit Facility. See "Risk Factors--Change of
Control."
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
ASSET SALES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an
Asset Sale, unless (x) the Company, or its
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Restricted Subsidiaries, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the fair market value (as determined in
good faith by the Company) of the assets sold or otherwise disposed of and (y)
at least 75.0% of the consideration therefor received by the Company, or such
Restricted Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; PROVIDED that the amount of (a) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes), that are assumed
by the transferee of any such assets, (b) any notes or other obligations
received by the Company or such Restricted Subsidiary from such transferee that
are converted by the Company or such Restricted Subsidiary into cash (to the
extent of the cash received) within 180 days following the closing of such Asset
Sale and (c) any Designated Noncash Consideration received by the Company or any
of its Restricted Subsidiaries in such Asset Sale having an aggregate fair
market value, taken together with all other Designated Noncash Consideration
received pursuant to this clause (c) that is at that time outstanding, not to
exceed the greater of (x) $25.0 million or (y) 10.0% of Total Assets at the time
of the receipt of such Designated Noncash Consideration (with the fair market
value of each item of Designated Noncash Consideration being measured at the
time received and without giving effect to subsequent changes in value), shall
be deemed to be cash for purposes of this provision and for no other purpose.
Within 365 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary
may apply the Net Proceeds from such Asset Sale, at its option, (i) to
permanently reduce (x) Obligations under the Senior Credit Facility (and to
correspondingly reduce commitments with respect thereto) or other Indebtedness
(other than Subordinated Indebtedness) (provided that if the Company shall so
reduce Obligations under such Indebtedness, it will equally and ratably reduce
Obligations under the Notes if the Notes are then prepayable or, if the Notes
may not be then prepaid, the Company will make an offer (in accordance with the
procedures set forth below for an Asset Sale Offer) to all Holders to purchase
the amount of Notes that would otherwise be prepaid at a price in cash equal to
100% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase) or (y) Indebtedness of a
Wholly-Owned Restricted Subsidiary (other than Indebtedness owed to the Company
or another Restricted Subsidiary), (ii) to an investment in any one or more
businesses, capital expenditures or acquisitions of other assets in each case,
used or useful in a Similar Business and/or (iii) to make an investment in
properties or assets that replace the properties and assets that are the subject
of such Asset Sale. Pending the final application of any such Net Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any, or otherwise invest such Net Proceeds in
Cash Equivalents or Investment Grade Securities. The Indenture provides that any
Net Proceeds from the Asset Sale that are not invested or applied as provided
and within the time period set forth 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 shall make an offer to all
Holders of Notes (an "ASSET SALE OFFER") to purchase the maximum principal
amount of Notes, that is an integral multiple of $1,000, that may be purchased
out of the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. The Company will commence an
Asset Sale Offer with respect to Excess Proceeds within ten Business Days after
the date that Excess Proceeds exceeds $10.0 million by mailing the notice
required pursuant to the terms of the Indenture, with a copy to the Trustee. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased in the manner described under the
caption "Selection and Notice" below. Upon completion of any such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of the
Indenture, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
With certain exceptions, the Senior Credit Facility does, and future credit
agreements or other agreements relating to Indebtedness to which the Company
becomes a party may, prohibit the Company from purchasing any Notes pursuant to
this covenant. In the event the Company is prohibited from purchasing the Notes,
the Company could seek the consent of its lenders to the purchase of the Notes
or could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing the Notes. In such case, the Company's
failure to purchase such tendered Notes would constitute an Event of Default
under the Indenture which would, in turn, constitute an event of default under
the Senior Credit Facility.
SELECTION AND NOTICE. If less than all of the Notes are to be redeemed at
any time or if more Notes are tendered pursuant to an Asset Sale Offer than the
Company is required to purchase, selection of such Notes for redemption or
purchase, as the case may be, will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed, or, if such Notes are not so listed, on a pro rata basis,
by lot or by such other method as the Trustee shall deem fair and appropriate
(and in such manner as complies with applicable legal requirements); PROVIDED
that no Notes of $1,000 or less shall he purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each Holder of Notes to be purchased or redeemed at such
Holder's registered address. If any Note is to be purchased or redeemed in part
only, any notice of purchase or redemption that relates to such Note shall state
the portion of the principal amount thereof that has been or is to be purchased
or redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed
portion of any Note purchased or redeemed in part will be issued in the name of
the Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date unless the Company defaults in payment of the
purchase or redemption price, interest shall cease to accrue on Notes or
portions thereof purchased or called for redemption.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests,
including any dividend or distribution payable in connection with any merger or
consolidation (other than (A) dividends or distributions by the Company payable
in Equity Interests (other than Disqualified Stock) of the Company or (B)
dividends or distributions by a Restricted Subsidiary so long as, in the case of
any dividend or distribution payable on or in respect of any class or series of
securities issued by a Subsidiary other than a Wholly-Owned Subsidiary, the
Company or a Restricted Subsidiary receives at least its PRO RATA share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities); (ii) purchase, redeem, defease or otherwise acquire or
retire for value any Equity Interests of the Company or any direct or indirect
parent of the Company; (iii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value in each case, prior
to any scheduled repayment, or maturity, any Subordinated Indebtedness (other
than Indebtedness permitted under clauses (g) and (i) of the covenant described
under "--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock"); or (iv) make any Restricted Investment (all such payments and other
actions set forth
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in clauses (i) through (iv) above being collectively referred to as "RESTRICTED
PAYMENTS"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) immediately after giving effect to such transaction on a pro forma
basis, the Company could incur $1.00 of additional Indebtedness under the
provisions of the first paragraph of "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issuance Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (v) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that could have been paid pursuant to such clause if $2.5 million and $5.0
million were substituted in such clause for $5.0 million and $10.0 million,
respectively), (vi) and (ix) of the next succeeding paragraph, but excluding
all other Restricted Payments permitted by the next succeeding paragraph),
is less than the sum of (i) 50.0% of the Consolidated Net Earnings of the
Company for the period (taken as one accounting period) from the fiscal
quarter that first begins after the Issuance Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, in the
case such Consolidated Net Earnings for such period is a deficit, minus 100%
of such deficit), PLUS (ii) 100% of the aggregate net cash proceeds and the
fair market value, as determined in good faith by the Board of Directors, of
marketable securities received by the Company since immediately after the
closing of the Transactions from the issue or sale of Equity Interests of
the Company (including Retired Capital Stock (as defined below), but
excluding cash proceeds and marketable securities received from the sale of
Equity Interests to members of management, directors or consultants of the
Company and its Subsidiaries after the Issuance Date to the extent such
amounts have been applied to Restricted Payments in accordance with clause
(v) of the next succeeding paragraph and excluding Excluded Contributions)
or debt securities of the Company that have been converted into such Equity
Interests of the Company (other than Refunding Capital Stock (as defined
below) or Equity Interests or convertible debt securities of the Company
sold to a Restricted Subsidiary of the Company and other than Disqualified
Stock or debt securities that have been converted into Disqualified Stock),
PLUS (iii) 100% of the aggregate amount of cash and marketable securities
contributed to the capital of the Company following the Issuance Date
(excluding Excluded Contributions), PLUS (iv) 100% of the aggregate amount
received in cash and the fair market value of marketable securities (other
than Restricted Investments) received from (A) the sale or other disposition
(other than to the Company or a Restricted Subsidiary) of Restricted
Investments made by the Company and its Restricted Subsidiaries or (B) a
dividend from, or the sale (other than to the Company or a Restricted
Subsidiary) of the stock of, an Unrestricted Subsidiary (other than an
Unrestricted Subsidiary the Investment in which was made by the Company or a
Restricted Subsidiary pursuant to clauses (vii) or (x) below).
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) (a) the redemption, repurchase, retirement or other acquisition of
any Equity Interests (the "RETIRED CAPITAL STOCK") or Subordinated
Indebtedness of the Company in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of,
Equity Interests of the Company (other than any Disqualified Stock) (the
"REFUNDING CAPITAL STOCK"), and (b) if immediately prior to the retirement
of Retired Capital Stock, the declaration and payment of dividends thereon
was permitted under clause (vi) of this paragraph, the declaration and
payment of dividends on the Refunding Capital Stock in an aggregate amount
per year no greater than the
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aggregate amount of dividends per annum that was declarable and payable on
such Retired Capital Stock immediately prior to such retirement; PROVIDED,
HOWEVER, that at the time of the declaration of any such dividends, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof;
(iii) distributions or payments of Receivables Fees;
(iv) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, new Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired for value (plus the amount of any
premium required to be paid under the terms of the instrument governing the
Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired), (B) such Indebtedness is subordinated to the Notes at least to the
same extent as such Subordinated Indebtedness so purchased, exchanged,
redeemed, repurchased, acquired or retired for value, (C) such Indebtedness
has a final scheduled maturity date equal to or later than the final
scheduled maturity date of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired and (D) such Indebtedness has a Weighted
Average Life to Maturity equal to or greater than the remaining Weighted
Average Life to Maturity of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired;
(v) a Restricted Payment to pay for the repurchase, retirement or other
acquisition or retirement for value of common Equity Interests of the
Company held by any future, present or former employee, director or
consultant of the Company, any Subsidiary of the Company or Evenflo &
Spalding Holdings Corporation or any subsidiary thereof pursuant to any
management equity plan or stock option plan or any other management or
employee benefit plan or agreement; PROVIDED, HOWEVER, that the aggregate
Restricted Payments made under this clause (v) does not exceed in any
calendar year $5.0 million (with unused amounts in any calendar year being
carried over to succeeding calendar years subject to a maximum (without
giving effect to the following proviso) of $10.0 million in any calendar
year); PROVIDED FURTHER that such amount in any calendar year may be
increased by an amount not to exceed (i) the cash proceeds from the sale of
Equity Interests of the Company to members of management, directors or
consultants of the Company and its Subsidiaries that occurs after the
Issuance Date (to the extent the cash proceeds from the sale of such Equity
Interest have not otherwise been applied to the payment of Restricted
Payments by virtue of the preceding paragraph (c)) plus (ii) the cash
proceeds of key man life insurance policies received by the Company and its
Restricted Subsidiaries after the Issuance Date less (iii) the amount of any
Restricted Payments previously made pursuant to clauses (i) and (ii) of this
subparagraph (v); and PROVIDED FURTHER that cancellation of Indebtedness
owing to the Company from members of management of the Company or any of its
Restricted Subsidiaries in connection with a repurchase of Equity Interests
of the Company will not be deemed to constitute a Restricted Payment for
purposes of this covenant or any other provision of the Indenture;
(vi) the declaration and payment of dividends to holders of any class or
series of Designated Preferred Stock (other than Disqualified Stock) issued
after the Issuance Date (including, without limitation, the declaration and
payment of dividends on Refunding Capital Stock in excess of the dividends
declarable and payable thereon pursuant to clause (ii)); PROVIDED, HOWEVER,
that for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date
of issuance of such Designated Preferred Stock or the declaration of such
excess dividends on Refunding Capital Stock, after giving effect to such
issuance or declaration on a pro forma basis, the Company and its Restricted
Subsidiaries would have had a Fixed Charge Coverage Ratio of at least 2.00
to 1.00;
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(vii) Investments in Unrestricted Subsidiaries having an aggregate fair
market value, taken together with all other Investments made pursuant to
this clause (vii) that are at that time outstanding, not to exceed $10.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value);
(viii) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(ix) the payment of dividends on the Company's Common Stock, following
the first public offering of the Company's Common Stock after the Issuance
Date, of up to 6.0% per annum of the net proceeds received by the Company in
such public offering, other than public offerings with respect to the
Company's Common Stock registered on Form S-8;
(x) Investments in Unrestricted Subsidiaries that are made with Excluded
Contributions;
(xi) the payment of dividends on Disqualified Stock which is issued in
accordance with the covenant described under "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock;"
(xii) other Restricted Payments in an aggregate amount not to exceed
$10.0 million; PROVIDED, HOWEVER, that at the time of, and after giving
effect to, any Restricted Payment permitted under clauses (iv), (v), (vi),
(vii), (viii), (ix), (xi), and (xii), no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof; and
PROVIDED FURTHER that for purposes of determining the aggregate amount
expended for Restricted Payments in accordance with clause (c) of the
immediately preceding paragraph, only the amounts expended under clauses
(i), (ii) (with respect to the payment of dividends on Refunding Capital
Stock pursuant to clause (b) thereof), (v) (only to the extent that amounts
paid pursuant to such clause are greater than amounts that would have been
paid pursuant to such clause if $2.5 million and $5.0 million were
substituted in such clause for $5.0 million and $10.0 million,
respectively), (vi) and (ix) shall be included; and
(xiii) the repurchase, redemption or other acquisition or retirement for
value of preferred stock or Subordinated Indebtedness of the Company or any
of its Restricted Subsidiaries pursuant to a "change of control" or "asset
sale" covenant set forth in the indenture or certificate of designations
pursuant to which the same is issued; PROVIDED that such repurchase,
redemption or other acquisition or retirement for value shall only be
permitted if all of the terms and conditions in such provisions have been
complied with and such repurchases, redemptions or other acquisitions or
retirements for value are made in accordance with such indenture or
certificate of designations pursuant to which the same is issued and
PROVIDED FURTHER that the Company has repurchased all Notes required to be
repurchased by the Company pursuant to the terms and conditions described
under the caption "--Repurchase at the Option of Holders--Change of Control"
or "--Repurchase at the Option of Holders--Asset Sales," as the case may be,
prior to the repurchase, redemption or other acquisition or retirement for
value of such preferred stock or Subordinated Indebtedness pursuant to the
"change of control" or "asset sale" covenant included in such indenture of
certificate of designations.
As of the Issuance Date, all of the Company's Subsidiaries will be
Restricted Subsidiaries. In the future, the Company will not permit any
Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the
second to last sentence of the definition of "Unrestricted Subsidiary." For
purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary,
all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid) in the Subsidiary so designated will be deemed to
be Restricted Payments in an amount determined as set forth in the last sentence
of the definition of "Investments." Such designation will only be permitted if a
Restricted Payment in such amount would be permitted at such time (whether
pursuant to the first paragraph of this covenant or under clause (vii), (x) or
(xii)) and if such Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Unrestricted Subsidiaries will not be subject to any of the
restrictive covenants set forth in the Indenture.
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LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED
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" and
collectively, an "INCURRENCE") any Indebtedness (including Acquired
Indebtedness) and that the Company will not issue any shares of Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock if the
Fixed Charge Coverage Ratio for the Company's and its Restricted Subsidiaries'
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.00 to 1.00, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, and the application of proceeds therefrom had occurred at the beginning of
such four-quarter period.
The foregoing limitations will not apply to:
(a) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under Credit Facilities and the issuance and creation of
letters of credit and banker's acceptances thereunder (with letters of
credit and banker's acceptances being deemed to have a principal amount
equal to the face amount thereof) up to an aggregate principal amount of
$100.0 million outstanding at any one time;
(b) the incurrence by the Company of Indebtedness represented by the
Notes issued on the Issuance Date;
(c) the Existing Indebtedness (other than Indebtedness described in
clauses (a) and (b));
(d) Indebtedness (including Capitalized Lease Obligations) incurred by
the Company or any of its Restricted Subsidiaries, to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount which, when aggregated
with the principal amount of all other Indebtedness then outstanding and
incurred pursuant to this clause (d) and including all Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (d), does not exceed the greater of (x)
$15.0 million or (y) 10.0% of Total Assets;
(e) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; PROVIDED, HOWEVER, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(f) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; PROVIDED, HOWEVER, that (i) such Indebtedness is
not reflected as a dollar amount on the balance sheet of the Company or any
Restricted Subsidiary (contingent obligations referred to in a footnote to
financial statements will not be deemed to be reflected on such balance
sheet for purposes of this clause (i)) and (ii) the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds
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including noncash proceeds (the fair market value of such noncash proceeds
being measured at the time received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(g) Indebtedness of the Company to a Restricted Subsidiary; PROVIDED
that any such Indebtedness is made pursuant to an intercompany note and is
subordinated in right of payment to the Notes; PROVIDED FURTHER that any
subsequent issuance or transfer of any Capital Stock or any other event
which will result in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case to be an incurrence of such Indebtedness;
(h) shares of preferred stock of a Restricted Subsidiary issued to the
Company or another Restricted Subsidiary; PROVIDED that any subsequent
issuance or transfer of any Capital Stock or any other event which results
in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any other subsequent transfer of any such shares of preferred stock (except
to the Company or another Restricted Subsidiary) shall be deemed, in each
case, to be an issuance of shares of preferred stock;
(i) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary; PROVIDED that (i) any such Indebtedness is made
pursuant to an intercompany note and (ii) if a Guarantor incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of such
Guarantor; PROVIDED FURTHER that any subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case, to be an incurrence of such Indebtedness;
(j) Hedging Obligations that are incurred in the ordinary course of
business (1) for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of the Indenture
to be outstanding or (2) for the purpose of fixing or hedging currency
exchange rate risk with respect to any currency exchanges;
(k) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(l) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
(m) Indebtedness and Disqualified Stock of the Company and Indebtedness
and preferred stock of any of its Restricted Subsidiaries not otherwise
permitted hereunder in an aggregate principal amount or liquidation
preference, which when aggregated with the principal amount and liquidation
preference of all other Indebtedness and Disqualified Stock then outstanding
and incurred pursuant to this clause (m), does not exceed $20.0 million at
any one time outstanding; PROVIDED, HOWEVER, that Indebtedness of Foreign
Subsidiaries, which when aggregated with the principal amount of all other
Indebtedness of Foreign Subsidiaries then outstanding and incurred pursuant
to this clause (m), does not exceed $15.0 million (or the equivalent thereof
in any other currency) at any one time outstanding (it being understood that
any Indebtedness incurred pursuant to this clause (m) shall cease to be
deemed incurred or outstanding for purposes of this clause (m) but shall be
deemed to be incurred for purposes of the first paragraph of this covenant
from and after the first date on which the Company could have incurred such
Indebtedness under the first paragraph of this covenant without reliance on
this clause (m));
(n) (i) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the incurrence
of such Indebtedness incurred by such Restricted Subsidiary is permitted
under the terms of the Indenture and (ii) any Excluded Guarantee (as defined
below under "--Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries") of a Restricted Subsidiary;
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(o) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness which serves to refund, refinance or restructure any
Indebtedness incurred as permitted under the first paragraph of this
covenant and clauses (b) and (c) above, this clause (o) and clause (p) below
or any Indebtedness issued to so refund, refinance or restructure such
Indebtedness including additional Indebtedness incurred to pay premiums and
fees in connection therewith (the "REFINANCING INDEBTEDNESS") prior to its
respective maturity; PROVIDED, HOWEVER, that such Refinancing Indebtedness
(i) has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred which is not less than the remaining Weighted
Average Life to Maturity of Indebtedness being refunded or refinanced, (ii)
to the extent such Refinancing Indebtedness refinances Indebtedness
subordinated or PARI PASSU to the Notes, such Refinancing Indebtedness is
subordinated or PARI PASSU to the Notes at least to the same extent as the
Indebtedness being refinanced or refunded and (iii) shall not include (x)
Indebtedness of a Subsidiary that refinances Indebtedness of the Company or
(y) Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary;
(p) Indebtedness or Disqualified Stock of Persons that are acquired by
the Company or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of the Indenture;
PROVIDED that such Indebtedness or Disqualified Stock is not incurred in
contemplation of such acquisition or merger; and PROVIDED FURTHER that after
giving effect to such acquisition or merger, either (i) the Company would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first sentence of this
covenant or (ii) the Fixed Charge Coverage Ratio is greater than immediately
prior to such acquisition or merger; and
(q) Indebtedness incurred in respect of the Indemnity Agreement.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
permitted Indebtedness described in clauses (a) through (p) 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 Indebtedness in any manner
that complies with this covenant and such item of Indebtedness will be treated
as having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof, except as otherwise set forth in clause (m) above.
Accrual of interest, the accretion of accreted value and the payment of interest
in the form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this covenant.
LIMITATION ON LIENS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur or suffer to
exist any Lien (other than Permitted Liens) upon any of its property or assets
(including Capital Stock), whether owned on the date of the Indenture or
thereafter acquired, securing any Indebtedness, unless contemporaneously
therewith effective provision is made to secure the Indebtedness due under the
Indenture and the Notes or, in respect of Liens on any Restricted Subsidiary's
property or assets, any Guarantee of such Restricted Subsidiary, equally and
ratably with (or prior to in the case of Liens with respect to Subordinated
Indebtedness) the Indebtedness secured by such Lien for so long as such
Indebtedness is so secured.
MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The
Indenture provides that the Company may not consolidate or merge with or into or
wind up into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to any Person
unless (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made is a corporation organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any territory
thereof (the Company or such Person, as the case may be, being herein called the
"SUCCESSOR COMPANY"); (ii) the Successor Company (if other than the Company)
expressly assumes all the obligations of the Company under the Indenture and the
Notes pursuant to a
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supplemental indenture or other documents or instruments in form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; (iv) immediately after giving pro forma effect to
such transaction, as if such transaction had occurred at the beginning of the
applicable four quarter period, (A) the Successor Company would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first sentence of the covenant described
under "--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock" or (B) the Fixed Charge Coverage Ratio for the Successor Company and its
Restricted Subsidiaries would be greater than such Ratio for the Company and its
Restricted Subsidiaries immediately prior to such transaction; (v) each
Guarantor, if any, unless it is the other party to the transactions described
above, shall have by supplemental indenture confirmed that its Guarantee shall
apply to such Person's obligations under the Indenture and the Notes; and (vi)
the Company shall have delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with the Indenture. The Successor
Company will succeed to, and be substituted for, the Company under the Indenture
and the Notes. Notwithstanding the foregoing clause (iv), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (b) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another State of the United States so long as the amount of Indebtedness of the
Company and its Restricted Subsidiaries is not increased thereby.
Each Guarantor, if any, shall not, and the Company will not permit a
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless (i) such
Guarantor is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made is a corporation organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory thereof
(such Guarantor or such Person, as the case may be, being herein called the
"SUCCESSOR GUARANTOR"); (ii) the Successor Guarantor (if other than such
Guarantor) expressly assumes all the obligations of such Guarantor under the
Indenture and such Guarantor's Guarantee pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default exists;
and (iv) the Guarantor shall have delivered or caused to be delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture. The Successor Guarantor will succeed to, and be
substituted for, such Guarantor under the Indenture and such Guarantor's
Guarantee.
TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate of the Company (each of the
foregoing, an "AFFILIATE TRANSACTION") involving aggregate consideration in
excess of $5.0 million, unless (a) such Affiliate Transaction is on terms that
are not materially less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (b)
the Company delivers to the Trustee with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, a resolution adopted by the majority of the Board of
Directors of the Company approving such Affiliate Transaction and set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (a) above.
The foregoing provisions will not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments permitted by the provisions of
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the Indenture described above under the covenant "--Limitation on Restricted
Payments"; (iii) the payment of customary annual management, consulting and
advisory fees and related expenses to KKR and its Affiliates; (iv) the payment
of reasonable and customary fees paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary; (v) payments by the Company or any of its Restricted Subsidiaries to
KKR and its Affiliates made for any financial advisory, financing, underwriting
or placement services or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or divestitures
which payments are approved by a majority of the Board of Directors of the
Company in good faith; (vi) transactions in which the Company or any of its
Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter
from an Independent Financial Advisor stating that such transaction is fair to
the Company or such Restricted Subsidiary from a financial point of view or
meets the requirements of clause (a) of the preceding paragraph; (vii) payments
or loans to employees or consultants which are approved by a majority of the
Board of Directors of the Company in good faith; (viii) any agreement as in
effect as of the Issuance Date or any amendment thereto (so long as any such
amendment is not disadvantageous to the holders of the Notes in any material
respect) or any transaction contemplated thereby; (ix) the existence of, or the
performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which it
is a party as of the Issuance Date and any similar agreements which it may enter
into thereafter; PROVIDED, HOWEVER, that the existence of, or the performance by
the Company or any of its Restricted Subsidiaries of obligations under any
future amendment to any such existing agreement or under any similar agreement
entered into after the Issuance Date shall only be permitted by this clause (ix)
to the extent that the terms of any such amendment or new agreement are not
otherwise disadvantageous to the Holders of the Notes in any material respect;
(x) the Transactions and the payment of all fees and expenses related to the
Transactions; (xi) transactions with customers, clients, suppliers, or
purchasers or sellers of goods or services, in each case in the ordinary course
of business and otherwise in compliance with the terms of the Indenture which
are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the Board of Directors of the Company or the senior management
thereof, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party; (xii) sales of accounts
receivable, or participations therein, in connection with any Receivables
Facility; and (xiii) the issuance of Equity Interests (other than Disqualified
Stock) of the Company to any Permitted Holder and their Related Parties.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:
(a) (i) 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 (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the Issuance
Date, including pursuant to the Senior Credit Facility and its
related documentation;
(2) the Indenture, the Notes and the provisions of the Company's
certificate of incorporation relating to the preferred stock of the
Company to be issued on the Issuance Date and any
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certificate of designations or revision to the certificate of
incorporation relating to preferred stock issued in exchange for, or
as a refinancing, refunding or replacement of, the preferred stock
issued on the Issuance Date;
(3) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature discussed
in clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the Company
or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), 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;
(6) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such
Subsidiary;
(7) secured Indebtedness otherwise permitted to be incurred pursuant to
the covenants described under "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock" and "--Liens" that
limit the right of the debtor to dispose of the assets securing such
Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(9) other Indebtedness or preferred stock of Restricted Subsidiaries
permitted to be incurred subsequent to the Issuance Date pursuant to
the provisions of the covenant described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock;"
(10) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) customary provisions contained in leases and other agreements
entered into in the ordinary course of business;
(12) restrictions created in connection with any Receivables Facility
that, in the good faith determination of the Board of Directors of
the Company, are necessary or advisable to effect such Receivables
Facility; or
(13) any encumbrances or restrictions of the type referred to in clauses
(a), (b) and (c) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (1) through (12) above, PROVIDED
that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are,
in the good faith judgment of the Company's Board of Directors, no
more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing.
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. (a)
The Indenture provides that the Company will not permit any Restricted
Subsidiary to guarantee the payment of any Indebtedness of the Company or any
Indebtedness of any other Restricted Subsidiary unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a Guarantee
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of payment of the Notes by such Restricted Subsidiary except that if such
Indebtedness is by its express terms subordinated in right of payment to the
Notes, any such guarantee of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated in right of payment to such Restricted
Subsidiary's Guarantee with respect to the Notes substantially to the same
extent as such Indebtedness is subordinated to the Notes; (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Guarantee; and
(iii) such Restricted Subsidiary shall deliver to the Trustee an opinion of
counsel to the effect that (A) such Guarantee of the Notes has been duly
executed and authorized and (B) such Guarantee of the Notes constitutes a valid,
binding and enforceable obligation of such Restricted Subsidiary, except insofar
as enforcement thereof may be limited by bankruptcy, insolvency or similar laws
(including, without limitation, all laws relating to fraudulent transfers) and
except insofar as enforcement thereof is subject to general principles of
equity; PROVIDED that this paragraph (a) shall not be applicable to any
guarantee of any Restricted Subsidiary (x) that (A) existed at the time such
Person became a Restricted Subsidiary of the Company and (B) was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary of the Company or (y) that guarantees the payment of Obligations of
the Company or any Restricted Subsidiary under the Senior Credit Facility or any
other Credit Facility (other than in respect of Subordinated Indebtedness) and
any refunding, refinancing or replacement thereof, in whole or in part, PROVIDED
that such refunding, refinancing or replacement thereof constitutes Indebtedness
that is not Subordinated Indebtedness and is not incurred pursuant to a
registered offering of securities under the Securities Act or a private
placement of securities (including under Rule 144A) pursuant to an exemption
from the registration requirements of the Securities Act, which private
placement provides for registration rights under the Securities Act (any
guarantee excluded by operation of this clause (y) being an "EXCLUDED
GUARANTEE").
(b) Notwithstanding the foregoing and the other provisions of the Indenture,
any Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms
that it shall be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
guarantee which resulted in the creation of such Guarantee, except a discharge
or release by or as a result of payment under such guarantee.
REPORTS AND OTHER INFORMATION. The Indenture provides that, commencing with
the period ended September 30, 1998, whether or not the Company is subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall deliver to the Trustee and to each Holder and to prospective
purchasers of Notes identified to the Company by the Initial Purchasers, within
15 days after it is or would have been required to file such with the
Commission, annual and quarterly financial statements substantially equivalent
to financial statements that would have been included in reports filed with the
Commission, if the Company were subject to the requirements of Section 13 or
15(d) of the Exchange Act, including, with respect to annual information only, a
report thereon by the Company's certified independent public accountants as such
would be required in such reports to the Commission, and, in each case, together
with a management's discussion and analysis of financial condition and results
of operations which would be so required. Notwithstanding the foregoing, such
requirements shall be deemed satisfied prior to the Exchange Offer or the
effectiveness of the Shelf Registration Statement by the filing with the
Commission of the Exchange Offer Registration Statement and/or Shelf
Registration Statement, and any amendments thereto, with such financial
information that satisfies Regulation S-X of the Securities Act.
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EVENTS OF DEFAULT AND REMEDIES
The following events constitute Events of Default under the Indenture:
(i) default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal of, or premium, if any, on the
Notes;
(ii) default for 30 days or more in the payment when due of interest on,
or Liquidated Damages with respect to, the Notes;
(iii) failure by the Company or any Guarantor for 30 days after receipt
of written notice given by the Trustee or the holders of at least 30.0% in
principal amount of the Notes then outstanding to comply with any of its
other agreements in the Indenture or the Notes;
(iv) default under any mortgage, indenture or instrument under which
there is issued or by which there is secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries or
the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries (other than Indebtedness owed to the Company or a Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is created
after the Issuance Date, if both (A) such default either (1) results from
the failure to pay any such Indebtedness at its stated final maturity (after
giving effect to any applicable grace periods) or (2) relates to an
obligation other than the obligation to pay principal of any such
Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior
to its stated maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in default
for failure to pay principal at stated final maturity (after giving effect
to any applicable grace periods), or the maturity of which has been so
accelerated, aggregate $10.0 million or more at any one time outstanding;
(v) failure by the Company or any Significant Subsidiary or group of
Restricted Subsidiaries that, taken together (as of the latest audited
consolidated financial statements for the Company and its Subsidiaries)
would constitute a Significant Subsidiary to pay final judgments aggregating
in excess of $10.0 million (net of any amounts with respect to which a
reputable and creditworthy insurance company has acknowledged liability in
writing), which judgments are not paid, discharged or stayed for a period of
60 days;
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries; or
(vii) any Guarantee shall for any reason cease to be in full force and
effect or be declared null and void or any responsible officer of the
Company or any Guarantor denies that it has any further liability under any
Guarantee or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture).
If any Event of Default (other than of a type specified in clause (vi)
above) occurs and is continuing under the Indenture, the Trustee or the Holders
of at least 30.0% in principal amount of the then outstanding Notes may declare
the principal, premium, if any, interest and any other monetary obligations on
all the then outstanding Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising under
clause (vi) of the first paragraph of this section, all outstanding Notes will
become due and payable without further action. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Indenture provides that the Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal, premium, if any, or interest)
if it determines that withholding notice is in their
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interest. In addition, the Trustee shall have no obligation to accelerate the
Notes, if in the best judgment of the Trustee, acceleration is not in the best
interests of the holders.
The Indenture provides that the Holders of a majority in aggregate principal
amount of the then outstanding Notes issued thereunder by notice to the Trustee
may on behalf of the Holders of all of such 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, premium, if any, or
the principal of any such Note held by a non-consenting Holder. In the event of
any Event of Default specified in clause (iv) above, such Event of Default and
all consequences thereof (including, without limitation, any acceleration or
resulting payment default) shall be annulled, waived and rescinded,
automatically and without any action by the Trustee or the Holders of the Notes,
if within 20 days after such Event of Default arose (x) the Indebtedness or
guarantee that is the basis for such Event of Default has been discharged, or
(y) the holders thereof have rescinded or waive the acceleration, notice or
action (as the case may be) giving rise to such Event of Default, or (z) if the
default that is the basis for such Event of Default has been cured.
The Indenture provides that the Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required, within five Business Days, upon becoming aware of any
Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Company or any Guarantor, to deliver
to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee incorporator or stockholder of the Company or
any Guarantor, shall have any liability for any obligations of the Company or
the Guarantors under the Notes, the Guarantees or the Indenture or for any claim
based on, in respect of, or by reason of such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for assistance 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 obligations of the Company and the Guarantors, if any, under the
Indenture will terminate (other than certain obligations) and will be released
upon payment in full of all of the Notes. The Company may, at its option and at
any time, elect to have all of its obligations discharged with respect to the
outstanding Notes and have each Guarantor's obligation discharged with respect
to its Guarantee ("LEGAL DEFEASANCE") and cure all then existing Events of
Default except for (i) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such Notes when such payments are due solely out
of the trust created pursuant to the Indenture, (ii) the Company's obligations
with respect to Notes concerning issuing temporary Notes, registration of such
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 and each Guarantor
released with respect to certain covenants that are described in the Indenture
("COVENANT DEFEASANCE") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment on other indebtedness, 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 with
respect to the Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
due on the outstanding Notes on the stated maturity date or on the
applicable redemption date, as the case may be, of such principal, premium,
if any, or interest on the outstanding Notes;
(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, subject to customary assumptions
and exclusions, (A) the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling or (B)
since the Issuance Date, there has been a change in the applicable U.S.
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel in the United States shall confirm that, subject to
customary assumptions and exclusions, the Holders of the outstanding Notes
will not recognize income, gain or loss for U.S. federal income tax purposes
as a result of such Legal Defeasance and will be subject to U.S. 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, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. 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 with respect to certain Events of Default on the date of such
deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than the Indenture) to which, the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound;
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions 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 under
any applicable U.S. federal or state law, and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion of
counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when (a) either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore
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been deposited in trust and thereafter repaid to the Company) have been
delivered to the Trustee for cancellation; or (ii) all such Notes not
theretofore delivered to such Trustee for cancellation have become due and
payable by reason of the making of a notice of redemption or otherwise or will
become due and payable within one year and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with such Trustee as trust funds
in trust solely for the benefit of the Holders, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient without consideration of any reinvestment of interest, to pay
and discharge the entire indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation for principal, premium, if any, and accrued
interest and Liquidated Damages, if any, to the date of maturity or redemption;
(b) no Default or Event of Default with respect to the Indenture or the Notes
shall have occurred and be continuing on the date of such deposit or shall occur
as a result of such deposit and such deposit will not result in a breach or
violation of, or constitute a default under, any other instrument to which the
Company or any Guarantor is a party or by which the Company or any Guarantor is
bound; (c) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under such Indenture; and (d) the Company has delivered
irrevocable instructions to the Trustee under such Indenture to apply the
deposited money toward the payment of such Notes at maturity or the redemption
date, as the case may be. In addition, the Company must deliver an Officers'
Certificate and an opinion of counsel to the Trustee stating that all conditions
precedent to satisfaction and discharge have been satisfied.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, any
Guarantee and the Notes issued thereunder 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).
The Indenture provides that without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder of the Notes): (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 such Note or alter or waive the provisions
with respect to the redemption of the Notes (other than provisions relating to
the covenants described above under the caption "--Repurchase at the Option of
Holders"), (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of such Notes and a waiver of the payment default that resulted
from such acceleration), or in respect of a covenant or provision contained in
the Indenture or any Guarantee which cannot be amended or modified without the
consent of all Holders, (v) make any Note payable in money other than that
stated in such Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of
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principal of or premium, if any, or interest on the Notes, (vii) make any change
in the foregoing amendment and waiver provisions or (viii) impair the right of
any Holder of the Notes to receive payment of principal of, or interest on such
Holder's Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes.
The Indenture provides that, notwithstanding the foregoing, without the
consent of any Holder of Notes, the Company, any Guarantor (with respect to a
Guarantee or the Indenture to which it is a party) and the Trustee may amend or
supplement the Indenture, any Guarantee or the Notes (i) to cure any ambiguity,
omission, defect or inconsistency, (ii) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (iii) to comply with the covenant
relating to mergers, consolidations and sales of assets, (iv) to provide for the
assumption of the Company's or any Guarantor's obligations to Holders of such
Notes, (v) 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, (vi) to add covenants for the
benefit of the Holders or to surrender any right or power conferred upon the
Company, (vii) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, (viii) to evidence and provide for the acceptance of appointment under the
Indenture by a successor Trustee pursuant to the requirements thereof, or (ix)
to add a Guarantor under the Indenture.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of and 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, or resign.
The Indenture provides that the Holders of a majority in principal amount of
the outstanding Notes issued thereunder 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 person in the conduct of his or her 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 such Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to the Company at
Northwoods Business Center II, 707 Crossroads Court, Vandalia, Ohio 45377,
Attention: Secretary.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, Exchange Notes will be issued in registered,
global form in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof. Exchange Notes initially will be represented by one or more
Exchange Notes in registered, global form without interest coupons
(collectively, the "GLOBAL EXCHANGE NOTES"). The Global Exchange Notes will be
deposited with the Trustee as custodian for DTC in New York, New York, and
registered in the name of DTC or its nominee (a "NOMINEE"), in each case, for
credit to an account of a direct or indirect participant in DTC as described
below.
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The Global Exchange Notes may be transferred, in whole and not in part, only
to another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Exchange Notes may be
exchanged for Exchange Notes in certificated form in certain limited
circumstances. See "--Transfer of Interests in Global Exchange Notes for
Certificated Exchange Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Exchange
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities of its participating organizations (collectively, the
"DIRECT PARTICIPANTS") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Direct Participants. The Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, including the Euroclear System
("EUROCLEAR") and Cedel Bank, societe anonyme ("CEDEL"). Access to DTC's system
is also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"INDIRECT PARTICIPANTS"). DTC may hold securities beneficially owned by other
persons only through the Direct Participants or Indirect Participants and such
other persons' ownership interest and transfer of ownership interest will he
recorded only on the records of the Direct Participant and/or Indirect
Participant, and not on the records maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Exchange Notes, DTC will credit the accounts of the
Direct Participants with portions of the principal amount of the Global Exchange
Notes, and (ii) DTC will maintain records of the ownership interests of such
Direct Participants in the Global Exchange Notes and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global Exchange Notes. Direct Participants and Indirect Participants must
maintain their own records of the ownership interests of, and the transfer of
ownership interests by and between, Indirect Participants and other owners of
beneficial interests in the Global Exchange Notes.
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. All ownership
interests in any Global Exchange Notes, including those of customers' securities
accounts held through Euroclear or CEDEL, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or CEDEL may also be
subject to the procedures and requirements of such systems.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Exchange Note
to such persons. Because DTC can act only on behalf of Direct Participants,
which in turn act on behalf of Indirect Participants and others, the ability of
a person having a beneficial interest in a Global Exchange Note to pledge such
interest to persons or entities that are not Direct Participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by the lack
of physical certificates evidencing such interests.
EXCEPT AS DESCRIBED IN "TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES FOR
CERTIFICATED EXCHANGE NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
EXCHANGE NOTES WILL NOT HAVE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE
CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY
PURPOSE.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes are registered (including Exchange Notes
represented by Global Exchange Notes) as the owners
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thereof for the purpose of receiving payments and for any and all other purposes
whatsoever. Payments in respect of the principal, premium, if any, and interest
on Global Exchange Notes registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee as the registered holder under the
Indenture. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Exchange Notes or for maintaining, supervising
or reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Exchange Note or (ii) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Exchange Notes is to credit the accounts of the relevant Direct Participants
with such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Exchange Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Exchange Notes will be governed by
standing instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee or the Company. Neither the Company nor the
Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Exchange
Notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Exchange Notes for all purposes.
Except for trades involving only Euroclear or CEDEL participants, interests
in the Global Exchange Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and, therefore, transfers between Direct
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in immediately available funds. Transfers between Indirect
Participants (other than Indirect Participants who hold an interest in the
Exchange Notes through Euroclear or CEDEL) who hold an interest through a Direct
Participant will be effected in accordance with the procedures of such Direct
Participant but generally will settle in immediately available funds. Transfers
between and among Indirect Participants who hold interests in the Exchange Notes
through Euroclear and CEDEL will be effected in the ordinary way in accordance
with their respective rules and operating procedures.
Cross-market transfers between Direct Participants in DTC, on the one hand,
and Indirect Participants who hold interests in the Exchange Notes through
Euroclear or CEDEL, on the other hand, will be effected by Euroclear or CEDEL's
respective Nominee through DTC in accordance with DTC's rules on behalf of
Euroclear or CEDEL; HOWEVER, delivery of instructions relating to cross-market
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL, as the case may be, and within their established deadlines (Brussels time
for Euroclear and U.K. time for CEDEL). Indirect Participants who hold interest
in the Exchange Notes through Euroclear and CEDEL may not deliver instructions
directly to Euroclear's or CEDEL's Nominee. Euroclear or CEDEL will, if the
transaction meets its settlement requirements, deliver instructions to its
respective Nominee to deliver or receive interests on Euroclear's or CEDEL's
behalf in the relevant Global Exchange Note in DTC, and make or receive payment
in accordance with normal procedures for same-day fund settlement applicable to
DTC.
Because of time zone differences, the securities account of an Indirect
Participant who holds an interest in the Exchange Notes through Euroclear or
CEDEL purchasing an interest in a Global Exchange Note from a Direct Participant
in DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL Indirect Participant during the European business day
immediately following the settlement date of DTC in New York. Although recorded
in DTC's accounting records as of DTC's settlement date in New York, Euroclear
and CEDEL customers will not have access to the cash amount credited to their
accounts as a result of a sale of an interest in a Global Exchange Note to a DTC
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participant until the European business day for Euroclear or CEDEL immediately
following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Exchange Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default under the
Exchange Notes, DTC reserves the right to exchange Global Exchange Notes
(without the direction of one or more of its Direct Participants) for legended
Exchange Notes in certificated form, and to distribute such certificated forms
of Exchange Notes to its Direct Participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Exchange Notes among Direct
Participants, Euroclear and CEDEL, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Company nor the Trustee will have any responsibility for
the performance by DTC, Euroclear or CEDEL or their respective Direct and
Indirect Participants of their respective obligations under the rules and
procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES FOR CERTIFICATED EXCHANGE NOTES
An entire Global Exchange Note may be exchanged for definitive Exchange
Notes in registered, certificated form without interest coupons ("CERTIFICATED
EXCHANGE NOTES") if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Exchange Notes and the Company
thereupon fails to appoint a successor depositary within 90 days or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Certificated Exchange Notes or (iii) there shall have occurred
and be continuing a Default or an Event of Default with respect to the Exchange
Notes. In any such case, the Company will notify the Trustee in writing that,
upon surrender by the Direct and Indirect Participants of their interest in such
Global Exchange Note, Certificated Exchange Notes will be issued to each person
that such Direct and Indirect Participants and DTC identify as being the
beneficial owner of the related Exchange Notes.
Beneficial interests in Global Exchange Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Exchange Notes upon request to
DTC, by such Direct Participant (for itself or on behalf of an Indirect
Participant), but only upon at least 20 days' prior written notice given to the
Trustee by or on behalf of DTC in accordance with customary DTC procedures.
Certificated Exchange Notes delivered in exchange for any beneficial interest in
any Global Exchange Note will be registered in the names, and issued in any
approved denominations, requested by DTC on behalf of such Direct or Indirect
Participants (in accordance with DTC's customary procedures).
Neither the Company nor the Trustee will be liable for any delay by the
holder of the Global Exchange Notes or the DTC in identifying the beneficial
owners of Exchange Notes, and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of the
Global Exchange Note or DTC for all purposes.
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SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Exchange Notes (including principal, premium, if any,
and interest) be made by wire transfer of immediately available funds to the
accounts specified by the holder of such Global Exchange Note. With respect to
Certificated Exchange Notes, the Company will make all payments of principal,
premium, if any, and interest by wire transfer of immediately available funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address. The
Company expects that secondary trading in the Certificated Exchange Notes will
also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement, the Company agreed to file
the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with the Commission with respect to the Exchange Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer to the Holders of Transfer Restricted Securities (as defined) who are able
to make certain representations the opportunity to exchange their Transfer
Restricted Securities for Exchange Notes in the Exchange Offer. If (i) the
Company is not required to file the Exchange Offer Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of Transfer
Restricted Securities notifies the Company prior to the 20th day following
consummation of the Exchange Offer that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not available for such resales or (C) that it is
a broker-dealer and owns Old Notes acquired directly from the Company or an
affiliate of the Company, the Company will file with the Commission a shelf
registration statement pursuant to Rule 415 under the Securities Act (a "SHELF
REGISTRATION STATEMENT" and, together with the Exchange Offer Registration
Statement, the "REGISTRATION STATEMENTS") to cover resales of the Notes by the
Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Company
will use its reasonable best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each Old
Note until (i) the date on which such Old Note has been exchanged by a person
for an Exchange Note in the Exchange Offer, (ii) the date on which such Old Note
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) the date on which such
Old Note is distributed to the public pursuant to Rule 144 under the Act.
Pursuant to the Registration Rights Agreement, the Company shall make available,
for a period of 90 days after the consummation of the Exchange Offer, a
prospectus meeting the requirements of the Securities Act to any broker-dealer
for use in connection with any resale of the Exchange Notes.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 135
days after the Closing Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 240 days after the Issuance Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, Exchange Notes in exchange for all Old
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement, the Company will use its best reasonable
efforts to file the Shelf Registration Statement with the Commission on or prior
to 75 days after such filing obligation arises and to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior to
60 days after such filings. If (a) the
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Company fails to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"EFFECTIVENESS TARGET DATE"), (c) the Company fails to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"REGISTRATION DEFAULT"), then the Company will pay liquidated damages to each
Holder of Notes ("Liquidated Damages"). Liquidated Damages will accrue, at an
annual rate of 0.25% of the aggregate principal amount of the Old Notes, on the
date of such Registration Default, payable in cash semi-annually in arrears on
each interest payment date, commencing on the date of such Registration Default.
All accrued liquidated damages will be paid by the Company on each interest
payment date until cured or waived to the global Old Note Holder by wire
transfer of immediately available funds and to Holders of certificated Old Notes
by wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
The Registration Rights Agreement provides that the Liquidated Damages
specified above will be the exclusive remedy available to Holders of Transfer
Restricted Securities for any failure by the Company to comply with the
registration requirements of the Registration Rights Agreement.
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 of the provisions of the Registration Rights Agreement.
GOVERNING LAW
The Indenture, the Notes and the Guarantees, if any, will be, subject to
certain exceptions, governed by and construed in accordance with the internal
laws of the State of New York.
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. For
purposes of the Indenture, unless otherwise specifically indicated, the term
"consolidated" with respect to any Person refers to such Person consolidated
with its Restricted Subsidiaries, and excludes from such consolidation any
Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate
of such Person.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
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"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10.0% or more of the voting securities of a Person
shall be deemed to be control.
"ASSET SALE" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the Company or
any Restricted Subsidiary (each referred to in this definition as a
"DISPOSITION") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than: (a) a disposition of Cash Equivalents
or Investment Grade Securities or obsolete or worn equipment in the ordinary
course of business or inventory or goods held for sale in the ordinary course of
business; (b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described above under
"--Certain Covenants--Merger, Consolidation or Sale of All or Substantially All
Assets" or any disposition that constitutes a Change of Control pursuant to the
Indenture; (c) the making of any Restricted Payment or Permitted Investment that
is permitted to be made, and is made, pursuant to the first paragraph of the
covenant described above under "--Certain Covenants--Limitation on Restricted
Payments;" (d) any disposition of assets with an aggregate fair market value of
less than $1.0 million; (e) any disposition of property or assets by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly-Owned Restricted Subsidiary; (f) any exchange of like
property pursuant to Section 1031 of the Internal Revenue Code of 1986, as
amended, for use in a Similar Business; (g) any financing transaction with
respect to property built or acquired by the Company or any Restricted
Subsidiary after the Issuance Date including, without limitation,
sale-leasebacks and assets securitizations; (h) foreclosures on assets; (i)
sales of accounts receivable, or participations therein, in connection with any
Receivables Facility; and (j) any sale of Equity Interests in, or Indebtedness
or other securities of, an Unrestricted Subsidiary.
"CAPITALIZED 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 and reflected as a liability on
a balance sheet (excluding the footnotes thereto) 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) U.S. dollars, (ii) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof, (iii) certificates of deposit, time deposits 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 commercial bank having capital
and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95.0% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
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from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, 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; or
(ii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than the Permitted Holders and
their Related Parties, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision) of 50.0% or more of the total
voting power of the Voting Stock of the Company.
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 (determined on a consolidated
basis). 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.
"CONSOLIDATED" with respect to any Person refers to such Person consolidated
with its Restricted Subsidiaries, and excludes from such consolidation any
Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate
of such Person.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense of such Person and its Restricted Subsidiaries for such period on a
consolidated basis and otherwise determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period, the sum,
without duplication, of: (a) consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Earnings (including amortization of
original issue discount, non-cash interest payments, the interest component of
Capitalized Lease Obligations, and net payments and receipts (if any) pursuant
to Hedging Obligations to the extent included in Consolidated Interest Expense,
excluding amortization of deferred financing fees) and (b) consolidated
capitalized interest of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued; PROVIDED, HOWEVER, that Receivables Fees shall
be deemed not to constitute Consolidated Interest Expense.
"CONSOLIDATED NET EARNINGS" means, with respect to any Person for any
period, the aggregate of the Net Earnings, of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, and otherwise determined
in accordance with GAAP; PROVIDED, HOWEVER, that (i) any net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto)
shall be excluded, (ii) the Net Earnings for such period shall not include the
cumulative effect of a change in accounting principles during such period, (iii)
any net after-tax earnings (loss) from discontinued operations and any net
after-tax gains or losses on disposal of discontinued operations shall be
excluded, (iv) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to asset dispositions other than in the ordinary
course of business (as determined in good faith by the Board of Directors of the
Company) shall be excluded, (v) the Net Earnings for such period of any Person
that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted
for by the equity method of accounting, shall be included only to the extent of
the amount of
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dividends or distributions or other payments paid in cash (or to the extent
converted into cash) to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof in respect of such period, (vi) the Net Earnings of any
Person acquired in a pooling of interests transaction shall not be included for
any period prior to the date of such acquisition and (vii) the Net Earnings for
such period 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 its Net Earnings is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by the 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, unless
such restriction with respect to the payment of dividends or in similar
distributions has been legally waived.
"CONTINGENT OBLIGATIONS" means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ("PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof.
"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other institutional lenders or
indentures 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), letters of credit or other long-term Indebtedness, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DESIGNATED NONCASH CONSIDERATION" means the fair market value of noncash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of the Company, less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of such Designated Noncash
Consideration.
"DESIGNATED PREFERRED STOCK" means preferred stock of the Company (other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company, on the issuance date thereof, the
cash proceeds of which are excluded from the calculation set forth in paragraph
(c) of the covenant described under "--Certain Covenants-- Limitation on
Restricted Payments."
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, in each case prior to the date 91 days
after the earlier of the maturity date of the Notes or the date the Notes are no
longer outstanding; PROVIDED, HOWEVER that if such Capital Stock is issued to
any employee
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or to any plan for the benefit of employees of the Company or its Subsidiaries
or by any such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Company or its Subsidiaries in order to satisfy applicable statutory or
regulatory obligations, PROVIDED, FURTHER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof (or of any
security into which it is convertible or for which it is putable or
exchangeable) have the right to require the issuer to repurchase such Capital
Stock (or such security into which it is convertible or for which it is putable
or exchangeable) upon the occurrence of any of the events constituting an asset
sale or a change of control shall not constitute Disqualified Stock if such
Capital Stock (and all such securities into which it is convertible or for which
it is putable or exchangeable) provides that the issuer thereof will not
repurchase or redeem any such Capital Stock (or any such security into which it
is convertible or for which it is putable or exchangeable) pursuant to such
provisions prior to compliance by the Company with the provisions of the
Indenture described under the caption "Repurchase at the Option of
Holders--Change of Control" or "Repurchase at the Option of Holders--Asset
Sales," as the case may be.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Earnings of such Person for such period plus (a) provision for taxes based
on income or profits of such Person for such period deducted in computing
Consolidated Net Earnings, plus (b) Consolidated Interest Expense of such Person
for such period and any Receivables Fees paid by such Person or any of its
Restricted Subsidiaries during such period, in each case to the extent the same
was deducted in calculating such Consolidated Net Earnings, plus (c)
Consolidated Depreciation and Amortization Expense of such Person for such
period to the extent such depreciation and amortization were deducted in
computing Consolidated Net Earnings, plus (d) any expenses or charges related to
any Equity Offering, Permitted Investment or Indebtedness permitted to be
incurred by the Indenture (including such expenses or charges related to the
Transactions) or any costs incurred in the cancellation of stock options and, in
each case, deducted in such period in computing Consolidated Net Earnings, plus
(e) the amount of any restructuring charge deducted in such period in computing
Consolidated Net Earnings, plus (f) without duplication, any other non-cash
charges reducing Consolidated Net Earnings for such period (excluding any such
charge which requires an accrual of a cash reserve for anticipated cash charges
for any future period), plus (g) the amount of any minority interest expense
deducted in calculating Consolidated Net Earnings, less, without duplication (h)
non-cash items increasing Consolidated Net Earnings of such Person for such
period (excluding any items which represent the reversal of any accrual of, or
cash reserve for, anticipated cash charges in any prior period).
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any public or private sale of common stock or
preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"EXCLUDED CONTRIBUTIONS" means the net cash proceeds received by the
Company after the closing of the Transactions from (a) contributions to its
equity capital other than contributions from the issuance of Disqualified Stock
and (b) the sale (other than to a Subsidiary or to any Company or Subsidiary
management equity plan or stock option plan or any other management or employee
benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of
the Company, in each case designated as Excluded Contributions pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company on the date such capital
contributions are made or the date such Equity Interests are sold, as the case
may be, the cash proceeds of which are excluded from the calculation set forth
in paragraph (c) of the "Limitation on Restricted Payments" covenant.
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"EXISTING INDEBTEDNESS" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issuance Date, plus interest accruing thereon,
after application of the net proceeds of the sale of the Notes as described in
this Prospectus.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
or issues or redeems Disqualified Stock or preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of Disqualified Stock or preferred stock, as if the same had occurred
at the beginning of the applicable four-quarter period. For purposes of making
the computation referred to above, Investments, acquisitions, dispositions,
mergers, consolidations and discontinued operations (as determined in accordance
with GAAP) that have been made by the Company or any of its Restricted
Subsidiaries during the four-quarter reference period or subsequent to such
reference period and on or prior to or simultaneously with the Calculation Date
shall be calculated on a pro forma basis assuming that all such Investments,
acquisitions, dispositions, discontinued operations, mergers and consolidations
(and the reduction of any associated fixed charge obligations and the change in
EBITDA resulting therefrom) had occurred on the first day of the four-quarter
reference period. If since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Investment, acquisition, disposition, discontinued operation,
merger or consolidation that would have required adjustment pursuant to this
definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect thereto for such period as if such Investment, acquisition,
disposition, discontinued operation, merger or consolidation had occurred at the
beginning of the applicable four-quarter period. For purposes of this
definition, whenever pro forma effect is to be given to a transaction, the pro
forma calculations shall be made in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate effect on the Calculation Date had been the
applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness). Interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Company to be the rate
of interest implicit in such Capitalized Lease Obligation in accordance with
GAAP. For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Company may designate.
"FIXED CHARGES" means, with respect to any Person for any period, the sum
of (a) Consolidated Interest Expense of such Person for such period and (b) all
cash dividend payments (excluding items eliminated in consolidation) on any
series of Disqualified Stock of such Person.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary not organized or
existing under the laws of the United States, any State thereof, the District of
Columbia, or any territory thereof.
"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 Issuance Date.
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"GOVERNMENT SECURITIES" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
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 Government Securities
or a specific payment of principal of or interest on any such Government
Securities 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 Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"GUARANTEE" means any guarantee of the obligations of the Company under the
Indenture and the Notes by any Person in accordance with the provisions of the
Indenture. When used as a verb, "Guarantee" shall have a corresponding meaning.
No Guarantees will be issued in connection with the initial offering and sale of
the Notes.
"GUARANTOR" means any Person that incurs a Guarantee; PROVIDED that upon
the release and discharge of such Person from its Guarantee in accordance with
the Indenture, such Person shall cease to be a Guarantor. No Guarantees will be
issued in connection with the initial offering and sale of the Notes.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"HOLDER" means a holder of the Notes.
"INDEBTEDNESS" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers' acceptances (or, without double counting, reimbursement
agreements in respect thereof), (iii) representing the balance deferred and
unpaid of the purchase price of any property (including Capitalized Lease
Obligations), except any such balance that constitutes a trade payable or
similar obligation to a trade creditor, in each case accrued in the ordinary
course of business or (iv) representing any Hedging Obligations, if and to the
extent of any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) that would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with
GAAP, (b) to the extent not otherwise included, any obligation by such Person to
be liable for, or to pay, as obligor, guarantor or otherwise, on the
Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); PROVIDED, HOWEVER, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness and
obligations under or in respect of Receivables Facilities shall not be deemed to
constitute Indebtedness of a Person.
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"INDEMNITY AGREEMENT" means the agreement to be entered into between the
Company and Evenflo & Spalding Holdings Corporation pursuant to which each party
will indemnify the other for all losses arising from the other's business prior
to the Transactions.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the reasonable judgment of the
Company's Board of Directors, qualified to perform the task for which it has
been engaged.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly and
fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit, advances to customers, commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities issued by any other Person and investments that are required by GAAP
to be classified on the balance sheet (excluding the footnotes thereto) of the
Company in the same manner as the other investments included in this definition
to the extent such transactions involve the transfer of cash or other property.
For purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "--Certain Covenants--Limitation on Restricted Payments," (i)
"Investments" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of a
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"ISSUANCE DATE" means the closing date for the sale and original issuance
of the Notes under the Indenture.
"KKR" means Kohlberg Kravis Roberts & Co. L.P.
"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);
provided that in no event shall an operating lease be deemed to constitute a
Lien.
"MANAGEMENT GROUP" means the group consisting of the Officers of the
Company.
"MOODY'S" means Moody's Investors Service, Inc.
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"NET EARNINGS" means, with respect to any Person, the net earnings (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale and the sale or disposition of such Designated
Noncash Consideration (including, without limitation, legal, accounting and
investment banking fees, and brokerage and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than required by clause (i) of the second paragraph
of "--Repurchase at the Option of Holders--Asset Sales") to be paid as a result
of such transaction and any deduction of appropriate amounts to be provided by
the Company as a reserve in accordance with GAAP against any liabilities
associated with the asset disposed of in such transaction and retained by the
Company after such sale or other disposition thereof, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities and guarantees of payment of such principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"OFFICER" means the Chairman of the Board, the President, any Executive
Vice President, Senior Vice President or Vice President, the Treasurer, the
Controller or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company that meets the requirements set forth in the
Indenture.
"PERMITTED HOLDERS" means KKR and any of its Affiliates and the Management
Group.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person that is engaged in a Similar Business if
as a result of such Investment (i) such Person becomes a Restricted Subsidiary
or (ii) such Person, in one transaction or a series of related transactions, 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; (d) any Investment in securities or other assets not
constituting cash or Cash Equivalents and received in connection with an Asset
Sale made pursuant to the provisions of "--Repurchase at the Option of
Holders--Asset Sales" or any other disposition of assets not constituting an
Asset Sale; (e) any Investment existing on the Issuance Date; (f) advances to
employees not in excess of $5.0 million outstanding at any one time, in the
aggregate; (g) any Investment acquired by the Company or any of its Restricted
Subsidiaries (i) in exchange for any other Investment or accounts receivable
held by the Company or any such Restricted Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or accounts receivable or (ii) as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries with respect to
any secured Investment or other transfer of title with respect to any secured
Investment in default; (h) Hedging Obligations permitted under clause (j) of the
"Limitation of Incurrence of Indebtedness and Issuance of Disqualified Stock"
covenant; (i) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case incurred in the ordinary
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course of business; (j) any Investment in a Similar Business (other than an
Investment in an Unrestricted Subsidiary) having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (j) that
are at that time outstanding, not to exceed the greater of (x) $25.0 million or
(y) 10.0% of Total Assets at the time of such Investment (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value); (k) Investments the payment for which
consists of Equity Interests of the Company (exclusive of Disqualified Stock);
PROVIDED, HOWEVER, that such Equity Interests will not increase the amount
available for Restricted Payments under clause (c) of the "Limitation on
Restricted Payments" covenant; (l) additional Investments having an aggregate
fair market value, taken together with all other Investments made pursuant to
this clause (l) that are at that time outstanding, not to exceed the greater of
(x) $15.0 million or (y) 5.0% of Total Assets at the time of such Investment
(with the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value); (m) any transaction
to the extent it constitutes an investment that is permitted by and made in
accordance with the provisions of the second paragraph of the covenant described
under "--Certain Covenants--Transactions with Affiliates" (except transactions
described in clauses (ii) and (vi) of such paragraph); (n) any Investment by
Restricted Subsidiaries in other Restricted Subsidiaries and Investments by
Subsidiaries that are not Restricted Subsidiaries in other Subsidiaries that are
not Restricted Subsidiaries; (o) Investments relating to any special purpose
Wholly-Owned Subsidiary of the Company organized in connection with a
Receivables Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such Receivables
Facility; and (p) guarantees (including Guarantees) of Indebtedness permitted
under the covenant "--Certain Covenants--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock".
"PERMITTED LIENS" means, with respect to any Person, (a) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws or
similar legislation, or in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such Person is a party, or
to secure public or statutory obligations of such Person or deposits or cash or
U.S. government bonds to secure surety or appeal bonds to which such Person is a
party, or for contested taxes or import or custom duties or for the payment of
rent, in each case incurred in the ordinary course of business; (b) Liens
imposed by law, including carriers', warehousemen's, mechanics', materialmen and
repairmen Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings, if a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made in respect thereof;
(c) Liens for taxes, assessments or other governmental charges not yet subject
to penalties for non-payment or which are being contested in good faith by
appropriate proceedings provided reserves required pursuant to GAAP have been
taken on the books of the Company or its Restricted Subsidiaries, as the case
may be; (d) Liens in favor of issuers of surety or performance bonds or bankers'
acceptance or letters of credit issued pursuant to the request of and for the
account of such Person in the ordinary course of its business; PROVIDED,
HOWEVER, that such letters of credit do not constitute Indebtedness; (e)
encumbrances, easements or reservations of, or rights of others for, licenses,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or liens incidental to the conduct of the business of such Person or
to the ownership of its properties which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person; (f) Liens securing a Hedging
Obligation, so long as the related Indebtedness is, and is permitted to be under
the Indenture, secured by a Lien on the same property; (g) leases and subleases
of real property which do not materially interfere with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries; (h) judgment
Liens not giving rise to an Event of Default so long as such Lien is adequately
bonded and any appropriate legal proceedings which may have been duly initiated
for the review of such judgment have not been finally terminated or the period
within which such proceedings may be initiated has not expired; (i) Liens for
the purpose of securing the payment (or the refinancing of the payment) of all
or a part of the purchase price of, or Capitalized Lease Obligations with
respect to, assets or property acquired or
130
<PAGE>
constructed in the ordinary course of business provided that (x) the aggregate
principal amount of Indebtedness secured by such Liens is otherwise permitted to
be incurred under the Indenture and does not exceed the cost of the assets or
property so acquired or constructed and (y) such Liens are created within 90
days of construction or acquisition of such assets or property and do not
encumber any other assets or property of the Company or any Restricted
Subsidiary other than such assets or property and assets affixed or appurtenant
thereto; (j) Liens arising solely by virtue of any statutory or common law
provision relating to banker's Liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a depository
institution; PROVIDED that such deposit account is not a pledged cash collateral
account; (k) Liens arising from Uniform Commercial Code financing statement
filings regarding operating leases entered into by the Company and its
Restricted Subsidiaries in the ordinary course of business; (l) Liens existing
on the Issuance Date; (m) Liens on property or shares of stock of a Person at
the time such Person becomes a Subsidiary; PROVIDED, HOWEVER, that such Liens
are not created, incurred or assumed in connection with, or in contemplation of,
such other Person becoming a Subsidiary; PROVIDED FURTHER, HOWEVER, that any
such Lien may not extend to any other property owned by the Company or any
Restricted Subsidiary; (n) Liens on property at the time the Company or a
Subsidiary acquired the property, including any acquisition by means of a merger
or consolidation with or into the Company or any Restricted Subsidiary;
PROVIDED, HOWEVER, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such acquisition; PROVIDED FURTHER,
HOWEVER, that such Liens may not extend to any other property owned by the
Company or any Restricted Subsidiary; (o) Liens securing Indebtedness or other
obligations of a Subsidiary owing to the Company or a Wholly-Owned Subsidiary;
(p) Liens securing the Notes and Guarantees; (q) Liens securing Indebtedness
incurred to refinance Indebtedness that was previously so secured, provided that
(A) such Liens are not materially less favorable to the Holders and (B) any such
Lien is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in respect
thereof) that secured (or, under the written arrangements under which the
original Lien arose, could secure) the obligations to which such Liens relate;
(r) Liens on assets incurred in connection with a Receivables Facility; (s)
Liens securing Indebtedness and other obligations under a senior credit
agreement or other senior bank facility, including, without limitation, the
Senior Credit Facility, and related Hedging Obligations and Liens on assets of
Restricted Subsidiaries securing guarantees of Indebtedness and other
obligations under a senior credit agreement or other senior bank facility,
including, without limitation, the Senior Credit Facility, permitted to be
incurred under the Indenture; (t) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any Restricted
Subsidiary in the ordinary course of business; (u) Liens securing Indebtedness
permitted to be incurred pursuant to clause (m) of the second paragraph of
"--Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock;"
and (v) Liens created, incurred or existing in respect of unfunded pension
obligations or any similar obligations of the Company or any of its Restricted
Subsidiaries or any Guarantor.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"PREFERRED STOCK" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"RECEIVABLES FACILITY" means one or more receivables financing facilities,
as amended from time to time, pursuant to which the Company and/or any of its
Restricted Subsidiaries sells its accounts receivable to a Person that is not a
Restricted Subsidiary.
"RECEIVABLES FEES" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
131
<PAGE>
"RELATED PARTIES" means any Person controlled by a Permitted Holder,
including any partnership or limited liability company of which a Permitted
Holder or its Affiliates is the general partner or managing member, as the case
may be.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; PROVIDED,
HOWEVER, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"SENIOR CREDIT FACILITY" means that certain revolving credit facility
described in this Prospectus among the Company and the lenders from time to time
party thereto, including any collateral documents, instruments and agreements
executed in connection therewith, and any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any
indentures or credit facilities or commercial paper facilities with banks or
other institutional lenders that replace, refund or refinance any part of the
loans, notes, other credit facilities or commitments thereunder, including any
such replacement, refunding or refinancing facility or indenture that increases
the amount borrowable thereunder or alters the maturity thereof; PROVIDED,
HOWEVER, that if at any time there is more than one facility which could
constitute the Senior Credit Facility, the Company will designate to the Trustee
which one of such facilities will be the Senior Credit Facility for purposes of
the subordination and acceleration provisions of the Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"SIMILAR BUSINESS" means a business, the majority of whose revenues are
derived from the design, manufacture, import and/or distribution of juvenile and
infant products, or any line of business engaged in by the Company or its
Subsidiaries on the Issuance Date, or any business or activity that is
reasonably similar thereto or a reasonable extension, development or expansion
thereof or ancillary thereto.
"SUBORDINATED INDEBTEDNESS" means (a) with respect to the Company, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Notes and (b) with respect to any Guarantor, any Indebtedness of
such Guarantor which is by its terms subordinated in right of payment to the
Guarantee of such Guarantor.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture,
limited liability company or similar entity) of which more than 50.0% 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 of determination 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, joint venture, limited
liability company or similar entity of which (x) more than 50.0% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general,
special or limited partnership or otherwise and (y) such Person or any
Wholly-Owned Restricted Subsidiary of such Person is a controlling general
partner or otherwise controls such entity.
132
<PAGE>
"TOTAL ASSETS" means time total consolidated assets of the Company and its
Restricted Subsidiaries as shown on the most recent balance sheet (excluding the
footnotes thereto) of the Company.
"TRANSACTIONS" means (i) the transactions contemplated by the stock
purchase agreement dated August 20, 1998, between KKR 1996 Fund L.P. and Lisco,
Inc., pursuant to which KKR 1996 Fund L.P. will acquire 51% of the outstanding
common stock of the Company and 100% of the outstanding preferred stock of the
Company, including the distribution of such preferred stock by the Company to
Lisco, Inc., (ii) the transactions contemplated by the stock purchase agreement
dated August 20, 1998, between Great Star Corporation and Lisco, Inc., pursuant
to which Great Star Corporation will acquire 6.6% of the outstanding common
stock of the Company, (iii) the repayment by the Company of approximately $110.0
million of intercompany debt owed to Spalding & Evenflo Companies, Inc. and its
Affiliates, (iv) the offering of $110.0 million of Notes by the Company and (v)
the entering into of the Senior Credit Facility on the Issuance Date.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company (including any existing Subsidiary and any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Equity Interests of, or
owns, or holds any Lien on, any property of, the Company or any Subsidiary of
the Company (other than any Subsidiary of the Subsidiary to be so designated),
PROVIDED that (a) any Unrestricted Subsidiary must be an entity of which shares
of the capital stock or other equity interests (including partnership interests)
entitled to cast at least a majority of the votes that may be cast by all shares
or equity interests having ordinary voting power for the election of directors
or other governing body are owned, directly or indirectly, by the Company, (b)
the Company certifies that such designation complies with the covenants
described under "--Certain Covenants--Limitation on Restricted Payments" and (c)
each of (I) the Subsidiary to be designated and (II) 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; PROVIDED
that, immediately after giving effect to such designation, (i) the Company could
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test described under "--Certain Covenants--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock" or (ii) the Fixed
Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be
greater than such ratio for the Company and its Restricted Subsidiaries
immediately prior to such designation, in each case on a pro forma basis taking
into account such designation. Any such designation by the Board of Directors
shall be notified by the Company 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 of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" is any Wholly-Owned Subsidiary that is
a Restricted Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly-Owned Subsidiaries of such Person and one or
more Wholly-Owned Subsidiaries of such Person.
133
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. A broker-dealer may not participate in the Exchange
Offer with respect to Old Notes acquired other than as a result of market-making
activities or other trading activities. To the extent any such broker-dealer
participates in the Exchange Offer and so notifies the Company, or causes the
Company to be so notified in writing, the Company has agreed for a period of 90
days after the date of this Prospectus, that it will make this Prospectus, as
amended or supplemented, available to such broker-dealer for use in connection
with any such resale, and will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. In
addition, until , 1998 (90 days after the date of this Prospectus),
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at prevailing market prices at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers or any such Exchange Notes. Any broker-dealer that
resells Exchange Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such Exchange Notes may be deemed to be an "underwriter" within the meaning
of the Securities Act, and any profit on any such resale of Exchange Notes and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old Notes
against certain liabilities, including certain liabilities that may arise under
the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the Prospectus in connection with the sale or transfer of
Exchange Notes, and acknowledges and agrees that, upon receipt of notice from
the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
or which may impose upon the Company disclosure obligations that may have a
material adverse effect on the Company (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
the Prospectus until the Company has notified such broker-dealer that delivery
of the Prospectus may resume and has furnished copies of any amendment or
supplement to the Prospectus to such broker-dealer.
134
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes
offered hereby will be passed upon for the Company by Simpson Thacher &
Bartlett, New York, New York. Certain partners of Simpson Thacher & Bartlett,
members of their families, related persons and others, have an indirect
interest, through limited partnerships, through KKR 1996 Fund L.P., in less than
1% of the Common Stock.
EXPERTS
The consolidated balance sheets as of September 30, 1996 and 1997 and the
related statements of consolidated earnings (loss) and comprehensive earnings
(loss), consolidated cash flows and consolidated shareholders' equity for each
of the three fiscal years in the period ended September 30, 1997 of Evenflo
Company, Inc. included in the Prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The statements of revenues and direct costs for the years ended December 31,
1995 and 1996 of Gerry Baby Products Company (a subsidiary of Huffy Corporation)
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
135
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Evenflo Company, Inc. and Subsidiaries Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Statements of Consolidated Earnings (Loss) and Comprehensive Earnings (Loss) for the
nine months ended June 30, 1997 and 1998............................................................... F-2
Unaudited Condensed Consolidated Balance Sheet as of June 30, 1998....................................... F-3
Unaudited Condensed Statements of Consolidated Cash Flows for the nine months ended June 30, 1997 and
1998................................................................................................... F-4
Unaudited Condensed Statement of Consolidated Shareholders' Equity for the nine months ended June 30,
1998................................................................................................... F-5
Notes to Unaudited Condensed Consolidated Financial Statements........................................... F-6
Evenflo Company, Inc. and Subsidiaries Consolidated Financial Statements
Independent Auditors' Report............................................................................. F-9
Statements of Consolidated Earnings (Loss) and Comprehensive Earnings (Loss) for the years ended
September 30, 1995, 1996 and 1997...................................................................... F-10
Consolidated Balance Sheets as of September 30, 1996 and 1997............................................ F-11
Statements of Consolidated Cash Flows for the years ended September 30, 1995, 1996 and 1997.............. F-12
Statements of Consolidated Shareholders' Equity for the years ended September 30, 1995, 1996 and 1997.... F-13
Notes to Consolidated Financial Statements............................................................... F-14
Gerry Baby Products Company (a subsidiary of Huffy Corporation) Financial Statements
Independent Auditors' Report............................................................................. F-29
Statements of Revenues and Direct Costs for the years ended December 31, 1995 and 1996................... F-30
Notes to Statements of Revenues and Direct Costs......................................................... F-31
</TABLE>
F-1
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS (LOSS)
AND COMPREHENSIVE EARNINGS (LOSS)
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
NET SALES.................................................................................. $ 205,650 245,233
Cost of sales............................................................................ 161,036 197,119
---------- ---------
GROSS PROFIT............................................................................... 44,614 48,114
Selling, general and administrative expenses............................................. 36,688 45,363
Restructuring costs...................................................................... 404 1,443
Allocated Spalding expenses.............................................................. 2,150 2,100
---------- ---------
INCOME (LOSS) FROM OPERATIONS.............................................................. 5,372 (792)
Interest expense, net.................................................................... 4,572 8,102
Currency loss, net....................................................................... 100 510
---------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES........................................................ 700 (9,404)
Income taxes (benefit)................................................................... 308 (3,675)
---------- ---------
NET EARNINGS (LOSS)........................................................................ 392 (5,729)
Other comprehensive earnings (loss)--currency translation
adjustments net of tax benefits of $55 and $294........................................ (112) (615)
---------- ---------
COMPREHENSIVE EARNINGS (LOSS).............................................................. $ 280 (6,344)
---------- ---------
---------- ---------
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-2
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash.............................................................................. $ 3,756
Receivables, less allowance of $1,598............................................. 75,168
Inventories....................................................................... 67,794
Deferred income taxes............................................................. 7,835
Other............................................................................. 2,416
---------
TOTAL CURRENT ASSETS.......................................................... 156,969
Property, plant and equipment, net................................................ 63,897
Intangible assets, net............................................................ 47,102
Deferred financing costs.......................................................... 2,100
Other............................................................................. 1,467
---------
TOTAL ASSETS.................................................................. $ 271,535
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................................................. $ 52,202
Accrued expenses.................................................................. 31,195
---------
TOTAL CURRENT LIABILITIES..................................................... 83,397
Long-term debt to Spalding........................................................ 107,120
Payable to Spalding............................................................... 24,617
Deferred income taxes............................................................. 1,101
Pension........................................................................... 2,940
Post-retirement benefits.......................................................... 1,470
---------
TOTAL LIABILITIES............................................................. 220,645
COMMITMENTS AND CONTINGENCIES (NOTE F)
SHAREHOLDERS' EQUITY
Common stock...................................................................... 2
Paid-in capital................................................................... 88,224
Retained earnings (deficit)....................................................... (26,466)
Equity in divisions of Spalding................................................... (8,980)
Accumulated other comprehensive earnings (loss)--currency translation
adjustments..................................................................... (1,890)
---------
TOTAL SHAREHOLDERS' EQUITY.................................................... 50,890
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................... $ 271,535
---------
---------
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-3
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1997 1998
- ------------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)....................................................................... $ 392 (5,729)
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
Depreciation............................................................................ 6,351 9,600
Intangibles amortization................................................................ 716 1,160
Deferred income taxes................................................................... 1,070 3,917
Deferred financing costs amortization................................................... 300 300
---------- ----------
Subtotal.............................................................................. 8,829 9,248
Receivables............................................................................. (12,151) (7,463)
Inventories............................................................................. (7,257) (7,073)
Current liabilities, excluding bank loans............................................... (697) (8,470)
Other................................................................................... (2,153) (596)
---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES...................................... (13,429) (14,354)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................................................... (14,865) (13,112)
Payment to purchase net assets of Gerry................................................... (68,652) 0
---------- ----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES........................................... (83,517) (13,112)
---------- ----------
NET CASH PROVIDED (USED) BEFORE FINANCING ACTIVITIES.................................. (96,946) (27,466)
CASH FLOWS FROM FINANCING ACTIVITIES
Note payable to Spalding.................................................................. 52,569 0
Net increase in allocated portion of Spalding debt........................................ 8,000 15,000
Net borrowings (repayments) of other indebtedness......................................... (204) 0
Increase in allocated portion of Spalding deferred financing costs........................ 0 (300)
Net change in long-term Spalding receivable/payable....................................... 25,633 20,771
Net cash transfers between divisions and Spalding......................................... 11,049 (5,785)
---------- ----------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES....................................... 97,047 29,686
---------- ----------
CASH--net change.......................................................................... 101 2,220
beginning of period................................................................. 4,745 1,536
---------- ----------
end of period....................................................................... $ 4,846 3,756
---------- ----------
---------- ----------
SUPPLEMENTAL CASH FLOW DATA
Interest paid............................................................................. $ 4,302 7,730
Income taxes paid (refunded).............................................................. (737) (7,466)
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-4
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
(DEFICIENCY) ACCUMULATED
RETAINED IN OTHER
COMMON PAID-IN EARNINGS DIVISIONS COMPREHENSIVE
STOCK CAPITAL (DEFICIT) OF SPALDING EARNINGS (LOSS) TOTAL
----------- --------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1997................................... $ 2 88,224 (23,525) (407) (1,275) 63,019
Net earnings (loss) for the nine months.............. 0 0 (2,941) (2,788) 0 (5,729)
Net cash transfers to Spalding....................... 0 0 0 (5,785) 0 (5,785)
Currency translation adjustments..................... 0 0 0 0 (615) (615)
----------- --------- --------- ----------- ------ ---------
June 30, 1998........................................ $ 2 88,224 (26,466) (8,980) (1,890) 50,890
----------- --------- --------- ----------- ------ ---------
----------- --------- --------- ----------- ------ ---------
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-5
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE A--ORGANIZATION AND BASIS OF PRESENTATION
Prior to August 20, 1998 (the "Closing Date") Spalding Holdings Corporation,
formerly known as Evenflo & Spalding Holdings Corporation ("Spalding"), through
its wholly-owned subsidiaries, operated in two business segments, one of which,
known as Evenflo ("Evenflo Segment"), serves the infant and juvenile product
market. The Evenflo Segment included Evenflo Company, Inc. which sells its
products in the United States and other countries, and certain other Spalding
subsidiaries and divisions of subsidiaries that sell infant and juvenile
products in other countries and that hold the Evenflo Segment patents and
trademarks. On May 20, 1998, Spalding reorganized (the "Reorganization") the
ownership structure of all of its subsidiaries included in the Evenflo Segment
except for the Canadian subsidiary, which was completed July 31, 1998. After the
Reorganization was complete, Evenflo Company, Inc. became the parent company of
the other Spalding subsidiaries and divisions of subsidiaries in the Evenflo
Segment (the "Company"). For accounting purposes, the Reorganization was
accounted for as a reorganization of companies under common control in a manner
similar to a pooling-of-interests. As such, certain reclassifications have been
made to shareholders' equity in the accompanying condensed consolidated
financial statements. The accounting basis of the assets and liabilities of the
Company included in the accompanying condensed consolidated financial statements
represent the historical cost basis of Spalding at the date of the
Reorganization.
On the Closing Date, KKR 1996 Fund L.P., a limited partnership affiliated
with Kohlberg Kravis Roberts & Co. L.P., acquired 51% of the outstanding common
shares of the Company (the "Common Stock") for a purchase price of $25,500 and
acquired cumulative preferred stock of the Company for a purchase price of
$40,000, both acquired from a subsidiary of Spalding. The subsidiary of Spalding
received such newly-authorized preferred stock as a distribution from the
Company. In addition, prior to the acquisition of Common Stock by KKR 1996 Fund
L.P., Great Star Corporation ("Great Star"), an affiliate of Abarco N.V.
("Abarco"), acquired 6.6% of the outstanding Common Stock for a purchase price
of $3,300 from a subsidiary of Spalding. The Company, on the Closing Date, (i)
issued and sold $110,000 aggregate principal amount of senior notes in a private
offering and (ii) entered into a $100,000 revolving credit facility with a
syndicate of banks and other financial institutions and borrowed $10,000 under
such credit facility on the Closing Date. The Company applied the proceeds of
these transactions to repay indebtedness to Spalding and to pay transaction fees
and expenses of approximately $10,000.
The accompanying condensed consolidated financial statements include the
accounts of the Company and have been prepared in accordance with generally
accepted accounting principles. All significant accounts and transactions
between the consolidated entities have been eliminated in consolidation.
The condensed consolidated financial statements are unaudited and should be
read in conjunction with the audited consolidated financial statements and notes
thereto for the fiscal year ended September 30, 1997 included elsewhere in this
Prospectus.
In the opinion of management, all adjustments necessary for a fair
presentation of such condensed consolidated financial statements have been
included. Such adjustments consist only of normal recurring items. Interim
results are not necessarily indicative of results for a full year. The condensed
consolidated financial statements and notes thereto for the nine months ended
June 30, 1997 and 1998 do not contain certain information included in the
Company's annual consolidated financial statements and notes thereto.
F-6
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE B--ACQUISITION
On April 21, 1997, the Company acquired certain net assets of Gerry Baby
Products Company ("Gerry") for a purchase price of $68,652. Gerry had
manufacturing and administrative operations in Colorado, which subsequent to the
acquisition have been consolidated into the Company's operations in Ohio and
Georgia. Gerry also has manufacturing operations in Wisconsin. Gerry
manufactured and/or marketed specialty juvenile products under the GERRY and
SNUGLI brand names. The Gerry acquisition was accounted for using the purchase
method of accounting; accordingly, the operating results of Gerry have been
included in the condensed statement of consolidated earnings (loss) from the
date of acquisition. If the acquisition had taken place at October 1, 1996,
rather than in April 1997, pro forma consolidated net sales would have been
$267,012 and pro forma consolidated net loss would have been $(593) for the nine
months ended June 30, 1997.
NOTE C--RESTRUCTURING COSTS
The Company incurred $2,377 of restructuring and other unusual costs for the
nine months ended June 30, 1998. Restructuring costs were $1,443 to relocate the
Gerry Colorado warehouse operation to Evenflo's Ohio and Georgia locations.
Other unusual expenses included (i) $235 expensed to cost of sales to relocate
the Gerry Colorado warehouse operations to Evenflo's Ohio and Georgia locations,
(ii) $159 expensed to cost of sales attributable to the manufacturing and
warehouse reconfiguration at Piqua, Ohio (known as "Project Discovery") and
(iii) $540 charged to selling, general and administrative expenses relating to
Year 2000 conversion costs. The Company incurred $4,244 of restructuring and
other unusual costs for the nine months ended June 30, 1997. Restructuring costs
were $404 to relocate the Gerry Colorado warehouse operations to Evenflo's Ohio
and Georgia locations. Other unusual costs included (i) $1,524 expensed to cost
of sales for Project Discovery, (ii) $1,268 expensed to cost of sales, as a
result of expensing the increase to fair market value of Gerry's inventory as
such inventory was sold, such increase resulting from the application of
purchase accounting in the Gerry acquisition, and (iii) $1,048 charged to
selling, general and administrative expenses to combine Evenflo's feeding and
furniture operations which were previously managed separately.
NOTE D--INVENTORIES
<TABLE>
<S> <C>
Finished goods..................................................... $ 30,322
Work in progress................................................... 11,992
Raw materials...................................................... 25,480
---------
Total inventories.............................................. $ 67,794
---------
---------
</TABLE>
NOTE E--LONG-TERM DEBT TO SPALDING
On September 30, 1996, Spalding completed its recapitalization pursuant to
which Spalding was acquired by Strata Associates L.P. (the "Recapitalization"),
which was financed in part with the proceeds from certain bank borrowings by
Spalding totaling $425,800. The shares of common stock of certain of Spalding's
domestic subsidiaries (including Evenflo Company, Inc.) were pledged as
collateral and certain of Spalding's subsidiaries (including Evenflo Company,
Inc.) have guaranteed the indebtedness under the
F-7
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE E--LONG-TERM DEBT TO SPALDING (CONTINUED)
Spalding bank borrowings. The amount of the guaranteed bank indebtedness
allocated to the Company was $58,000 as of June 30, 1998. The weighted average
interest rate on this debt for the nine months ended June 30, 1998 was 9.63%.
Interest expense, including the Company's share of deferred financing cost
amortization, on the allocated portion of the bank indebtedness was $3,000 and
$3,500 for the nine months ended June 30, 1997 and 1998. Also included in
long-term debt to Spalding is a note payable to Spalding for $49,120, the
proceeds of which were used in the purchase of certain net assets of Gerry.
NOTE F--CONTINGENCIES
The Company is both a plaintiff and defendant in numerous lawsuits
incidental to its operations, some alleging substantial claims. In addition, the
Company's operations are subject to federal, state and local environmental laws
and regulations. The Company has entered into settlement agreements with the
U.S. Environmental Protection Agency and other parties on several sites and is
still negotiating on other sites. The settlement amounts and estimated
liabilities are not significant.
Management is of the opinion that, after taking into account the merits of
defenses, insurance coverage and established reserves, the ultimate resolution
of these matters will not have a material adverse effect in relation to the
Company's consolidated financial statements.
Spalding is in disagreement with the Internal Revenue Service ("IRS")
regarding the valuation of trademarks purchased from an Abarco affiliate in
1994. The IRS has completed the field audit for the year in which the
transactions occurred and has preliminarily indicated that, as to potential
effects related to the Company, a portion of the past amortization deductions
relating to such trademarks may be disallowed. Spalding has informed the Company
that it intends to vigorously contest any assessment from the IRS. If Spalding
were unsuccessful in appealing the assessment relating to these trademarks, a
portion of the Company's deferred tax asset ($2,935 at June 30, 1998) relating
to future amortization of such trademarks owned by the Company would be written
off as a charge to paid-in capital. Under the terms of indemnity provisions
contained in the recapitalization agreement relating to the Recapitalization,
Spalding and the Company believe that any resulting liability relating to years
prior to the Recapitalization would be indemnified by Abarco, the selling
entity. With respect to the 1997 tax year, the Company believes that its maximum
liability, if any, will not exceed $164, including interest and penalties.
Under an indemnification agreement entered into on the Closing Date,
Spalding agreed to indemnify the Company for all losses and liabilities of any
kind, including with respect to the above-referenced tax matter, relating to any
non-Company matters and the Company agreed to indemnify Spalding for all losses
and liabilities of any kind relating to the Company's business. In addition,
Spalding agreed to indemnify the Company for the expense of product recalls and
corrective actions relating to products manufactured by the Company prior to the
Closing Date.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evenflo Company, Inc.:
We have audited the accompanying consolidated balance sheets of Evenflo Company,
Inc. and subsidiaries (the "Company") as of September 30, 1996 and 1997, and the
related statements of consolidated earnings (loss) and comprehensive earnings
(loss), cash flows and shareholders' equity for each of the three fiscal years
in the period ended September 30, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of September 30,
1996 and 1997, and the results of its operations and its cash flows for each of
the three fiscal years in the period ended September 30, 1997 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Tampa, Florida
November 7, 1997
(August 20, 1998 as to Note R)
F-9
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS (LOSS)
AND COMPREHENSIVE EARNINGS (LOSS)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES.................................................................... $ 210,039 237,165 296,743
Cost of sales.............................................................. 157,611 178,733 235,925
---------- ---------- ----------
GROSS PROFIT................................................................. 52,428 58,432 60,818
Selling, general and administrative expenses............................... 41,518 42,801 52,232
Restructuring costs........................................................ 0 0 9,591
Allocated Spalding expenses................................................ 2,500 2,500 2,900
1994 Management Stock Ownership Plan expense............................... 107 2,621 0
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS................................................ 8,303 10,510 (3,905)
Interest expense, net...................................................... 4,273 4,128 7,243
Currency loss, net......................................................... 833 204 47
---------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY LOSS................... 3,197 6,178 (11,195)
Income taxes (benefit)..................................................... 1,052 3,197 (4,884)
---------- ---------- ----------
EARNINGS (LOSS) BEFORE EXTRAORDINARY LOSS.................................... 2,145 2,981 (6,311)
Extraordinary loss on early extinguishment of debt, net of
$360 tax benefit......................................................... 0 560 0
---------- ---------- ----------
NET EARNINGS (LOSS).......................................................... 2,145 2,421 (6,311)
Other comprehensive earnings (loss)--currency translation adjustments net
of tax benefits of $431, $150 and $174................................... (551) (260) (367)
---------- ---------- ----------
COMPREHENSIVE EARNINGS (LOSS)................................................ $ 1,594 2,161 (6,678)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-10
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................................................... $ 4,745 1,536
Receivables, less allowance of $1,108 and $1,407.......................................... 46,551 67,705
Inventories............................................................................... 33,009 60,721
Deferred income taxes..................................................................... 5,924 11,114
Other..................................................................................... 206 2,317
---------- ----------
TOTAL CURRENT ASSETS.................................................................. 90,435 143,393
Property, plant and equipment, net........................................................ 33,742 60,461
Intangible assets, net.................................................................... 22,545 48,262
Receivable from Spalding.................................................................. 26,678 0
Deferred financing costs.................................................................. 2,500 2,100
Deferred income taxes..................................................................... 114 0
Other..................................................................................... 1,377 1,509
---------- ----------
TOTAL ASSETS.......................................................................... $ 177,391 255,725
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Non-U.S. bank loans....................................................................... $ 204 0
Accounts payable.......................................................................... 45,617 56,253
Accrued expenses.......................................................................... 22,706 35,532
Income taxes.............................................................................. 89 82
---------- ----------
TOTAL CURRENT LIABILITIES............................................................. 68,616 91,867
Long-term debt to Spalding................................................................ 43,000 92,120
Payable to Spalding....................................................................... 0 3,846
Deferred income taxes..................................................................... 0 463
Pension................................................................................... 2,600 2,940
Post-retirement benefits.................................................................. 1,350 1,470
---------- ----------
TOTAL LIABILITIES..................................................................... 115,566 192,706
COMMITMENTS AND CONTINGENCIES (NOTES L, M, N, O AND R)
SHAREHOLDERS' EQUITY
Common stock.............................................................................. 2 2
Paid-in capital........................................................................... 88,224 88,224
Retained earnings (deficit)............................................................... (8,118) (23,525)
Equity (deficiency) in divisions of Spalding.............................................. (17,375) (407)
Accumulated other comprehensive earnings
(loss)--currency translation adjustments................................................ (908) (1,275)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY............................................................ 61,825 63,019
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................ $ 177,391 255,725
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-11
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1995 1996 1997
- ------------------------------------------------------------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)........................................................... $ 2,145 2,421 (6,311)
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
Depreciation................................................................ 4,724 5,708 8,207
Intangibles amortization.................................................... 794 794 1,106
Deferred income taxes....................................................... (1,257) 1,059 (4,613)
Deferred financing cost amortization........................................ 0 180 400
Expenses related to 1994 Management Stock Ownership Plan.................... 107 2,621 0
Extraordinary loss on early extinquishment of debt.......................... 0 920 0
Other....................................................................... 580 300 460
---------- ---------- ----------
Subtotal.................................................................. 7,093 14,003 (751)
Receivables................................................................. (3,699) (1,625) (37)
Inventories................................................................. (4,080) (3,510) (7,709)
Current liabilities, excluding bank loans................................... 2,104 15,632 9,776
Other....................................................................... 1 (213) (2,221)
---------- ---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES.......................... 1,419 24,287 (942)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.......................................................... (6,531) (9,377) (20,927)
Payment to purchase net assets of Gerry....................................... 0 0 (68,652)
Acquisition of non-U.S. trademarks from affiliate............................. 0 (363) 0
---------- ---------- ----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES............................... (6,531) (9,740) (89,579)
---------- ---------- ----------
NET CASH PROVIDED (USED) BEFORE FINANCING ACTIVITIES...................... (5,112) 14,547 (90,521)
CASH FLOWS FROM FINANCING ACTIVITIES
Note payable to Spalding...................................................... 0 0 49,120
Net increase in allocated portion of Spalding debt............................ 20,000 11,000 0
Net borrowings (repayments) of other indebtedness............................. (751) (4) (204)
Increase in allocated portion of Spalding deferred financing costs............ (1,100) (2,500) 0
Net change in long-term Spalding receivable/payable........................... (4,831) (13,546) 30,524
Net cash transfers between divisions and Spalding............................. (7,118) (7,557) 8,239
Dividend to Spalding.......................................................... (587) 0 (367)
Additional capital contribution by Spalding................................... 0 363 0
---------- ---------- ----------
NET CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES.................... 5,613 (12,244) 87,312
---------- ---------- ----------
Cash--net change.............................................................. 501 2,303 (3,209)
beginning of period..................................................... 1,941 2,442 4,745
---------- ---------- ----------
end of period........................................................... $ 2,442 4,745 1,536
---------- ---------- ----------
---------- ---------- ----------
SUPPLEMENTAL CASH FLOW DATA
Interest paid................................................................. $ 4,266 3,732 6,763
Income taxes paid (refunded).................................................. 2,437 1,731 (266)
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-12
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
(DEFICIENCY) ACCUMULATED
RETAINED IN OTHER
COMMON PAID-IN EARNINGS DIVISIONS COMPREHENSIVE
STOCK CAPITAL (DEFICIT) OF SPALDING EARNINGS (LOSS) TOTAL
----------- --------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1994.................................. $ 2 87,861 (707) (14,090) (97) 72,969
Net earnings (loss) for the year.................... 0 0 (3,498) 5,643 0 2,145
Net cash transfers to Spalding...................... 0 0 0 (7,118) 0 (7,118)
Currency translation adjustments.................... 0 0 0 0 (551) (551)
Dividend to Spalding................................ 0 0 (587) 0 0 (587)
----------- --------- --------- ----------- ------ ---------
September 30, 1995.................................. 2 87,861 (4,792) (15,565) (648) 66,858
Net earnings (loss) for the year.................... 0 0 (3,326) 5,747 0 2,421
Net cash transfers to Spalding...................... 0 0 0 (7,557) 0 (7,557)
Currency translation adjustments.................... 0 0 0 0 (260) (260)
Additional capital contribution by Spalding......... 0 363 0 0 0 363
----------- --------- --------- ----------- ------ ---------
September 30, 1996.................................. 2 88,224 (8,118) (17,375) (908) 61,825
Net earnings (loss) for the year.................... 0 0 (15,040) 8,729 0 (6,311)
Net cash transfers from Spalding.................... 0 0 0 8,239 0 8,239
Currency translation adjustments.................... 0 0 0 0 (367) (367)
Dividend to Spalding................................ 0 0 (367) 0 0 (367)
----------- --------- --------- ----------- ------ ---------
September 30, 1997.................................. $ 2 88,224 (23,525) (407) (1,275) 63,019
----------- --------- --------- ----------- ------ ---------
----------- --------- --------- ----------- ------ ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-13
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE A--ORGANIZATION
ORGANIZATION AND OPERATION. Evenflo & Spalding Holdings Corporation, which
will change its name to Spalding Holdings Corporation ("Spalding") through its
wholly-owned subsidiaries, operates in two business segments, one of which,
known as Evenflo ("Evenflo Segment"), serves the infant and juvenile product
market. The Evenflo Segment includes Evenflo Company, Inc., which sells its
products in the United States and other countries, and certain other Spalding
subsidiaries and divisions of subsidiaries that sell infant and juvenile
products in other countries and that hold the Evenflo Segment patents and
trademarks. The accompanying consolidated financial statements include the
accounts of all of the Spalding subsidiaries and divisions of subsidiaries
operating in the Evenflo Segment (the "Company") and are reported on the
historical cost basis of Spalding.
Prior to September 30, 1996, Spalding was a wholly-owned subsidiary of
Abarco N.V. ("Abarco"). On September 30, 1996, Abarco and Strata Associates L.P.
("Strata"), an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR"), entered
into a Recapitalization and Stock Purchase Agreement (the "Recapitalization
Agreement") pursuant to which Strata acquired control of Spalding (the
"Recapitalization"). The Recapitalization was accounted for as a
recapitalization. Accordingly, Spalding uses the historical cost basis in its
consolidated financial statements.
The Company manufactures and markets under the EVENFLO, GERRY and SNUGLI
trade names specialty juvenile products including reusable and disposable baby
bottle feeding systems, breast-feeding aids, pacifiers and oral development
items, baby bath, health and safety items, monitors and other baby care products
and accessories, as well as juvenile car seats, stationary activity products,
strollers, high chairs, portable play yards, cribs, dressers and changing
tables, gates, soft carriers and frame carriers, child carriers and mattresses.
ACQUISITION OF GERRY. On April 21, 1997, the Company acquired certain net
assets of Gerry Baby Products Company ("Gerry") for a purchase price of $68,652.
Gerry had manufacturing operations in Colorado and in Wisconsin and maintained
its administrative operations in Colorado. Gerry manufactured and/or marketed
specialty juvenile products under the GERRY and SNUGLI brand names. The net
assets acquired consisted of the following:
<TABLE>
<S> <C>
Receivables....................................................... $ 21,117
Inventories....................................................... 20,003
Other current assets.............................................. 11
Property, plant and equipment..................................... 14,324
Intangible assets................................................. 26,823
Other assets...................................................... 53
---------
Total........................................................... 82,331
Accounts payable.................................................. (10,230)
Accrued expenses.................................................. (3,449)
---------
Net assets purchased............................................ $ 68,652
---------
---------
</TABLE>
F-14
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE A--ORGANIZATION (CONTINUED)
The Gerry acquisition was accounted for using the purchase method of
accounting; accordingly, the operating results of Gerry have been included in
the statements of consolidated earnings (loss) from the date of acquisition. The
Company's loss for 1997 was increased by $1,268 from selling, in the ordinary
course of business, inventory which was written up to fair value at date of
acquisition in accordance with purchase accounting. If the acquisition had taken
place at October 1, 1995 rather than in April 1997, pro forma consolidated net
sales and net earnings (loss) would have been $361,192 and $2,298 for the year
ended September 30, 1996 and $358,105 and $(7,296) for the year ended September
30, 1997.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Evenflo Company, Inc. and its subsidiaries. All significant
accounts and transactions between the consolidated entities have been eliminated
in consolidation.
TRANSACTIONS WITH SPALDING. The Company is included in Spalding's U.S. cash
management system. The Company maintains separate lockbox cash collection
accounts and cash disbursement accounts. Each business day cash is transferred
to the Company's cash accounts from the collection accounts to cover
disbursements. If there is a shortfall after such transfer, Spalding will
advance sufficient cash to cover the shortfall. If there is excess cash,
Spalding may use the cash to cover Spalding's disbursement needs or pay down
Spalding debt. Spalding maintains credit facilities to be used for the working
capital needs of its various operations including the Company. Interest was
neither credited for the benefit of positive cash flow nor charged for seasonal
cash requirements. The net cash transfers are treated as receivables and
payables with Spalding.
Certain Spalding administrative expenses have been allocated to the Company
to reflect assistance provided in the areas of accounting, auditing, employee
relations, insurance, legal, planning, tax and treasury. These allocations
considered the Company's proportionate size as indicated by net sales. In
addition, Spalding allocates out-of-pocket expenses relating to acquisition
activity incurred by Spalding on behalf of the Company. The Spalding expense
allocation is recorded as a charge to operations with a corresponding increase
to the payable to Spalding. Management believes that the methodology used to
allocate the costs is reasonable, but may not necessarily be indicative of the
costs of such services had they been performed by the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value of amounts
reported in the consolidated financial statements have been determined by using
available market information and appropriate valuation methodologies. The
carrying value of all current assets and current liabilities approximates fair
value because of their short-term nature. The fair value of the note payable to
Spalding, which carries a variable interest rate, approximates the carrying
value.
INVENTORIES. Inventories are valued at the lower of cost or market (net
realizable value). Cost for United States inventories has been determined by use
of the last-in, first-out method. Cost for non-U.S. inventories has been
determined by use of the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT. These assets are stated at cost and are
depreciated principally using the straight-line method over estimated useful
lives which range from 3 to 20 years. Certain assets are
F-15
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
depreciated for income tax purposes using accelerated methods. Assets that
become fully depreciated are removed from the asset and related accumulated
depreciation accounts.
INTANGIBLE ASSETS. Intangible assets are amortized on the straight-line
basis using a 40 year life.
IMPAIRMENT OF LONG-LIVED ASSETS. Periodically, the Company evaluates the
recoverability of the net carrying value of its property, plant and equipment
and its intangible assets by comparing the carrying values to the estimated
future undiscounted cash flows. A deficiency in these cash flows relative to the
carrying amounts is an indication of the need for a write-down due to
impairment. The impairment write-down would be the difference between the
carrying amounts and the fair value of these assets. A loss on impairment will
be recognized by a charge to earnings.
INCOME TAXES. Spalding and its United States subsidiaries, including the
Company, are parties to a tax sharing agreement which provides that each member
of the consolidated return group shall pay its share of the consolidated tax
liability based on the ratio of its separate liability to the aggregate separate
liabilities of all group members. A member shall make or receive compensatory
payments to the extent its separate liability differs from its share of the
group's liability. Deferred income taxes reflect the impact of temporary
differences between the amounts of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax purposes. In
accordance with Statement of Financial Accounting Standards No. 109 ("SFAS
109"), these deferred income taxes are measured by applying currently enacted
tax laws.
RETIREMENT PLANS AND POST-RETIREMENT BENEFITS. Current service costs of
retirement plans and post-retirement healthcare and life insurance benefits are
accrued annually. Prior service costs resulting from amendments to the plans are
amortized over the average remaining service period of employees expected to
receive benefits.
DEFERRED COMPENSATION. In connection with the Spalding 1996 Stock Purchase
and Option Plan for Key Employees of Evenflo & Spalding Holdings Corporation and
Subsidiaries (the "1996 Employee Stock Ownership Plan"), which was created as a
result of the Recapitalization, Spalding canceled its long-term incentive
compensation plans and paid the $1,444 total awards outstanding as of September
30, 1996 to the Company's employees in the 1997 fiscal year. The Company's
compensation expense under these plans was $129 in 1995 and $60 in 1996.
EMPLOYEE STOCK OWNERSHIP PLANS. Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), encourages, but
does not require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has employees who are included in
the 1996 Employee Stock Ownership Plan. Spalding chose to account for stock-
based compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"), and related interpretations. The Company will use the intrinsic
value method under APB No. 25. Accordingly, compensation cost for the stock
options included under the 1996 Employee Stock Ownership Plan for the Company's
employees is measured as the excess, if any, of the fair value of Spalding's
common stock at the date of the grant over the amount an employee must pay to
acquire the stock.
F-16
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Prior to September 30, 1996 compensation cost for the shares covered under
Spalding's 1994 Management Stock Ownership Plan was recorded in the amount of
any increase in value as determined by a formula. The per share valuation was
determined once a year by Spalding's executive committee, using a specified
multiple of EBITDA (earnings before interest, income taxes, depreciation and
amortization) less outstanding Spalding debt.
REVENUE RECOGNITION. The Company recognizes revenue from product sales when
the goods are shipped and title passes to the customer.
ADVERTISING. Advertising costs are expensed as incurred and included in
selling, general and administrative expenses. Advertising expenses amounted to
$12,123, $13,441 and $17,239 in 1995, 1996 and 1997.
CURRENCY TRANSLATION. Non-U.S. currency-denominated assets and liabilities
are translated into U.S. dollars at the exchange rates existing at the balance
sheet dates. Translation adjustments resulting from fluctuations in the exchange
rates are recorded as a separate component of common shareholders' equity.
Income and expense items are translated at the average exchange rates during the
respective periods.
CURRENCY EXCHANGE CONTRACTS. Open forward currency exchange contracts are
marked-to-market using the spot rates at each balance sheet date and the change
in market value is recorded by the Company as a currency gain or loss.
USE OF ESTIMATES. The preparation of the accompanying consolidated
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingencies at the
date of the consolidated financial statements and of sales and expenses
recognized during the reporting period. Actual results could differ from these
estimates.
CASH FLOWS. For purposes of the statements of consolidated cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). SFAS No. 131 requires public entities to report certain information about
operating segments, their products and services, the geographic areas in which
they operate, and their major customers, in complete financial statements and in
condensed interim financial statements issued to shareholders. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. This standard
addresses disclosure issues and therefore will not affect the Company's
financial position or results of operations.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits" ("SFAS No. 132"). SFAS No. 132
revises employers' disclosures about pension and other post-retirement benefit
plans. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. The adoption of SFAS No. 132 is not expected to have a material effect on
the Company's consolidated financial
F-17
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
statements. This standard addresses disclosure issues and therefore will not
affect the Company's financial position or results of operations.
NOTE C--INVENTORIES
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Finished goods.......................................................... $ 14,073 28,392
Work in process......................................................... 5,606 9,800
Raw materials........................................................... 13,330 22,529
--------- ---------
Total inventories..................................................... $ 33,009 60,721
--------- ---------
--------- ---------
</TABLE>
The cost of 91% of 1996 and 94% of 1997 inventories was computed using the
last-in, first-out (LIFO) method of inventory valuation. Use of the LIFO method
decreased the 1996 and 1997 year end inventories by $1,788 and $1,123.
NOTE D--PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land.................................................................. $ 1,260 1,735
Buildings and building improvements................................... 18,081 22,230
Machinery and equipment............................................... 43,163 71,309
---------- ----------
62,504 95,274
Accumulated depreciation.............................................. (28,762) (34,813)
---------- ----------
Property, plant and equipment, net.................................. $33,742 60,461
---------- ----------
---------- ----------
</TABLE>
NOTE E--INTANGIBLE ASSETS, NET
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
United States trademarks................................................ $ 23,000 39,900
Non-U.S. trademarks..................................................... 1,120 2,720
Goodwill................................................................ 17,674 25,997
--------- ---------
41,794 68,617
Accumulated amortization................................................ (19,249) (20,355)
--------- ---------
Intangible assets, net................................................ $ 22,545 48,262
--------- ---------
--------- ---------
</TABLE>
F-18
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE F--ACCRUED EXPENSES
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Compensation and other employee benefits................................ $ 4,525 4,854
Liability for self insurance............................................ 11,038 10,787
Liability for restructuring costs....................................... 0 8,247
Other, principally operating expenses................................... 7,143 11,644
--------- ---------
Total accrued expenses................................................ $ 22,706 35,532
--------- ---------
--------- ---------
</TABLE>
The majority of the Company's employees are covered under insured group
health and workers' compensation insurance programs. Commercial and product
liability insurance coverages are high deductible insured programs. Commercial
liability deductibles are $250 per occurrence. Product liability deductibles are
$500 per occurrence and $3,000 in aggregate. As a supplement to these programs,
the Company carries $75,000 in umbrella coverage. The liability for self
insurance claims shown in the table above covers the deductibles and self
insurance programs and is based upon an annual review by the Company and its
independent actuary of claims filed and claims incurred but not yet reported.
In July 1997, Company management adopted a plan to integrate the Gerry
Colorado administrative and manufacturing operations into Evenflo's Ohio and
Georgia locations (known as the "Gerry integration"). As a result, the Company
accrued $9,591 of restructuring costs in the year ended September 30, 1997
consisting of (i) $4,105 of severance costs for the Colorado employees, (ii)
$2,630 of shut-down costs of the Colorado facility, (iii) $1,237 of computer
conversion costs to preserve prior manufacturing information, and (iv) $1,619 of
other costs. The Company has funded $1,344 of these restructuring costs leaving
an accrual of $8,247 as of September 30, 1997. In addition, the Company incurred
$9,758 of unusual expenses, which have been charged to cost of sales and
selling, general and administrative expenses, related to (i) $3,100 inventory
write-down resulting from a decision to discontinue the sale of certain Gerry
products as a result of the Gerry integration, (ii) $2,629 of unusual costs to
combine the Company's feeding and furniture operations which were previously
managed separately, (iii) $2,761 attributable to the manufacturing and warehouse
reconfiguration at Piqua, Ohio and (iv) $1,268 as a result of expensing the
increase to fair market value of Gerry's inventory as such inventory was sold,
such increase resulting from the application of purchase accounting in the Gerry
Acquisition.
NOTE G--LONG-TERM DEBT TO SPALDING
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Note payable to Spalding................................................ $ 0 49,120
Allocated portion of Spalding debt...................................... 43,000 43,000
--------- ---------
Total long-term debt to Spalding.................................... $ 43,000 92,120
--------- ---------
--------- ---------
</TABLE>
In 1997 Spalding loaned the Company $49,120 for use in acquiring certain net
assets of Gerry. The note is due September 30, 1999 and carries a variable
interest rate equal to the Spalding weighted average interest rate under the
Spalding borrowings (9.46% at September 30, 1997).
F-19
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE G--LONG-TERM DEBT TO SPALDING (CONTINUED)
On September 30, 1996, Spalding completed the Recapitalization (see Note A).
The Recapitalization was financed in part with the proceeds from certain bank
borrowings by Spalding totaling $425,800. The shares of common stock of certain
of Spalding's domestic subsidiaries (including Evenflo Company, Inc.) were
pledged as collateral and certain of Spalding's subsidiaries (including Evenflo
Company, Inc.) have guaranteed the indebtedness under the Spalding bank
borrowings. In connection with Spalding's debt agreements, the Company is
required to comply, along with Spalding, with certain restrictions which, among
others, include meeting or maintaining certain financial ratios and limiting
capital expenditures.
Prior to the Recapitalization, Evenflo Company, Inc. guaranteed the bank
borrowings of Spalding (which were repaid from the proceeds of the
Recapitalization indebtedness) for the years ended September 30, 1995 and 1996.
As a result of the Evenflo Company, Inc. guarantees, Spalding allocated to
the Company a portion of its guaranteed indebtedness in the amount of $43,000 at
September 30, 1996 and 1997, its related deferred financing costs and its
interest expense for each fiscal year based on respective fair values at
September 30, 1996. Interest expense, including the Company's share of debt
issue cost amortization, on such indebtedness was $3,400, $3,200, and $4,100 for
the years ended September 30, 1995, 1996 and 1997.
NOTE H--INCOME TAXES
Earnings (loss) before income taxes and extraordinary loss in the United
States and outside the United States, along with the components of the income
tax provision, are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Earnings (loss) before income taxes and extraordinary loss:
United States................................................. $ 1,237 5,156 (13,955)
Other nations................................................. 1,960 1,022 2,760
--------- --------- ---------
Total..................................................... $ 3,197 6,178 (11,195)
--------- --------- ---------
--------- --------- ---------
Income tax provision:
Current taxes:
Federal taxes............................................... $ 1,120 2,495 (1,687)
State taxes................................................. 160 (39) 83
Other nations' taxes........................................ 598 403 289
--------- --------- ---------
Total..................................................... 1,878 2,859 (1,315)
Deferred taxes:
Federal taxes............................................... (586) 316 (3,320)
State taxes................................................. (240) 22 (249)
--------- --------- ---------
Total..................................................... (826) 338 (3,569)
--------- --------- ---------
Total income taxes (benefit).............................. $ 1,052 3,197 (4,884)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE H--INCOME TAXES (CONTINUED)
The differences between the effective income tax rate and the U.S. statutory
rate are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- --------- ---------
<S> <C> <C> <C>
U.S. statutory rate........................................................ 35% 35% (35)%
State income taxes, net of federal benefit................................. (2 ) 0 (1)
Non-U.S. tax rate differences.............................................. (2 ) (1) (2)
Canada losses (earnings) for which no taxes were recorded
due to net operating loss carryforwards.................................. (2 ) 1 (5)
1994 Management Stock Ownership Plan expenses.............................. 1 15 0
Other...................................................................... 3 2 (1)
--
--- ---
Effective tax rate..................................................... 33% 52% (44)%
--
--
--- ---
--- ---
</TABLE>
A division of a Canadian subsidiary of Spalding is included in the Evenflo
Segment. The losses (earnings) of this division were not subject to income tax
because of a net operating loss that was available to this subsidiary.
Accordingly, the Company has not recorded any tax expense or benefit for the
years ended September 30, 1995, 1996 and 1997.
Under the asset and liability method prescribed by SFAS 109, deferred income
taxes, net of appropriate valuation allowances, are provided for the temporary
differences between the financial reporting and tax basis of assets and
liabilities at currently enacted tax rates. Temporary differences and
carryforwards are as follows:
<TABLE>
<CAPTION>
CURRENT NET DEFERRED NONCURRENT NET
DEFERRED TAX
TAX ASSET ASSET (LIABILITY)
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
--------- --------- --------- ---------
Accrued liabilities................................. $ 4,969 9,706 0 0
Pension............................................. 0 0 960 1,147
Post-retirement benefits............................ 0 0 478 573
Other comprehensive loss............................ 0 0 543 717
Depreciation........................................ 0 0 (1,239) (1,906)
Intangibles amortization............................ 0 0 (804) (1,087)
Net operating loss carryforwards.................... 0 0 217 438
Other............................................... 955 1,408 176 93
--------- --------- --------- ---------
Total deferred income taxes....................... 5,924 11,114 331 (25)
Valuation allowance on net operating losses......... 0 0 (217) (438)
--------- --------- --------- ---------
Net deferred income taxes......................... $ 5,924 11,114 114 (463)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
On September 30, 1997, the Company had state net operating loss
carryforwards for which deferred tax benefits of $438 have been established. A
valuation allowance in the amount of $438 has been provided on the entire state
net operating loss carryforward portion of the deferred tax benefits.
Spalding contributed certain non-U.S. trademarks (the "Acquired Trademarks),
acquired in 1994 from an affiliate of Abarco, and the related deferred income
tax assets to certain of Spalding's wholly-owned
F-21
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE H--INCOME TAXES (CONTINUED)
subsidiaries, which are included in the accompanying consolidated financial
statements. Under generally accepted accounting principles the Company's portion
of the Acquired Trademarks costing $12,320 was not revalued to fair market value
but was recorded at the affiliate's net book value of $757. The original $757
carrying value of the Acquired Trademarks is being amortized over 40 years for
book purposes while the $12,320 fair market value is being amortized over 15
years for income tax purposes. The $4,047 deferred income tax asset at the date
the trademarks were acquired is being reduced as the Company recognizes the tax
benefit of the difference between the carrying value of $757 and the tax basis
of $12,320. The carrying value of the deferred tax asset at September 30, 1996
and 1997 was $3,407 and $3,138.
On September 30, 1995, 1996 and 1997 undistributed earnings of non-U.S.
subsidiaries of Spalding included in consolidated retained earnings (deficit)
amounted to $2,175, $3,071 and $3,749. The Company intends to continue to
indefinitely reinvest these earnings, which reflect full provision for non-U.S.
income taxes, to expand its international operations. Accordingly, no provision
has been made for U.S. income taxes that might be payable upon repatriation of
such earnings.
As part of the Spalding Recapitalization Agreement, Abarco has indemnified
Spalding for any potential income tax obligations through September 30, 1996.
The Spalding federal income tax returns through September 30, 1993 have been
examined by, and settled with, the Internal Revenue Service ("IRS"). See Note R
for information concerning a potential claim by the IRS that may affect the
Company.
NOTE I--SHAREHOLDERS' EQUITY
1996 EMPLOYEE STOCK OWNERSHIP PLAN. The 1996 Employee Stock Ownership Plan
consists of an aggregate of 9,800,000 shares of common stock of Spalding, which
may be sold or granted as options to key employees of Spalding, including
employees of the Company. The share issuance price and the option price must be
at least 50% of the fair market value of the common shares on the date of the
sale or grant and an option's maximum term is ten years. The option vests
ratably over a five-year period. Any outstanding options will become immediately
exercisable upon a change in control of Spalding. If an employee retires, any
shares owned may be put to Spalding or Spalding can call the shares based on a
fair market value formula, as defined. If an employee dies, becomes permanently
disabled or terminates employment, Spalding can call the shares based on a fair
market value formula, as defined.
In 1997, employees of the Company purchased 385,579 shares for $1,928 and
were granted 1,269,816 common share options at fair market value. As of
September 30, 1997 employees of the Company had an aggregate of 1,655,395 shares
and options outstanding and no options were exercisable; however, options for
253,963 common shares became exercisable on October 1, 1997.
The Company has elected the disclosure-only basis provisions of SFAS No.
123. Accordingly, no compensation cost has been recognized for the options. Had
compensation cost been determined based on the fair market value at the grant
date consistent with the method provided by SFAS No. 123, the Company's net
earnings (loss) for the year ended September 30, 1997 on a pro forma basis would
have been $(6,537) as compared to the reported amount of $(6,311).
F-22
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE I--SHAREHOLDERS' EQUITY (CONTINUED)
The estimated fair value was determined using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1997:
<TABLE>
<S> <C>
Dividend yield..................................................... 0%
Expected volatility................................................ 0%
Risk-free interest rate............................................ 6.38%
Option Term........................................................ 5 years
Estimated fair value of granted options............................ $1.37
</TABLE>
NOTE J--PENSION PLANS
The Company's United States operations have noncontributory, defined benefit
pension plans covering substantially all employees. These plans provide
employees with pension benefits that either are based on age and compensation or
are based on stated amounts for each year of service. The Company's funding
policy is to contribute annually the minimum amounts permitted by the Internal
Revenue Code. Plan assets are invested in a broadly diversified portfolio
consisting primarily of common stock and fixed income securities.
The September 30, 1996 and 1997 funded status of the Company's United States
defined benefit pension plans consists of the following:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
--------- --------- --------- ---------
Actuarial present value of benefits based on
service to date and present pay levels:
Vested.......................................... $7 13,944 12,314 0
Non-vested...................................... 0 1,017 830 78
--------- --------- --------- ---------
Accumulated benefit obligation.................... 7 14,961 13,144 78
Additional amounts related to projected pay
increases....................................... 1 201 62 0
--------- --------- --------- ---------
Total projected benefit obligation based on
service to date................................. 8 15,162 13,206 78
Plan assets at fair value......................... 11 15,654 12,031 22
--------- --------- --------- ---------
Projected benefit obligation in excess of (less
than) plan assets............................... (3) (492) 1,175 56
Unamortized net amount resulting from changes in
plan experience and actuarial assumptions....... 3 2,241 588 (9)
Unrecognized net transition obligation............ 0 406 457 0
Unamortized prior service cost.................... 0 787 905 0
--------- --------- --------- ---------
Pension liability (asset)......................... $0 2,942 3,125 47
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-23
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE J--PENSION PLANS (CONTINUED)
On September 30, 1996 and 1997 the Company's United States pension liability
due currently was $525 and $49, and the long-term portion was $2,600 and $2,940.
The 1995, 1996 and 1997 pension expense of the Company's United States
defined benefit plans includes the following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Benefits earned during the period................................... $ 695 709 927
Interest accrued on benefits earned in prior years.................. 770 816 748
Return on plan assets............................................... (679) (732) (789)
Net amortization.................................................... (81) (126) (108)
--------- --------- ---------
Pension expense of domestic defined benefit pension plans........... $ 705 667 778
--------- --------- ---------
--------- --------- ---------
</TABLE>
Assumptions used in the accounting for United States defined benefit pension
plans as of September 30, 1995, 1996 and 1997 were:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Discount rate............................................................ 7.5% 7.5% 7.0%
Rate of increase in compensation levels.................................. 4.5% 4.5% 4.5%
Expected long-term rate of return on assets.............................. 8.5% 8.5% 8.5%
</TABLE>
The Company's United States operations and most non-U.S. subsidiaries have
separate defined contribution plans. The purpose of these defined contribution
plans is generally to provide additional financial security during retirement by
providing employees with an incentive to make regular savings. Company
contributions to the plans are based on employee contributions or compensation.
The non-U.S. plans are integrated with the benefits required by the laws of the
various countries. The Company's defined contribution plans' expenses totaled
$409 in 1995, $257 in 1996 and $538 in 1997.
NOTE K--POSTRETIREMENT BENEFITS
The Company provides certain postretirement health care and life insurance
benefits for its domestic retired employees and their dependents. Substantially
all of the Company's United States employees may become eligible for those
benefits if they reach normal retirement age while working for the Company. Most
international employees are covered by government sponsored programs, and the
cost to the Company is not significant. The Company does not fund retiree health
care benefits in advance and has the right to modify these plans in the future.
F-24
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE K--POSTRETIREMENT BENEFITS (CONTINUED)
The September 30, 1996 and 1997 status of the postretirement benefit plans
consists of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation based on service to date:
Retirees................................................................. $ 856 857
Fully eligible active participants....................................... 181 210
Other active participants................................................ 257 341
--------- ---------
Accumulated post-retirement benefit obligation............................. 1,294 1,408
Unamortized net amount resulting from changes in plan experience and
actuarial assumptions.................................................... 72 74
--------- ---------
Post-retirement benefit liability.......................................... $ 1,366 1,482
--------- ---------
--------- ---------
</TABLE>
On September 30, 1996 and 1997 the post-retirement benefit liability due
currently was $16 and $12, and the long-term portion was $1,350 and $1,470.
The 1995, 1996 and 1997 postretirement benefit expense includes the
following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Benefits earned during the period..................................... $ 20 23 25
Interest accrued on benefits earned in prior years.................... 90 94 95
Net amortization...................................................... 4 4 (3)
--------- --------- ---------
Post-retirement benefit expense....................................... $ 114 121 117
--------- --------- ---------
--------- --------- ---------
</TABLE>
Assumptions used in the accounting for postretirement benefit plans as of
September 30, 1995, 1996 and 1997 were:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Discount rate......................................................... 7.5% 7.5% 7.0%
Rate of increase in compensation levels............................... 4.5% 4.5% 4.5%
Assumed current year health care cost trend rate
Retirees under 65................................................... 6.0% 5.0% 4.0%
Medicare eligible retirees.......................................... 7.0% 6.0% 5.0%
Assumed ultimate trend rate........................................... 0.0% 0.0% 0.0%
Year ultimate health care cost rate will be achieved.................. 2003 2003 2003
Effect of 1% increase in health care cost trend rates
Accumulated post-retirement benefit obligation...................... $ 60 70 80
Annual aggregate benefit and interest costs......................... $ 10 10 10
</TABLE>
F-25
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE L--LEASE COMMITMENTS
The Company leases certain manufacturing, warehousing and office facilities,
and equipment under various operating lease arrangements expiring periodically
through 2001. The Company has no material capital leases.
The following is a schedule by year of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year at September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 1,717
1999................................................................................. 128
2000................................................................................. 100
2001................................................................................. 65
---------
Total minimum lease payments......................................................... $ 2,010
---------
---------
</TABLE>
Rental expense under operating leases was $449 in 1995, $531 in 1996 and
$1,024 in 1997.
NOTE M--CURRENCY EXCHANGE CONTRACTS
The Company may from time to time enter into forward currency exchange
contracts to protect inventory purchases and affiliated note activities against
changes in future currency exchange rates. A forward currency exchange contract
is an agreement between two parties to buy or sell currency at a set price on a
future date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market using the spot rate at
the end of each accounting period and the change in market value is recorded by
the Company as currency gain or loss. Risk may arise upon entering into these
contracts from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. As of September 30, 1996 and 1997, the Company had
approximately $2,000 and $0 of currency contracts outstanding, with unrealized
currency losses of approximately $7 in 1996. These contracts mature within
twelve months.
NOTE N--CONCENTRATION OF CREDIT RISK
The Company sells a broad range of consumer products in North and South
America, Europe and the Pacific Rim. Concentrations of credit risk with respect
to trade receivables are limited due to the large number of customers comprising
the Company's customer base. Ongoing credit evaluations of customers' financial
condition are performed and, generally no collateral is required. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations. During 1995, 1996 and
1997 the Company's sales to two U.S. customers amounted to 33%, 34% and 37% of
net sales. No other customer exceeded 10% in the years ended September 30, 1995,
1996 and 1997.
NOTE O--CONTINGENCIES
The Company is both a plaintiff and defendant in numerous lawsuits
incidental to its operations, some alleging substantial claims. In addition, the
Company's operations are subject to federal, state and local environmental laws
and regulations. The Company has entered into settlement agreements with the
U.S.
F-26
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE O--CONTINGENCIES (CONTINUED)
Environmental Protection Agency and other parties on several sites and is still
negotiating on other sites. The settlement amounts and estimated liabilities are
not significant.
Management is of the opinion that, after taking into account the merits of
defenses, insurance coverage and established reserves, the ultimate resolution
of these matters will not have a material adverse effect in relation to the
Company's consolidated financial statements.
NOTE P--RELATED PARTY TRANSACTIONS
See Note B--"Summary of Significant Accounting Policies" for transactions
with Spalding, a description of the tax sharing agreement between Spalding and
the Company, certain information concerning the cancellation of Spalding's
long-term incentive compensation plans and descriptions of Spalding's employee
stock ownership plans.
See Note G--"Long-Term Debt to Spalding" for a description of a note payable
to Spalding to enable the Company to purchase certain net assets of Gerry and of
the methodology used by Spalding in allocating to the Company certain guaranteed
bank debt and related deferred financing costs and interest.
See Note H--"Income Taxes" and Note R--"Events Subsequent to the Balance
Sheet Date" for a description of an indemnity arrangement for Spalding from
Abarco, a Spalding and Company shareholder, related to a disagreement with the
IRS, the outcome of which may affect the Company.
NOTE Q--SEGMENT REPORTING
The following schedule presents information about the Company's continuing
operations in different geographic locations:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
GEOGRAPHIC LOCATION
Net sales
United States....................................................... $ 176,143 206,421 261,549
Other nations....................................................... 33,896 30,744 35,194
---------- ---------- ----------
Total net sales................................................... $ 210,039 237,165 296,743
---------- ---------- ----------
---------- ---------- ----------
Earnings (loss) before income taxes and extraordinary loss:
United States....................................................... $ 7,892 14,231 5,683
Other nations....................................................... 2,185 1,196 2,856
Restructuring costs................................................. 0 0 (9,591)
Allocated Spalding expenses......................................... (2,500) (2,500) (2,900)
1994 Management Stock Ownership Plan expense........................ (107) (2,621) 0
Interest expense, net............................................... (4,273) (4,128) (7,243)
---------- ---------- ----------
Earnings (loss) before income taxes and extraordinary loss........ $ 3,197 6,178 (11,195)
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets
United States....................................................... $ 142,083 165,135 240,979
Other nations....................................................... 13,413 12,256 14,746
---------- ---------- ----------
Total assets...................................................... $ 155,496 177,391 255,725
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-27
<PAGE>
EVENFLO COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE R--EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
On May 20, 1998 Spalding reorganized (the "Reorganization") the ownership
structure of all of its subsidiaries included in the Evenflo Segment (see Note
A), except for the Canadian subsidiary, which was completed July 31, 1998. After
the Reorganization was complete, Evenflo Company, Inc. became the parent company
of the other Spalding subsidiaries and divisions of subsidiaries in the Evenflo
Segment. For accounting purposes, the Reorganization was accounted for as a
reorganization of companies under common control in a manner similar to a
pooling-of-interests. As such, certain retroactive reclassifications have been
made to shareholders' equity in the accompanying consolidated financial
statements. The subsequent consolidated financial statements of the Company will
be reported at the historical cost basis of Spalding at the date of the
Reorganization.
On August 20, 1998 KKR 1996 Fund L.P., a limited partnership affiliated with
KKR, acquired 51% of the outstanding common shares of the Company (the "Common
Stock") for a purchase price of $25,500 and acquired cumulative preferred stock
of the Company for a purchase price of $40,000, both acquired from a subsidiary
of Spalding. The subsidiary of Spalding received such newly-authorized preferred
stock as a distribution from the Company. In addition, prior to the acquisition
of Common Stock by KKR 1996 Fund L.P., Great Star Corporation, an affiliate of
Abarco, acquired 6.6% of the outstanding Common Stock for a purchase price of
$3,300 from a subsidiary of Spalding. The Company (i) issued and sold $110,000
aggregate principal amount of senior notes in a private offering, and (ii)
entered into a $100,000 revolving credit facility with a syndicate of banks and
other financial institutions and borrowed $10,000 under the credit facility on
August 20, 1998. The Company applied the proceeds of these transactions to repay
indebtedness to Spalding and to pay transaction fees and expenses of
approximately $10,000.
Spalding is in disagreement with the IRS regarding the valuation of
trademarks purchased from an Abarco affiliate in 1994 (see Note H). The IRS has
completed the field audit for the year in which the transactions occurred and
has preliminarily indicated that, as to the potential effects related to the
Company, a portion of the past amortization deductions relating to such
trademarks may be disallowed. Spalding has informed the Company that it intends
to vigorously contest any assessment from the IRS. If Spalding were unsuccessful
in appealing the assessment relating to these trademarks, a portion of the
Company's deferred tax asset ($3,138 at September 30, 1997) relating to future
amortization of such trademarks owned by the Company would be written off as a
charge to paid-in capital. Under the terms of indemnity provisions contained in
the Recapitalization Agreement, Spalding and the Company believe that any
resulting liability relating to years prior to the Recapitalization would be
indemnified by Abarco, the selling entity. With respect to the 1997 tax year,
the Company believes that its maximum liability, if any, will not exceed $164,
including interest and penalties.
Under an indemnification agreement entered into on August 20, 1998, Spalding
agreed to idemnify the Company for all losses and liabilities of any kind,
including with respect to the above-referenced tax matter, relating to any
non-Company matters and the Company agreed to indemnify Spalding for all losses
and liabilities of any kind relating to the Company's business. In addition,
Spalding agreed to indemnify the Company for the expense of product recalls and
corrective actions relating to products manufactured by the Company prior to
August 20, 1998.
F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evenflo Company, Inc.:
We have audited the accompanying statements of revenues and direct costs of
Gerry Baby Products Company ("Gerry"), a subsidiary of Huffy Corporation, for
the years ended December 31, 1995 and 1996. The statements of revenues and
direct costs are the responsibility of Gerry's management. Our responsibility is
to express an opinion on the statements of revenues and direct costs based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the statements of revenues and direct costs
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of revenues
and direct costs. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall statements of revenues and direct costs presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the statements of revenues and direct costs present fairly, in
all material respects, the revenues and direct costs of Gerry for the years
ended December 31, 1995 and 1996 in conformity with generally accepted
accounting principles.
As more fully described in Note B to the statements of revenues and direct
costs, Gerry has been operated as a subsidiary of Huffy Corporation for the
years ended December 31, 1995 and 1996. Certain expense allocations and indirect
costs have not been included in the accompanying statements of revenues and
direct costs.
DELOITTE & TOUCHE LLP
Tampa, Florida
July 10, 1998
F-29
<PAGE>
GERRY BABY PRODUCTS COMPANY
(A SUBSIDIARY OF HUFFY CORPORATION)
STATEMENTS OF REVENUES AND DIRECT COSTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Net sales................................................................................. $ 114,437 124,064
Cost of sales........................................................................... 97,155 104,845
---------- ----------
Gross profit.............................................................................. 17,282 19,219
Direct selling, general and administrative expenses..................................... 14,499 15,801
---------- ----------
Excess of revenues over direct costs...................................................... $ 2,783 3,418
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Statements of Revenues and Direct Costs.
F-30
<PAGE>
GERRY BABY PRODUCTS COMPANY
(A SUBSIDIARY OF HUFFY CORPORATION)
NOTES TO STATEMENTS OF REVENUES AND DIRECT COSTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE A--DESCRIPTION OF BUSINESS
On April 21, 1997, Evenflo Company, Inc. ("Evenflo"), acquired certain net
assets of Gerry Baby Products Company ("Gerry"), a subsidiary of Huffy
Corporation ("Huffy") for $68,652. Gerry manufactures and/or markets specialty
juvenile products including baby bath, health and safety items, monitors and
other baby care products and accessories, as well as juvenile car seats,
strollers, high chairs, cribs, dressers and changing tables, gates and soft
carriers and frame carriers marketed under the GERRY and SNUGLI brand names.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying statements of revenues and direct
costs reflect the operations of Gerry, operating as a wholly-owned subsidiary of
Huffy, and may not necessarily be indicative of the financial results had Gerry
been operating as a separate entity. Allocations to Gerry for certain expenses
such as interest, portions of product liability costs, legal, insurance,
employee benefits, corporate overhead and income taxes by Huffy are not included
in these statements for the years ended December 31, 1995 and 1996. Accordingly,
the accompanying statements show only the revenues and direct costs for those
fiscal years.
INVENTORIES. Inventories are valued at the lower of cost (first-in,
first-out) or market.
PROPERTY, PLANT AND EQUIPMENT. Depreciation expense was approximately
$3,200 and $3,600 for the years ended December 31, 1995 and 1996.
REVENUE RECOGNITION. Gerry recognizes revenue from product sales when the
goods are shipped and title passes to the customer.
USE OF ESTIMATES. The preparation of the accompanying statements of
revenues and direct costs in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of revenues and direct costs during the reporting period.
Actual results could differ from those estimated.
NOTE C--COMMITMENTS AND CONTINGENCIES
Gerry leases certain Colorado manufacturing, warehousing, and office
facilities under a noncancelable lease agreement which expires October 21, 1998.
This lease generally contains a requirement for Gerry to pay taxes, insurance,
maintenance and other expenses in addition to the minimum base rentals. Rental
expense under the operating lease was approximately $1,500 and $1,400 for the
years ended December 31, 1995 and 1996.
In connection with the Evenflo purchase, the Gerry Colorado operations have
been relocated to the Evenflo Ohio and Georgia facilities and the Colorado lease
was cancelled on July 10, 1998.
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE 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 A SOLICITATION OF AN OFFER TO BUY THE
EXCHANGE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING THE
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR 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
Summary Historical and Pro Forma Consolidated
Financial Data................................ 11
Risk Factors.................................... 14
Transactions.................................... 26
Use of Proceeds................................. 28
Capitalization.................................. 28
Pro Forma Condensed Consolidated Financial
Statements.................................... 29
Selected Consolidated Historical Financial
Data.......................................... 39
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 42
Business........................................ 55
Management...................................... 70
Certain Relationships and Related
Transactions.................................. 76
Principal Shareholders.......................... 78
Description of the Credit Facility.............. 80
Description of Capital Stock.................... 81
The Exchange Offer.............................. 85
Description of the Exchange Notes............... 96
Plan of Distribution............................ 134
Legal Matters................................... 135
Experts......................................... 135
Index to Financial Statements................... F-1
</TABLE>
EVENFLO COMPANY, INC.
OFFER TO EXCHANGE UP TO
$110,000,000 OF ITS 11 3/4%
SERIES B
SENIOR NOTES DUE 2006
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT,
FOR ANY AND ALL
OF ITS OUTSTANDING
11 3/4% SENIOR NOTES DUE 2006
-----------------
PROSPECTUS
-----------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, desinterested director vote, stockholder vote, agreement or
otherwise. The Registrant's Restated Certificate of Incorporation provides that
the Registrant will indemnify directors and officers to the fullest extent
permitted by Delaware law for and against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement reasonably incurred in
connection with any threatened, pending or completed action, suit or proceeding
(brought in the right of the Registrant or otherwise) by a third party or by
such officer or director (in the latter case, only after authorization from the
Board of Directors of the Registrant). The Restated Certificate of Incorporation
also allows the Registrant to indemnify any person that is an employee or agent
to the fullest extent permitted by Delaware law for and against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding (brought in the right of the Registrant or
otherwise). The Registrant has also obtained officers' and directors' liability
insurance which insures against liabilities that officers and directors of the
Registrant, in such capacities, may incur.
Such 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except for liability (i) for any
transaction from which the director derives an improper personal benefit, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) for improper payment of dividends or
redemptions of shares, or (iv) for any breach of a director's duty of loyalty to
the company or its stockholders. Article Sixth of the Registrant's Restated
Certificate of Incorporation includes such a provision.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*2.1 Stock Purchase Agreement dated as of July 30, 1998, between KKR 1996 Fund L.P. and Lisco, Inc.
*2.2 Stock Purchase Agreement, dated as of August 19, 1998, between Great Star Corporation and Lisco, Inc.
*3.1 Restated Certificate of Incorporation of Evenflo Company, Inc. (the "Company").
*3.2 By-Laws of the Company.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
*4.1 Indenture dated as of August 20, 1998, between the Company and Marine Midland Bank, as Trustee (the
"Indenture").
<C> <S>
*4.2 Form of 11 3/4% Senior Note due 2006 (included in Exhibit 4.1).
*4.3 Form of 11 3/4% Series B Senior Note due 2006 (included in Exhibit 4.1).
*4.4 Registration Rights Agreement dated as of August 20, 1998, among the Company, Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and BancAmerica
Robertson Stephens.
**5 Opinion of Simpson Thacher & Bartlett.
*10.1 Credit Facility, dated as of August 20, 1998, among the Company, the several lenders from time to time
parties thereto, and Bank of America National Trust and Savings Association, as administrative agent.
*10.2 Stockholders' Agreement, dated as of August 20, 1998, among the Company, KKR 1996 Fund L.P. and Lisco,
Inc.
*10.3 Stockholders' Agreement, dated as of August 20, 1998, among the Company, KKR 1996 Fund L.P. and Great
Star Corporation.
*10.4 Registration Rights Agreement, dated as of August 20, 1998, between the Company and KKR 1996 Fund L.P.
*10.5 Indemnity Agreement, dated as of August 20, 1998, between the Company and Evenflo & Spalding Holdings
Corporation.
*10.6 Transition Services Agreement, dated as of August 20, 1998, between the Company and Evenflo & Spalding
Holdings Corporation.
*10.7 Tax Allocation and Indemnification Agreement, dated as of August 20, 1998, between the Company and
Evenflo & Spalding Holdings Corporation.
*12 Computation of Ratio of Earnings to Fixed Charges.
*21 List of Subsidiaries.
**23.1 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as Exhibit 5 hereto).
*23.2 Consent of Deloitte & Touche LLP, independent auditors, with respect to the Company.
*23.3 Consent of Deloitte & Touche LLP, independent auditors, with respect to Gerry Baby Products Company.
*24 Powers of Attorney (included on page II-6).
*25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Marine Midland Bank, as
Trustee.
*27.1 Financial Data Schedule for the year ended September 30, 1998.
*27.2 Financial Data Schedule for the nine months ended June 30, 1998.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules
Schedule II--Valuation Accounts and Reserves
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereto), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed to be underwriters, in addition to the information
called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding undertaking or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other
II-3
<PAGE>
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on September 30, 1998.
<TABLE>
<S> <C> <C>
EVENFLO COMPANY, INC.
By: /s/ RICHARD W. FRANK
-----------------------------------------
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 30th day of September, 1998 by the following
persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
Chairman of the Board of
/s/ RICHARD W. FRANK Directors and Chief
- ------------------------------ Executive Officer
Richard W. Frank (Principal Executive
Office)
Senior Vice
/s/ DARYLE A. LOVETT President--Finance
- ------------------------------ (Principal Financial and
Daryle A. Lovett Accounting Officer)
/s/ HENRY R. KRAVIS Director
- ------------------------------
Henry R. Kravis
Director
- ------------------------------
George R. Roberts
/s/ MICHAEL T. TOKARZ Director
- ------------------------------
Michael T. Tokarz
/s/ MARC S. LIPSCHULTZ Director
- ------------------------------
Marc S. Lipschultz
Director
- ------------------------------
Edwin L. Artzt
*By: /s/ RONALD P. MORAN
-------------------------
ATTORNEY-IN-FACT
II-5
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Evenflo Company, Inc., do
hereby constitute and appoint Daryle A. Lovett and Ronald P. Moran and each of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents may deem necessary or advisable
to enable said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but
without limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm all that
said attorneys and agents shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 30th day of September, 1998 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
Chairman of the Board of
/s/ RICHARD W. FRANK Directors and Chief
- ------------------------------ Executive Officer
Richard W. Frank (Principal Executive
Officer)
Senior Vice
/s/ DARYLE A. LOVETT President--Finance
- ------------------------------ (Principal Financial and
Daryle A. Lovett Accounting Officer)
/s/ HENRY R. KRAVIS
- ------------------------------ Director
Henry R. Kravis
- ------------------------------ Director
George R. Roberts
/s/ MICHAEL T. TOKARZ
- ------------------------------ Director
Michael T. Tokarz
/s/ MARC S. LIPSCHULTZ
- ------------------------------ Director
Marc S. Lipschultz
- ------------------------------ Director
Edwin L. Artzt
</TABLE>
II-6
<PAGE>
EVENFLO COMPANY, INC.
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II - VALUATION ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
YEAR ENDED SEPTEMBER 30, 1997 9/30/96 ADDITIONS DEDUCTIONS 9/30/97
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Doubtful accounts and allowances..................................
LIFO allowance....................................................
Deferred tax assets valuation allowance...........................
Accumulated amortization of goodwill and other intangibles........
Accumulated amortization of software..............................
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
YEAR ENDED SEPTEMBER 30, 1996 9/30/95 ADDITIONS DEDUCTIONS 9/30/96
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Doubtful accounts and allowances..................................
LIFO allowance....................................................
Deferred tax assets valuation allowance...........................
Accumulated amortization of goodwill and other intangibles........
Accumulated amortization of software..............................
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
YEAR ENDED SEPTEMBER 30, 1995 9/30/94 ADDITIONS DEDUCTIONS 9/30/95
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Doubtful accounts and allowances..................................
LIFO allowance....................................................
Deferred tax assets valuation allowance...........................
Accumulated amortization of goodwill and other intangibles........
Accumulated amortization of software..............................
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT PAGE NO.
- --------- --------------------------------------------------------------------------------------------- -------------
<C> <S> <C>
*2.1 Stock Purchase Agreement dated as of July 30, 1998, between KKR 1996 Fund L.P. and Lisco,
Inc.
*2.2 Stock Purchase Agreement, dated as of August 19, 1998, between Great Star Corporation and
Lisco, Inc.
*3.1 Restated Certificate of Incorporation of Evenflo Company, Inc. (the "Company").
*3.2 By-Laws of the Company.
*4.1 Indenture dated as of August 20, 1998, between the Company and Marine Midland Bank, as
Trustee (the "Indenture").
*4.2 Form of 11% Senior Note due 2006 (included in Exhibit4.1).
*4.3 Form of 11% Series B Senior Note due 2006 (included in Exhibit4.1).
*4.4 Registration Rights Agreement dated as of August 20, 1998, among the Company, Donaldson,
Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated
and BancAmerica Robertson Stephens.
**5 Opinion of Simpson Thacher & Bartlett.
*10.1 Credit Facility, dated as of August 20, 1998, among the Company, the several lenders from
time to time parties thereto, and Bank of America National Trust and Savings Association, as
administrative agent.
*10.2 Stockholders' Agreement, dated as of August 20, 1998, among the Company, KKR 1996 Fund L.P.
and Lisco, Inc.
*10.3 Stockholders' Agreement, dated as of August 20, 1998, among the Company, KKR 1996 Fund L.P.
and Great Star Corporation.
*10.4 Registration Rights Agreement, dated as of August 20, 1998, between the Company and KKR 1996
Fund L.P.
*10.5 Indemnity Agreement, dated as of August 20, 1998, between the Company and Evenflo & Spalding
Holdings Corporation.
*10.6 Transition Services Agreement, dated as of August 20, 1998, between the Company and Evenflo &
Spalding Holdings Corporation.
*10.7 Tax Allocation and Indemnification Agreement, dated as of August 20, 1998, between the
Company and Evenflo & Spalding Holdings Corporation.
*12 Computation of Ratio of Earnings to Fixed Charges.
*21 List of Subsidiaries.
**23.1 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as Exhibit 5
hereto).
*23.2 Consent of Deloitte & Touche LLP, independent auditors, with respect to the Company.
*23.3 Consent of Deloitte & Touche LLP, independent auditors, with respect to Gerry Baby Products
Company.
*24 Powers of Attorney (included on page II-6).
*25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Marine Midland
Bank, as Trustee.
*27.1 Financial Data Schedule for the year ended September 30, 1997.
*27.2 Financial Data Schedule for the nine months ended June 30, 1998.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
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* Filed herewith.
** To be filed by amendment.
<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of July 30, 1998
between KKR 1996 FUND L.P. ("Buyer") and LISCO, INC. ("Seller"), a wholly owned
subsidiary of EVENFLO & SPALDING HOLDINGS CORPORATION ("E&S").
RECITALS
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, 5,100,000 shares of Class A Common Stock ("Common Stock"), par
value $0.01 per share (the "Common Shares") and 400,000 shares of preferred
stock having terms to be mutually agreed upon by Buyer and Seller (the
"Preferred Stock"), par value $0.01 per share (the "Preferred Shares" and,
together with the Common Shares, the "Shares") of Evenflo Company, Inc. (the
"Company"), a Delaware corporation and, as of the date hereof, a wholly owned
subsidiary of Seller.
WHEREAS, in connection with the transactions contemplated by this
Agreement, Buyer, Seller and the Company will enter into a Stockholders'
Agreement (the "Stockholders' Agreement") dated as of the date hereof to provide
for certain matters relating to the respective holdings by Buyer and Seller of
Common Stock.
WHEREAS, in connection with the transactions contemplated by this
Agreement, the Company intends to (i) enter into a $100 million revolving credit
facility and (ii) issue and sell up to $110 million aggregate principal amount
of senior notes of the Company in a private placement transaction ((i) and (ii)
together, the "Financing").
WHEREAS, in connection with the Financing and the transactions
contemplated by this Agreement, the Company and E&S will enter into an Indemnity
Agreement (the "Indemnity Agreement") dated as of the date hereof pursuant to
which E&S will agree to indemnify the Company for all losses and liabilities of
any kind relating to any non-Company related matters and the Company will agree
to indemnify E&S for all losses and liabilities of any kind relating to the
business of the Company.
NOW, THEREFORE, in consideration of the foregoing and the
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE 1
PURCHASE AND SALE
Section 1.1 Purchase and Sale of the Shares. On the terms and subject
to the conditions of this Agreement, Seller shall sell, transfer and deliver to
Buyer, and Buyer shall purchase from Seller, the Common Shares for a purchase
price of $25,500,000 and the Preferred Shares for a purchase price of
$40,000,000 (the aggregate of such payments being referred to herein as the
"Purchase Price"), payable in cash as set forth in Section 1.2 below.
<PAGE>
Section 1.2 Closing. The closing (the "Closing") of the purchase and
sale of the Shares shall be held at the offices of Simpson Thacher & Bartlett at
a date and time to be mutually agreed upon by the parties (the "Closing Date").
At the Closing, (i) Buyer shall deliver to Seller, by wire transfer to a bank
account designated in writing by Seller, immediately available funds in an
amount equal to the Purchase Price and (ii) Seller shall deliver to Buyer
certificates representing the Shares duly endorsed in blank or accompanied by
stock powers duly endorsed in blank in proper form for transfer, with
appropriate transfer stamps, if any, affixed.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 2.1 Authority. Seller is a corporation duly organized and
validly existing under the jurisdiction of its incorporation. Seller has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to be taken by Seller to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by Seller and constitutes a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms.
Section 2.2 The Shares. Seller has good and valid title to the Shares,
free and clear of any liens, claims, encumbrances, security interests, options,
pre-emptive, drag-along or tag-along rights, rights of first refusal or first
offer, charges or restrictions of any kind (collectively, "Liens"). Assuming
Buyer has the requisite power and authority to be the lawful owner of the
Shares, upon delivery to Buyer at the Closing of certificates representing the
Shares, duly endorsed by Seller to Buyer for transfer pursuant to Section 1.1
and upon Seller's receipt of the Purchase Price, good and valid title to the
Shares will pass to Buyer, free and clear of any Liens, except for Liens arising
from acts of Buyer.
Section 2.3 Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement requires no order, license, consent,
authorization or approval of, or exemption by, or action by or in respect of, or
notice to, or filing or registration with, any governmental body, agency or
official except such as have been obtained or except where the failure to obtain
any such order, license, consent, authorization, approval or exemption or give
any such notice or make any filing or registration would not reasonably be
expected to adversely affect the ability of Seller to perform its obligations
hereunder.
Section 2.4 Noncontravention. The execution, delivery and performance
by Seller of this Agreement does not and will not (i) violate the certificate of
incorporation or bylaws of Seller, (ii) violate any law, rule, regulation,
judgment, injunction, order or decree applicable to or binding upon Seller,
(iii) require any consent or other action by any person
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under, constitute a default under (with due notice or lapse of time or both), or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of Seller or to a loss of any benefit to which Seller is entitled
under any provision of any agreement or other instrument binding upon Seller or
any of its assets or properties or (iv) result in the creation or imposition of
any material Lien on any property or asset of Seller.
Section 2.5 Capitalization. The authorized capital stock of the
Company as of the date of the Closing will consist of 20,000,000 shares of
Common Stock and 10,000,000 shares of preferred stock, $0.01 par value per
share. As of the date hereof, (i) 1,000 shares of Common Stock are issued and
outstanding, all of which are owned by Seller and (ii) no shares of preferred
stock are issued and outstanding. Other than the 1,000 shares of issued and
outstanding Common Stock, there are no outstanding (i) shares of capital stock
or voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (iii) options or other rights to acquire from the Company, or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company or (iv) obligation of the Company to repurchase or
otherwise acquire or retire any shares of capital stock or any convertible
securities, rights or options of the type described in clause (i), (ii), or
(iii).
Section 2.6 Litigation. There is no action, suit, investigation or
proceeding pending against or, to the knowledge of Seller, threatened against or
affecting Seller before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
Section 2.7 Financial Statements and Condition. (a) Prior to the
execution of this Agreement, Seller has delivered to Buyer true and complete
copies of the following financial statements (the "Financial Statements"):
(i) the unaudited condensed combined balance sheet of the
Company and its consolidated subsidiaries as of March 31,
1998 (the "Balance Sheet") and the related unaudited
condensed statement of combined earnings for the portion of
the fiscal year then ended then ended; and
(ii) the audited combined balance sheets of the Company and its
consolidated subsidiaries as of September 30, 1996 and 1997
and the related audited statement of earnings, shareholders'
equity and cash flows for each of the fiscal years then
ended, together with a true and correct copy of the report
on such audited information by Deloitte & Touche LLP.
Except as set forth in any notes thereto, all such Financial Statements
(including the notes thereto) were prepared in accordance with United States
generally accepted accounting principles ("GAAP") and fairly present in all
material respects the consolidated financial position and results of operations
and cash flows of the Company and its consolidated
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subsidiaries, as of the respective dates thereof and for the respective periods
covered thereby, subject, in the case of interim statements (which do not
contain any notes), to normal year-end adjustments.
(b) Except for the transactions contemplated hereby (including the
transactions related to the Financing), since March 31, 1998, the business of
the Company has been operated in all material respects in the ordinary course
and there has not been any material adverse change in the business, assets,
results of operations or financial condition of the Company and its
subsidiaries, taken as a whole.
Section 2.8 Absence of Undisclosed Liabilities. Neither the Company
nor any subsidiary of the Company has any liabilities or obligations, whether
currently due, accrued, direct or indirect, matured or unmatured, absolute,
contingent or otherwise, of a nature required under GAAP to be reflected or
reserved against in the notes or schedules thereto, other than: (i) liabilities
fully and adequately reflected or reserved against in the Balance Sheet, (ii)
liabilities incurred in the ordinary course of business and consistent with past
practice since September 30, 1997, and (iii) liabilities incurred in connection
with the acquisition of Gerry Baby Products Company.
Section 2.9 Taxes. (a) The Company has duly and timely filed (within
applicable extension periods) all material Tax Returns required to be filed by
it and has paid or adequately provided for in the Financial Statements all Taxes
that are due and payable, regardless of whether such Taxes are shown as due on
such Tax Returns. No deficiencies for any Taxes have been asserted or assessed
for which there is not an adequate reserve reflected in the Financial
Statements. Except as previously disclosed in writing to Buyer, the Company has
not entered into any agreement to extend or waive the limitations period
applicable to the filing of any Tax Return or the assertion or assessment of any
liability for Taxes. The Company is not a party to any Tax sharing, Tax
indemnity or other agreement relating to Taxes.
(b) "Tax" or "Taxes" mean all income, gross receipts, gains, sales,
use, employment, franchise, profits, excise, property, value added and other
taxes, fees, stamp taxes and duties, assessments or charges of any kind,
together with any interest and penalties, additions to tax or additional amounts
imposed by any taxing authority with respect thereto and the term "Tax Returns"
means any and all returns, reports and information statements with respect to
Taxes required to be filed with the IRS or other Tax authority, whether domestic
or foreign, including, without limitation, any and all consolidated, combined
and unitary tax returns.
Section 2.10 Full Disclosure. Seller has made or caused to be made
available to Buyer all material information and complete and accurate copies of
all material documents, files, records and papers relating to the Company and in
possession of Seller, the Company, or any subsidiary of the Company relating to
the business, assets, results of operations or financial condition of the
Company and its subsidiaries. Seller has not knowingly withheld and information
or documents, files, records or papers necessary to make the representations and
warranties set forth in this Article 2, in the context in which they were made,
not
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<PAGE>
misleading in any material respect. To the knowledge of Seller, the Company has
not furnished any information, documents, files, records papers or related
materials to Buyer that contain any untrue statement of a material fact.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 3.1 Authority. Buyer is a limited partnership duly organized
and validly existing under the jurisdiction of its formation. Buyer has all
requisite power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. All acts and other
proceedings required to be taken by Buyer to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement has been
duly executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Section 3.2 Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement requires no order, license, consent,
authorization or approval of, or exemption by, or action by or in respect of, or
notice to, or filing or registration with, any governmental body, agency or
official except such as have been obtained or except where the failure to obtain
any such order, license, consent, authorization, approval or exemption or give
any such notice or make any filing or registration would not reasonably be
expected to adversely affect the ability of Buyer to perform its obligations
hereunder.
Section 3.3 Noncontravention. The execution, delivery and performance
by Buyer of this Agreement does not and will not (i) violate the certificate of
limited partnership or agreement of limited partnership of Buyer, (ii) violate
any law, rule, regulation, judgment, injunction, order or decree applicable to
or binding upon Buyer, (iii) require any consent or other action by any person
under, constitute a default under (with due notice or lapse of time or both), or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of Buyer or to a loss of any benefit to which Buyer is entitled
under any provision of any agreement or other instrument binding upon Buyer or
any of its assets or properties or (iv) result in the creation or imposition of
any material Lien on any property or asset of Buyer.
Section 3.4 Securities Act. The Shares purchased by Buyer pursuant to
this Agreement are being acquired for investment only and not with a view to any
public distribution thereof, and Buyer shall not offer to sell or otherwise
dispose of the Shares so acquired by it in violation of any registration
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
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<PAGE>
Section 3.5 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer, threatened against or
affecting Buyer before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
ARTICLE 4
CONDITIONS TO CLOSING
Section 4.1 Conditions to Obligations of Buyer and Seller. The
obligations of Buyer and Seller to consummate the transactions contemplated
hereby are subject to the satisfaction of the following conditions:
(a) No provision of any applicable law, rule or regulation and no
judgment, injunction, order or decree by any governmental entity of
competent jurisdiction shall prohibit the consummation of the transactions
contemplated hereby.
(b) All material actions by or in respect of, or filings with, any
governmental body, agency, official or authority required to permit the
consummation of the Closing shall have been taken, made or obtained.
(c) The Company shall have received the proceeds of the Financing on
terms reasonably satisfactory to Seller and Buyer.
(d) Seller and Buyer shall have received from a qualified valuation
firm (who may be the same firm retained to deliver a solvency letter to the
financial institutions providing the senior debt portion of the Financing)
a letter in form and substance reasonably satisfactory to Buyer and Seller
as to the solvency of the Seller and the Company and its subsidiaries after
giving effect to the Financing, the Preferred Stock Investment and the
transactions contemplated by this Agreement.
(e) Each of Buyer and Seller shall be satisfied in their sole
discretion with the terms and conditions of the Preferred Stock.
(f) Each of the Company and E&S shall have executed and delivered the
Indemnity Agreement substantially in the form attached hereto as Exhibit A.
(g) Each of the Company and E&S shall have executed and delivered the
Employee Matters Agreement in a form reasonably satisfactory to both
parties.
(h) Each of the Company and E&S shall have executed and delivered the
Tax Disaffiliation Agreement in a form reasonably satisfactory to both
parties.
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Section 4.2 Conditions to Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated hereby is subject to the
satisfaction of the following further conditions:
(a) (i) Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing Date and (ii) the representations and warranties of Seller
contained in this Agreement shall be true in all material respects when
made and at and as of the Closing Date, as if made at and as of such date.
(b) The representations and warranties of Seller in the Agreement that
are qualified as to materiality shall be true and correct in all respects
as of the date hereof and at and as of the Closing as if made at and as of
such time, other than representations and warranties that speak as of a
specific date or time (which need only be true and correct in all respects
as of such date and time), and the representations and warranties of Seller
in this Agreement that are not qualified by materiality shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing as if made at and as of such time, other than representations and
warranties that speak as of a specific date or time (which need only be
true and correct in all material respects as of such date or time).
(c) Each of the Company and Seller shall have executed and delivered
the Stockholders' Agreement substantially in the form attached hereto as
Exhibit B.
(d) The Company shall have executed and delivered the Registration
Rights Agreement substantially in the form attached hereto as Exhibit C.
(e) The Company shall have executed and delivered a Management Fee
Agreement in a form reasonably acceptable to Buyer and the Company.
(f) The Company shall have executed and delivered a Stock Ownership
Agreement in a form reasonably acceptable to Buyer and the Company.
(g) The Company shall have paid all intercompany receivables owing to
E&S and its subsidiaries.
Section 4.3 Conditions to Obligation of Seller. The obligation of
Seller to consummate the transactions contemplated hereby is subject to the
satisfaction of the following further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Closing Date and (ii) the representations and warranties of Buyer contained
in this Agreement shall be true in all material respects when made and at
and as of the Closing Date, as if made at and as of such date.
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<PAGE>
(b) Each of the Company and Buyer shall have executed and delivered
the Stockholders' Agreement.
(c) Seller shall have received from an independent investment banking
institution a favorable opinion as to the fairness, from a financial point
of view, of the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF SELLER AND BUYER
Section 5.1 Further Assurances. Seller and Buyer agree that, from time
to time, whether on or after the Closing Date, each of them will execute and
deliver such further instruments of conveyance and transfer and take such other
actions as may be necessary to carry out the purposes and intents of this
Agreement.
Section 5.2 Conduct of Business. Except as otherwise contemplated by
the transactions provided for herein or the terms hereof, pending the Closing,
Seller shall cause the Company to operate and carry on its business in all
material respects only in the ordinary course consistent with past practice.
Section 5.3 No Inconsistent Action. Subject to Sections 7.1 and 7.2,
Seller, Buyer and the Company shall not take any action inconsistent with their
obligations under this Agreement or which could materially hinder or delay the
consummation of the transactions contemplated by this Agreement.
ARTICLE 6
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES; COMPETITION
Section 6.1 Survival. The representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall not
survive the Closing. This Section 6.1 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Closing.
Section 6.2 Competition. Without the express written consent of Buyer,
for so long as Buyer holds shares of Common Stock, none of Seller or any of its
affiliates (other than the Company and its direct and indirect subsidiaries)
shall directly or indirectly acquire any interest, or invest in any manner, in
any individual, corporation, limited liability company, partnership, trust,
joint stock company, business trust, unincorporated association, joint venture,
governmental authority or other legal entity of any nature whatsoever engaged in
the manufacture or marketing of juvenile products, whether located in or outside
of the United States.
ARTICLE 7
TERMINATION
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Section 7.1 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by either Seller, on the one hand, or Buyer, on the other hand, if
the Closing shall not have been consummated as of the close of business on
September 30, 1998; or
(c) by either Seller, on the one hand, or Buyer, on the other hand, if
consummation of the transactions contemplated hereby would violate any
non-appealable final order, decree or judgment of any court or governmental
body having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses 7.1(b) or (c)
shall promptly give notice of such termination to the other party.
Section 7.2 Effect of Termination. If this Agreement is terminated as
permitted by Section 7.1, such termination shall be without liability of any
party (or any stockholder, general partner, limited partner, member, director,
officer, employee, agent, consultant or representative of such party) to the
other party to this Agreement and this Agreement shall become void and of no
further force or effect; provided that if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance of
the obligations of the other party, (ii) failure to perform a covenant of this
Agreement or (iii) material breach by either party hereto of any representation
or warranty or agreement contained herein, such party shall be liable for such
breach prior to such termination. Notwithstanding the foregoing, the provisions
of Sections 8.2, 8.5, 8.6 and 8.7 shall survive any termination hereof pursuant
to Section 7.1.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
shall be deemed given when so delivered by hand, telexed, cabled or telecopied,
or if mailed, three business days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
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(a) if to Buyer,
KKR 1996 Fund L.P.
9 West 57th Street
New York, New York 10019
Attention: Michael T. Tokarz
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
(b) if to Seller,
Lisco, Inc.
c/o Spalding & Evenflo Companies, Inc.
425 Meadow Street
Chicopee, Massachusetts 01021-0901
Attention: General Counsel
Section 8.2 Expenses. Whether or not the transactions contemplated
hereby are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses.
Section 8.3 Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.4 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, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto (it being agreed that a merger
shall not be deemed an assignment requiring the consent of any Buyer).
Section 8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
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Section 8.6 Jurisdiction. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 8.1 shall be deemed
effective service of process on such party.
Section 8.7 Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 8.8 Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement shall confer upon any person other than the parties
hereto any rights or remedies hereunder.
Section 8.9 Entire Agreement. This Agreement, together with the
Stockholders' Agreement, constitutes the entire agreement between the parties
with respect to the subject mater of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.
Section 8.10 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 8.11 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
deemed to be excluded from this Agreement and the balance of this Agreement
shall be interpreted as if such provision were so excluded and shall be enforced
in accordance with its terms to the maximum extent permitted by law.
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IN WITNESS WHEREOF, each of the parties has duly executed this
Agreement or caused it to be duly executed as of the date first written above.
KKR 1996 FUND L.P.
By: KKR Associates 1996 L.P., its general partner
By: KKR 1996 GP LLC, its general partner
By:___________________________
LISCO, INC.
By:_________________________
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Exhibit 2.2
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of
August 19, 1998, is by and between Lisco, Inc., a Delaware corporation
("Lisco"), and Great Star Corporation, a corporation incorporated in the British
Virgin Islands ("Buyer").
WHEREAS, Buyer desires to purchase from Lisco, and Lisco desires to
sell to Buyer, shares of Class A common stock, par value $1.00 per share (the
"Common Stock"), of Evenflo Company, Inc. (the "Company") upon the terms and
subject to the conditions set forth herein; and
WHEREAS, at the Closing (as defined in Section 1.2), Buyer shall enter
into a Stockholders' Agreement substantially in the form set forth as Exhibit A
hereto (the "Stockholders' Agreement"), dated as of the Closing Date (as defined
in Section 1.2) by and between Buyer, the Company and KKR 1996 Fund L.P. (the
"KKR Fund").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Sale of Stock; Closing
Section 1.1 Purchase and Sale. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions set forth herein, at the Closing (as defined in Section 1.2),
(i) Lisco will sell to Buyer, and Buyer will purchase from Lisco, 660,000 shares
of Common Stock (the "Shares"). In consideration of the shares of Common Stock
to be delivered at the Closing, Buyer will wire transfer, in immediately
available funds, to the account specified by Lisco, $3,300,000 in respect of the
Shares purchased by Buyer. Lisco shall at the Closing deliver to Buyer share
certificates evidencing its ownership of the shares of Common Stock purchased by
Buyer duly endorsed in favor of Buyer.
Section 1.2 Time and Place of Closing. Unless this Agreement shall
have been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 6.1 hereof, the closing with respect to the
purchase and sale of the Shares (the "Closing") shall take place, subject to the
provisions of Article V hereof, at the offices of Simpson Thacher & Bartlett at
such time and date to be designated by Lisco in a written notice to Buyer not
less than 3 business days in advance of the Closing or such other date as may be
agreed upon by the parties. The actual time and date of the Closing are herein
referred to as the "Closing Date".
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ARTICLE II
Representations, Warranties and Agreements of Lisco
Lisco hereby represents, warrants and agrees as follows:
(a) Lisco is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware.
(b) Lisco has all requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance of Lisco's obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate proceedings on the part of Lisco and its Board of Directors
and stockholders and no other corporate action on the part of Lisco is necessary
for the execution, delivery and performance by Lisco of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Lisco, and assuming the due execution hereof by
Buyer, this Agreement constitutes the legal, valid and binding obligation of
Lisco in accordance with its terms except to the extent that its enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting creditors' rights generally and by general equity
principles.
(c) Lisco has good and valid title to the Shares, free and clear of
any liens, claims, encumbrances, security interests, options, pre-emptive,
drag-along or tag-along rights, rights of first refusal or first offer, charges
or restrictions of any kind (collectively, "Liens"). Assuming Buyer has the
requisite power and authority to be the lawful owner of the Shares, upon
delivery to Buyer at the Closing of certificates representing the Shares, duly
endorsed by Lisco to Buyer for transfer pursuant to Section 1.1 and upon Lisco's
receipt of the Purchase Price, good and valid title to the Shares will pass to
Buyer, free and clear of any Liens, except for Liens arising from acts of Buyer.
(d) The execution, delivery and performance by Lisco of this Agreement
requires no order, license, consent, authorization or approval of, or exemption
by, or action by or in respect of, or notice to, or filing or registration with,
any governmental body, agency or official except such as have been obtained or
except where the failure to obtain any such order, license, consent,
authorization, approval or exemption or give any such notice or make any filing
or registration would not reasonably be expected to adversely affect the ability
of Lisco to perform its obligations hereunder.
(e) The execution, delivery and performance by Lisco of this Agreement
does not and will not (i) violate the certificate of incorporation or bylaws of
Lisco, (ii) violate any law, rule, regulation, judgment, injunction, order or
decree applicable to or binding upon Lisco, (iii) require any consent or other
action by any person under, constitute a default under (with due notice or lapse
of time or both), or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Lisco or to a loss of any benefit to
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which Lisco is entitled under any provision of any agreement or other instrument
binding upon Lisco or any of its assets or properties or (iv) result in the
creation or imposition of any material Lien on any property or asset of Lisco.
ARTICLE III
Representations, Warranties and Agreements of Buyer
Buyer hereby represents, warrants and agrees as follows:
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction.
(b) Buyer has all requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance of Buyer's obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate proceedings on the part of Buyer and its Board of Directors
and stockholders and no other corporate action on the part of Buyer is necessary
for the execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Buyer, and assuming the due execution hereof by
Lisco, this Agreement constitutes the legal, valid and binding obligation of
Buyer in accordance with its terms except to the extent that its enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting creditors' rights generally and by general equity
principles.
(c) The execution, delivery and performance by Buyer of this Agreement
requires no order, license, consent, authorization or approval of, or exemption
by, or action by or in respect of, or notice to, or filing or registration with,
any governmental body, agency or official except such as have been obtained or
except where the failure to obtain any such order, license, consent,
authorization, approval or exemption or give any such notice or make any filing
or registration would not reasonably be expected to adversely affect the ability
of Buyer to perform its obligations hereunder.
(d) The execution, delivery and performance by Buyer of this Agreement
does not and will not (i) violate the certificate of limited partnership or
agreement of limited partnership of Buyer, (ii) violate any law, rule,
regulation, judgment, injunction, order or decree applicable to or binding upon
Buyer, (iii) require any consent or other action by any person under, constitute
a default under (with due notice or lapse of time or both), or give rise to any
right of termination, cancellation or acceleration of any right or obligation of
Buyer or to a loss of any benefit to which Buyer is entitled under any provision
of any agreement or other instrument binding upon Buyer or any of its assets or
properties or (iv) result in the creation or imposition of any material Lien on
any property or asset of Buyer.
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(e) The Shares purchased by Buyer pursuant to this Agreement are being
acquired for investment only and not with a view to any public distribution
thereof, and Buyer shall not offer to sell or otherwise dispose of the Shares so
acquired by it in violation of any registration requirements of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
ARTICLE IV
Covenants of Lisco and Buyer
Section 4.1 Further Assurances. Lisco and Buyer agree that, from time
to time, whether on or after the Closing Date, each of them will execute and
deliver such further instruments of conveyance and transfer and take such other
actions as may be necessary to carry out the purposes and intents of this
Agreement.
Section 4.2 No Inconsistent Action. Subject to Sections 6.1 and 6.2,
Lisco and Buyer shall not take any action inconsistent with their obligations
under this Agreement or which could materially hinder or delay the consummation
of the transactions contemplated by this Agreement.
Section 4.3 Stockholders' Agreement. At the Closing, Lisco and Buyer
shall each execute and deliver the Stockholders' Agreement.
ARTICLE V
Conditions Precedent to Obligations of Parties
Section 5.1 Conditions to Obligations of Parties. The respective
obligations of Buyer and Lisco hereunder are subject to the satisfaction at or
prior to the Closing Date, of each of the following conditions: (i) the parties
hereto shall have obtained from every government or governmental authority every
approval necessary to consummate the transactions contemplated by this Agreement
and (ii) there shall be no action, proceeding, injunction, order or decree of
any nature of any court or governmental agency or body of competent jurisdiction
that challenges, restrains or prohibits the consummation of such stock purchase.
Section 5.2 Conditions of Buyer's Obligation to Close. The obligation
of Buyer to consummate the transactions contemplated by this Agreement is
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions: (i) the representations and warranties of Lisco contained in this
Agreement shall be true and correct, in all material respects, on and as of the
Closing Date, (ii) Lisco shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants and conditions, contained in this Agreement to be performed or
complied with by it prior to the Closing Date and (iii) the Company, Lisco and
the KKR Fund shall have executed and delivered the Stockholders' Agreement.
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Section 5.3 Conditions of Lisco's Obligations to Close. The obligation
of Lisco to consummate the transactions contemplated by this Agreement with
respect to Buyer is subject to the satisfaction, at or prior to the Closing
Date, of the following conditions: (i) the representations and warranties of
Buyer contained in this Agreement shall be true and correct, in all material
respects, on and as of the Closing Date, (ii) Buyer shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement to be
performed or complied with by he/she prior to or at the Closing Date and (iii)
the Company, Buyer and the KKR Fund shall have executed and delivered the
Stockholder's Agreement and (iv) the KKR Fund shall have consummated the
purchase of 51% or more of the outstanding shares of Common Stock of the
Company.
ARTICLE VI
Termination
Section 6.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written agreement of Lisco and Buyer;
(b) by either Lisco, on the one hand, or Buyer, on the other hand, if
the Closing shall not have been consummated as of the close of business on
September 30, 1998; or
(c) by either Lisco, on the one hand, or Buyer, on the other hand, if
consummation of the transactions contemplated hereby would violate any
non-appealable final order, decree or judgment of any court or governmental
body having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses 6.1(b) or (c)
shall promptly give notice of such termination to the other party.
Section 6.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement the transactions contemplated hereby shall be
abandoned without further action by the parties hereto, and there shall be no
liability on the part of Lisco or Buyer, except for liabilities arising from the
breach of this Agreement. If this Agreement is terminated as provided herein all
filings, applications and other submissions made in connection herewith shall,
to the extent practicable, be withdrawn from the agency or other persons to
which they were made.
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ARTICLE VII
Miscellaneous
Section 7.1 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument.
Section 7.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York.
Section 7.3 Notices. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given if
delivered by hand (whether by overnight courier or otherwise) or sent by
registered or certified mail, return receipt requested, postage prepaid, or by
overnight delivery or telecopy, to the party to whom it is directed:
(a) If to Seller, to it at the following address:
Lisco, Inc.
c/o Spalding & Evenflo Companies, Inc.
425 Meadow Street
Chicopee, Massachusetts 01021-0901
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Attn: Alan G. Schwartz, Esq.
(b) If to Buyer, to it at the following address:
Great Star Corporation
c/o Arias Fabrega & Fabrega Trust Co.
Omar Hodge Building, Wickham's Cay
Road Town, Tortola
British Virgin Islands
Fax (284) 494-4980
with a copy to:
Finser Corporation
550 Biltmore Way, Suite 900
Coral Gables, Florida 33134
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Attn: Alejandro Rivera B.
Fax (305) 445-9667
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005-1413
Attn: Robert S. O' Hara, Jr.
Fax (212) 530-0175
Section 7.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that no party hereto shall be
entitled to assign its rights or delegate its obligations under this Agreement
without the express prior written consent of the other parties hereto.
Section 7.5 Headings; Definition. The section and article headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
Section 7.6 Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term, condition or provision of this Agreement on
the part of such party hereto to be performed or complied with. The waiver by
any party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
Section 7.7 Jurisdiction. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 7.3 shall be deemed
effective service of process on such party.
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Section 7.8 Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
LISCO, INC.
----------------------------------------
Name:
Title:
GREAT STAR CORPORATION
----------------------------------------
Name:
Title:
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Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
EVENFLO COMPANY, INC.
Evenflo Company, Inc., a corporation organized and existing under the
laws of the State of Delaware (hereinafter called the "Company"), hereby
certifies as follows:
1. The name of the Company is Evenflo Company, Inc. The Company was
initially incorporated under the name of Evenflo Juvenile Furniture Company,
Inc. The date of filing of its original Certificate of Incorporation with the
Secretary of State of Delaware was October 1, 1992.
2. The Board of Directors of the Company has duly adopted this
amendment and restatement of the Certificate of Incorporation in accordance with
the provisions of Sections 141(f), 242 and 245 of the Delaware General
Corporation Law.
3. The stockholders of the Company have duly adopted this amendment
and restatement of the Certificate of Incorporation in accordance with the
provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law.
4. The text of the Certificate of Incorporation is hereby amended and
restated to read as herein set forth in full:
FIRST: The name of the Company is Evenflo Company, Inc.
SECOND: The registered office of the Company is Corporation Trust
Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801 and
the registered agent is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: A. The total number of shares of capital stock that the
Company is authorized to issue is 35,000,000 shares, of which 25,000,000 shares
are common stock, par value $1.00 per share (hereinafter referred to as "Common
Stock"), and 10,000,000 shares are preferred stock, par value $1.00 per share
("Company Preferred Stock"), including 1,000,000 shares of variable rate
cumulative preferred stock, par value $1.00 per share (hereinafter referred to
as "Variable Rate Cumulative Preferred Stock"), with a liquidation preference of
$100.00 per share plus the amount of any accrued and unpaid dividends on such
share (the "Liquidation Preference").
<PAGE>
B. The Company is authorized to issue two classes of Common Stock, to
be designated as respectively Class A Common Stock ("Class A Common Stock") and
non-voting Class B Common Stock ("Class B Common Stock"). The total number of
shares of Class A Common Stock that the Company is authorized to issue is
20,000,000. The total number of shares of Class B Common Stock that the Company
is authorized to issue is 5,000,000. Holders of Class A Common Stock shall be
entitled to one vote for each share of Class A Common Stock held by such holder.
Class B Common Stock shall have no voting powers and holders of Class B Common
Stock shall not be entitled to any votes with respect to such shares of Class B
Common Stock held by such holder, except as required pursuant to applicable law.
C. The Company Preferred Stock may be issued from time to time in one
or more series with such designations as may be stated in the resolution or
resolutions providing for the issue of such stock from time to time adopted by
the Board of Directors or a duly authorized committee thereof. The resolution or
resolutions providing for the issue of shares of a particular series shall fix,
subject to applicable laws and the provisions of this Article Fourth, for each
such series the number of shares constituting such series and the designations
and powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limitation, such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of assets, conversion or
exchange, and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors or a duly authorized committee thereof
under the Delaware General Corporation Law.
D. The number of authorized shares of any class or classes of stock
may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of Class A Common Stock of the Company irrespective of the
provisions of Section 242(b)(2) of the Delaware General Corporation Law or any
corresponding provision that may hereafter be enacted.
E. On the date of filing of this Restated Certificate of Incorporation
in the Office of the Secretary of State of Delaware, each share of Common Stock
of the Company then outstanding shall be reclassified as 5,000 shares of Class A
Common Stock, par value $1.00 per share.
F. The powers, preferences and relative participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, of the Variable Rate Cumulative Preferred Stock are as follows:
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1. Rank.
The Variable Rate Cumulative Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, rank
senior to all classes of common stock of the Company and each other class
of Capital Stock (as defined below) or series of preferred stock. (All
equity securities of the Company to which the Variable Rate Cumulative
Preferred Stock ranks senior are collectively referred to herein as "Junior
Securities").
2. Dividends.
(a) Beginning on the date of original issuance (the "Original Issue
Date"), the Holders of the outstanding shares of Variable Rate Cumulative
Preferred Stock shall be entitled to receive dividends when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends. All dividends shall be cumulative, whether or not
earned or declared, from the Original Issue Date and shall be payable
quarterly in arrears on each Dividend Payment Date, commencing on the first
Dividend Payment Date after the Original Issue Date, at a rate (the
"Dividend Rate") applied to the Liquidation Preference (as adjusted for
accrued and unpaid dividends). The Dividend Rate for the Initial Dividend
Period shall be 14.000% per annum and for each subsequent 360 day period
(each a "Subsequent Dividend Period") shall be the rate determined in
accordance with subparagraph (g) below. Each such dividend shall be payable
to Holders of record as they appear on the stock books of the Company on
such record dates, not less than ten (10) nor more than sixty (60) days
preceding the Dividend Payment Date, as shall be fixed by the Board of
Directors. Dividends shall cease to accrue in respect of the Variable Rate
Cumulative Preferred Stock on the Redemption Date. The dividend payable on
each share of Variable Rate Cumulative Preferred Stock with respect to the
period from the Original Issue Date to the first Dividend Payment Date
shall be equal to (i) 14.000% of the Liquidation Preference multiplied by
(ii) a fraction equal to (A) the number of days from and including the
Original Issue Date to (but excluding) the Dividend Payment Date divided by
(B) 360.
(b) All dividends paid with respect to shares of the Variable Rate
Cumulative Preferred Stock pursuant to Section 2(a) shall be paid pro rata
to the Holders entitled thereto.
(c) Each fractional share of Variable Rate Cumulative Preferred Stock
outstanding shall be entitled to a ratably proportionate amount of all
dividends accruing with respect to each outstanding share of Variable Rate
Cumulative Preferred Stock pursuant to Section 2(a), and all such dividends
with respect to such outstanding fractional shares shall be cumulative and
shall accrue (whether or not declared), and shall be payable in the same
manner and at such times as provided for in Section
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2(a) with respect to dividends on each outstanding share of Variable Rate
Cumulative Preferred Stock. Each fractional share of Variable Rate
Cumulative Preferred Stock outstanding shall also be entitled to a ratably
proportionate amount of any other distributions made with respect to each
outstanding share of Variable Rate Cumulative Preferred Stock, and all such
distributions shall be payable in the same manner and at the same time as
distributions on each outstanding share of Variable Rate Cumulative
Preferred Stock.
(d) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on
shares of the Variable Rate Cumulative Preferred Stock at any time.
(e) (i) Holders of shares of the Variable Rate Cumulative Preferred
Stock shall be entitled to receive the dividends provided for in
Section 2(a) hereof in preference to and in priority over any
dividends upon any of the Junior Securities.
(ii) So long as any shares of the Variable Rate Cumulative
Preferred Stock are outstanding and dividends on any Dividend Payment
Date have not been paid, the Company shall not: (A) declare, pay or
set apart for payment any dividend on any of the Junior Securities;
(B) make any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the purchase, redemption or other
retirement of, any of the Junior Securities or any warrants, rights,
calls or options exercisable for or convertible into any of the Junior
Securities (other than the repurchase of Junior Securities held by
officers or other employees of the Company (if any) pursuant to the
terms of management stockholder agreements); (C) make any distribution
in respect of Junior Securities, either directly or indirectly, and
whether in cash, obligations or shares of the Company or other
property (other than distributions or dividends in Junior Securities
to the holders of Junior Securities); or (D) permit any corporation or
other entity directly or indirectly controlling, controlled by, or
under common control with the Company to purchase or redeem any of the
Junior Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities.
(f) Subject to the foregoing provisions of this Section 2, the Board
of Directors may declare and the Company may pay or set apart for payment
dividends and other distributions on any of the Junior Securities, and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights or options exercisable for or convertible into any of the Junior
Securities, and the Holders of the shares of the Variable Rate
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Cumulative Preferred Stock shall not be entitled to share therein.
(g) The Dividend Rate for any Subsequent Dividend Period will be a
floating rate per annum determined by reference to the Treasury Rate,
determined as described below, plus 8.6%. The Treasury Rate with respect to
the calculation of the Dividend Rate for any Subsequent Dividend Period, will
be calculated by the Calculation Agent on the second Market Day preceding the
commencement of such Subsequent Dividend Period (each, a "Determination
Date"), as follows:
(i) The Treasury Rate shall be, with respect to any Determination
Date, the rate displayed for such Determination Date (or the most
recent publication of such rate prior to the Determination Date) on
Telerate Page 7055 under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays
Approximately 3:45 p.m.," under the column for 10-year U.S. Treasury
securities. If such rate is no longer displayed on the relevant page,
or if not displayed by 3:00 p.m., New York City time on such
Determination Date, the Treasury Rate with respect to such Subsequent
Dividend Period will be determined as described in subsection (ii)
below.
(ii) If such rate is no longer displayed on Telerate Page 7055,
or if not displayed by 3:00 p.m., New York City time on the
Determination Date, as described in subsection (i) above, the Treasury
Rate will be such treasury constant maturity rate for 10-year U.S.
Treasury securities as published by the Board of Governors of the
Federal Reserve System in the weekly statistical release entitled
"Statistical Release H.15 (519), Selected Interest Rates," or any
successor publication of the Board of Governors of the Federal Reserve
System ("H.15(519)"). If such rate is no longer published, or if not
published by 3:00 p.m., New York City time on the Determination Date,
the Treasury Rate will be such treasury constant maturity rate (or
other United States Treasury rate) for 10-year U.S. Treasury
securities as may be then published by either the Board of Governors
of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on Telerate Page 7055 and published in the
relevant H.15(519).
(iii) If on any Determination Date, the Calculation Agent is
required but unable to determine the Treasury Rate in the manner
provided in subparagraphs (i) and (ii) above, the Treasury Rate for
such Dividend Period shall be the Treasury Rate as determined on the
previous Determination Date.
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(iv) Each calculation in respect of the Variable Rate
Cumulative Preferred Stock will be rounded, if necessary, to the
nearest one ten-thousandth of a percentage, with five hundred
thousandths being rounded upwards.
Notwithstanding the foregoing or anything herein to the contrary, (i) in
the event that the Dividend Rate as calculated in accordance with the
foregoing provisions would at any time exceed 16.0000%, such Dividend Rate
shall be reduced to 16.0000% per annum for such Subsequent Dividend Period,
and (ii) in the event that the Dividend Rate as calculated in accordance
with the foregoing provisions would at any time be less than 12.0000%, such
Dividend Rate shall be increased to 12.0000% per annum for such Subsequent
Dividend Period.
(h) The Calculation Agent shall, as soon as practicable after 9:00
a.m., New York City time, on each Determination Date, determine the
Dividend Rate and inform the Paying Agent. The Paying Agent will calculate
the amount of dividends payable in respect of the following Dividend
Payment Date during the applicable Dividend Period (the "Dividend Amount").
(i) All certificates, communications, opinions, determinations,
calculations, quotations and decisions given, expressed, made or obtained
for the purpose of the provisions relating to the payment and calculation
of dividends on the Variable Rate Cumulative Preferred Stock, whether by
the Calculation Agent or Paying Agent, will (in the absence of willful
default, bad faith or manifest error) be final, conclusive and binding on
the Company and all of the holders of the Variable Rate Cumulative
Preferred Stock and no liability will (in the absence of willful default,
bad faith or manifest error) attach to the Calculation Agent or Paying
Agent in connection with the exercise or non-exercise by any of them of
their powers, duties and discretion. None of the Paying Agent, the
Calculation Agent or the Company (or any of their respective officers,
directors, agents, beneficiaries, employees or affiliates) shall have any
liability to any person for the determination of the Treasury Rate which is
caused by circumstances beyond its reasonable control.
3. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Company, the Holders of shares
of Variable Rate Cumulative Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Company available for distribution to its
stockholders, whether such assets are capital, surplus or earnings, an amount in
cash equal to $100 for each share outstanding, plus an amount in cash equal to
accrued but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend
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from the last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding-up) before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities. After payment of
such amount to the Holders of Variable Rate Cumulative Preferred Stock, the
Holders of Variable Rate Cumulative Preferred Stock shall be entitled to no
further participation in any distribution of assets by the Company. If the
assets of the Company are not sufficient to pay in full the liquidation payments
payable to the Holders of outstanding shares of the Variable Rate Cumulative
Preferred Stock, then the Holders of all such shares shall share ratably in such
distribution of assets in accordance with the amounts which would be payable on
such distribution if the amounts to which the Holders of outstanding shares of
Variable Rate Cumulative Preferred Stock are entitled were paid in full.
(b) For the purposes of this Section 3, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or any other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the affairs of the Company.
4. Redemption.
(a) Optional Redemption. The Company may redeem, at the option of the
Board of Directors, at any time, from any source of funds legally available
therefor, in whole or in part, in the manner provided in Section 4(c) hereof,
any or all of the shares of Variable Rate Cumulative Preferred Stock, at a
redemption price equal to 100% of the aggregate liquidation preference of such
shares (which includes an amount equal to the accrued and unpaid dividends, if
any, with respect to all such shares through the date of redemption and includes
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the Redemption Date)(the "Optional Redemption Price").
(b) Pro Rata Redemption; Payment in Cash. In the event of a redemption
pursuant to Section 4(a) hereof of only a portion of the then outstanding shares
of Variable Rate Cumulative Preferred Stock redeemable thereunder, the Company
shall effect such redemption pro rata according to the number of shares held by
each Holder of such Variable Rate Cumulative Preferred Stock. All payments of
the Optional Redemption Price shall be made in cash.
(c) Procedure for Redemption. (i) At least ten (10) days and not more
than twenty (20) days prior to the date fixed for any redemption of the Variable
Rate Cumulative Preferred Stock, written notice (the "Redemption Notice") shall
be given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Variable Rate
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Cumulative Preferred Stock at such Holder's address as the same appears on the
stock register of the Company, provided, however, that neither failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Variable Rate Cumulative Preferred
Stock to be redeemed except as to the Holder or Holders to whom the Company has
failed to give said notice or except as to the Holder or Holders whose notice
was defective. The Redemption Notice shall state:
(A) that the redemption is pursuant to Section 4(a) hereof;
(B) the Optional Redemption Price;
(C) whether all or less than all of the outstanding shares of the Variable
Rate Cumulative Preferred Stock redeemable thereunder are to be
redeemed and the total number of shares of such Variable Rate
Cumulative Preferred Stock being redeemed;
(D) the number of shares of Variable Rate Cumulative Preferred Stock held
by the Holder that the Company intends to redeem;
(E) the date fixed for redemption;
(F) that the Holder is to surrender to the Company, at the place or places
where certificates for shares of Variable Rate Cumulative Preferred
Stock are to be surrendered for redemption, in the manner and at the
price designated, the certificate or certificates representing the
shares of Variable Rate Cumulative Preferred Stock to be redeemed; and
(G) that dividends on the shares of the Variable Rate Cumulative Preferred
Stock to be redeemed shall cease to accrue on such Redemption Date
unless the Company defaults on the payment of the Optional Redemption
Price.
(ii) On or before the date fixed for redemption, each Holder of Variable Rate
Cumulative Preferred Stock shall surrender the certificate or certificates
representing such shares of Variable Rate Cumulative Preferred Stock to the
Company, in the manner and at the place designated in the Redemption
Notice, and, on the Redemption Date, the Company shall pay to such Holder
the full Optional Redemption Price. Such shares shall be
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payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be cancelled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(iii) Unless the Company defaults in the payment in full of the Optional
Redemption Price, dividends on the Variable Rate Cumulative Preferred Stock
called for redemption shall cease to accumulate on the Redemption Date, and
the Holders of such redeemed shares shall cease to have any further rights
with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price, without interest.
(d) Change of Control. (i) Immediately after the occurrence of a
Change of Control the Company, subject to rights of the holders of debt
securities to have such debt repurchased in the event of a Change of Control,
will be required to make an offer as described below (the "Change of Control
Offer") to purchase all the outstanding shares of Variable Rate Cumulative
Preferred Stock, if any, at a price in cash equal to 101% of the aggregate
liquidation preference thereof (which includes all accrued and unpaid dividends
to the date of purchase and includes an amount equal to a prorated dividend for
the period from the last Dividend Payment Date to the date of purchase) (the
"Change of Control Payment").
(e) Procedure for a Change of Control Offer. (i) Within 30 days
following any Change of Control, written notice (the "Change of Control Notice")
shall be given by first class mail, postage prepaid, to each Holder, which shall
state:
(A) that the offer is pursuant to Section 4(d) hereof;
(B) that all shares of Variable Rate Cumulative Preferred Stock
properly tendered pursuant to such Change of Control Offer
will be accepted for payment;
(C) the Change of Control Payment;
(D) the purchase date, which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed,
except as may be otherwise required by applicable law (the
"Change of Control Payment Date");
(E) that the Holder is to surrender to the Company, at the place
or places where
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certificates for shares of Variable Rate Cumulative
Preferred Stock are to be surrendered for purchase, in the
manner and at the price designated, the certificate or
certificates representing the shares of Variable Rate
Cumulative Preferred Stock to be purchased; and
(F) that dividends on the shares of the Variable Rate Cumulative
Preferred Stock to be purchased shall cease to accrue on
such Change of Control Payment Date unless the Company
defaults on the payment of the Change of Control Payment.
(ii) On or before the date fixed for purchase, each Holder of Variable
Rate Cumulative Preferred Stock shall surrender the certificate
or certificates representing such shares of Variable Rate
Cumulative Preferred Stock to the Company, in the manner and at
the place designated in the Change of Control Notice, and, on the
Change of Control Payment Date, the Company shall pay to such
Holder the full Change of Control Payment. Such shares shall be
payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the
event that less than all of the shares represented by any such
certificate are purchased, a new certificate shall be issued
representing the unpurchased shares.
(iii) Unless the Company defaults in the payment in full of the Change
of Control Payment, dividends on the Variable Rate Cumulative
Preferred Stock purchased pursuant to the Change of Control Offer
shall cease to accrue on the Change of Control Payment Date, and
the Holders of such purchased shares shall cease to have any
further rights with respect thereto on the Change of Control
Payment Date, other than the right to receive the Change of
Control Payment, without interest.
(iv) The Company shall comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any ------------ other securities laws and
regulations thereunder to the extent that such laws or
regulations are applicable in connection with the repurchase of
Variable Rate Cumulative Preferred Stock pursuant to a Change of
Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of
the
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Variable Rate Cumulative Preferred Stock, the Company shall
comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described
herein by virtue thereof.
5. Voting Rights.
(a) The Holders of Variable Rate Cumulative Preferred Stock, except as
otherwise required under Delaware law and as set forth in paragraphs (b), (c)
and (d) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company.
(b) Holders of a majority of the issued and outstanding shares of
Variable Rate Cumulative Preferred Stock, voting separately and as a class,
shall have the right to elect two additional members of the Board of Directors
in the event (i) dividends have not been paid for six consecutive Dividend
Payment Dates or (ii) there has been any default in the performance by the
Company of its obligations under Sections 4(d) or (e) for a period of 30 days.
(c) Holders of Variable Rate Cumulative Preferred Stock shall have the
right to approve by majority vote any sale, lease, transfer, conveyance or other
disposition (including by way of merger, consolidation or other business
combination), in one or a series of related transactions, of all or
substantially all of the assets or a majority of the equity securities of the
Company, any liquidation of the Company and any amendment of the Company's
Restated Certificate of Incorporation adverse to Holders of the Variable Rate
Cumulative Preferred Stock; provided, however, that (a) the creation,
authorization or issuance of any shares of Junior Securities or (b) the increase
or decrease in the amount of authorized Capital Stock of any class, including
any Company Preferred Stock, shall not require the consent of the Holders of
Variable Rate Cumulative Preferred Stock and shall not be deemed to adversely
affect the rights, preferences, privileges or voting rights of Holders of shares
of Variable Rate Cumulative Preferred Stock.
(d) If vacancies shall exist in the offices of directors elected or to
be elected by the Holders of Variable Rate Cumulative Preferred Stock, a proper
officer of the Company may, and upon the written request of the Holders of
record of at least twenty percent (20%) of the shares of Variable Rate
Cumulative Preferred Stock then outstanding addressed to the Secretary of the
Company shall, call a special meeting of the Holders of Preferred Stock for the
purpose of electing directors. Any such meeting shall be held at the earliest
practicable date at the place for the holding of the annual meetings of
stockholders. If such meeting shall not be called by a proper officer of the
Company within twenty (20) days after personal service of said written request
upon the Secretary of the
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Company, or within twenty (20) days after mailing the same within the United
States by certified mail, addressed to the Secretary of the Company at its
principal executive offices, then the Holders of record of at least twenty
percent (20%) of the outstanding shares of Variable Rate Cumulative Preferred
Stock may designate in writing one of their number to call such meeting at the
expense of the Company, and such meeting may be called by the Person so
designated upon the notice required for the annual meeting of stockholders of
the Company and shall be held at the place for holding the annual meetings of
stockholders. Any Holder of Variable Rate Cumulative Preferred Stock so
designated shall have access to the lists of stockholders to be called pursuant
to the provisions hereof.
(e) At any meeting held for the purpose of electing directors at which
the Holders of Variable Rate Cumulative Preferred Stock shall have the right,
voting together as a separate class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding Variable Rate Cumulative Preferred Stock shall be required to
constitute a quorum of such Variable Rate Cumulative Preferred Stock.
(f) Any vacancy occurring in the office of a director elected by the
Holders of Variable Rate Cumulative Preferred Stock may be filled by the
remaining directors elected by the Holders of Variable Rate Cumulative Preferred
Stock unless and until such vacancy shall be filled by the Holders of Variable
Rate Cumulative Preferred Stock.
(g) In any case in which the Holders of Variable Rate Cumulative
Preferred Stock shall be entitled to vote pursuant to this Section 5 or pursuant
to Delaware law, each Holder of Preferred Stock shall be entitled to one vote
for each share of Preferred Stock held.
(h) The voting rights described in Section 5(b) above will continue
until such time as all dividends in arrears on the Variable Rate Cumulative
Preferred Stock are paid in full or any such default has been cured, as the case
may be, at which time the term of the directors elected pursuant to Section 5(b)
shall terminate.
6. Conversion or Exchange.
Holders of shares of Company Preferred Stock shall not have any rights
herein, in the absence of an offer by the Company, to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Company.
7. Preemptive Rights.
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No shares of Company Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Company, or any warrants,
rights or options issued or granted with respect thereto by the Company at any
time, regardless of how such securities or such warrants, rights or options may
be denominated, issued or granted.
8. Reissuance of Company Preferred Stock.
Shares of Company Preferred Stock that have been issued and reacquired
in any manner, including, without limitation, shares of Variable Rate Cumulative
Preferred Stock redeemed or purchased pursuant to Section 4, shall be cancelled
and shall not be reissued until after such time as there shall have been no
shares of the Company Preferred Stock outstanding.
9. Business Day.
If any payment, redemption or exchange shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment, redemption
or exchange shall be made on the immediately succeeding Business Day.
10. Definitions.
As used herein, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10.0% or more of the voting
securities of a Person shall be deemed to be control.
"Business Day" shall mean a day other than a Saturday, Sunday,
national or New York state holiday or other day on which commercial banks in New
York City are authorized or required by law to close.
"Capital Stock" shall mean (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
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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.
"Calculation Agent" shall mean any calculation agent (which may be the
Company) selected by the Company with respect to the Variable Rate Cumulative
Preferred Stock, in its capacity as calculation agent.
"Capital Gains Amount" shall have the meaning set forth in Section
2(j) above.
"Change of Control" shall mean the occurrence of any of the following:
(i) the sale, lease or transfer, 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; or
(ii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than the Permitted Holders and
their Related Parties, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision) of 50% or more of the total
voting power of the Voting Stock of the Company.
"Change of Control Notice" shall have the meaning set forth in Section
4(e) above.
"Change of Control Offer" shall have the meaning set forth in Section
4(d) above.
"Change of Control Payment" shall have the meaning set forth in
Section 4(d) above.
"Change of Control Payment Date" shall have the meaning set forth in
Section 4(e)(i)(D) above.
"Determination Date" shall have the meaning set forth in Section 2(g)
above.
"Dividend Payment Date" shall means each March 31, June 30, September
30 and December 31 of each year.
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"Dividend Amount" shall have the meaning set forth in Section 2(h)
above.
"Dividend Period" shall mean, with respect to a share of Variable Rate
Cumulative Preferred Stock, the Initial Dividend Period and, thereafter, each
Subsequent Dividend Period.
"Dividend Rate" shall have the meaning set forth in Section 2(a)
above.
"Exchange Act" shall have the meaning set forth in Section 4(e)(iv)
above.
"H.15(519)" shall have the meaning set forth in Section 2(g) above.
"Holder" shall mean a record holder of shares of Variable Rate
Cumulative Preferred Stock.
"Initial Dividend Period" shall mean the dividend period commencing on
and including the Original Issue Date and ending on and including, the fifth
successive Dividend Payment Date to occur thereafter.
"Junior Securities" shall have the meaning set forth in
Section 1 above.
"Market Day" shall mean any Business Day on which commercial banks are
open for business in New York City.
"Officer" shall mean the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of the Company.
"Optional Redemption Price" shall have the meaning set forth in
Section 4(a) above.
"Original Issue Date" shall have the meaning set forth in Section 2(a)
above.
"Paying Agent" shall mean any paying agent (which may be the Company)
selected by the Company with respect to the Variable Rate Cumulative Preferred
Stock, in its capacity as paying agent.
"Permitted Holders" shall mean Kohlberg Kravis Roberts & Co. L.P. and
any of its Affiliates.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture association, joint stock company, trust,
unincorporated association, government or any agency or political subdivision or
any other entity.
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"Redemption Date" with respect to any shares of Variable Rate
Cumulative Preferred Stock, shall mean the date on which such shares of Variable
Rate Cumulative Preferred Stock are redeemed by the Company.
"Redemption Notice" shall have the meaning set forth in Section
4(c)(i) above.
"Related Parties" shall mean any Person controlled by a Permitted
Holder, including any partnership or limited liability company of which a
Permitted Holder or its Affiliates is the general partner or managing member, as
the case may be.
"Subsequent Dividend Period" shall have the meaning set forth in
Section 2(a) above.
"Subsidiary" shall mean, with respect to any Person, (i) any
corporation, association, or other business entity (other than a partnership,
joint venture, limited liability company or similar 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 of determination 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,
joint venture, limited liability company or similar entity of which (x) more
than 50% of the capital accounts, distribution rights, total equity and voting
interests or general or limited partnership interests, as applicable, are owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof whether in the form
of membership, general, special or limited partnership or otherwise and (y) such
Person or any Wholly-Owned Subsidiary of such Person is a controlling general
partner or otherwise controls such entity.
"Telerate Page 7055" shall mean the display designated as Page 7055 on
the Dow Jones Telerate Service (or such other pages as may replace Page 7055 on
that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519)).
"Treasury Rate" shall have the meaning set forth in Section 2(g)
above.
"Voting Stock" of any Person as of any date shall mean the Capital
Stock of such person that is at the time entitled to vote in the election of the
Board of Directors of such person.
"Wholly-Owned Subsidiary" of any Person shall mean a Subsidiary of
such Person, 100% of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned by
such Person or
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by one or more Wholly-Owned Subsidiaries of such Person and one or more
Wholly-Owned Subsidiaries of such Person.
11. Legally Available Funds.
The Company shall use its best efforts, including, without limitation,
through the revaluation of its assets in accordance with the General Corporation
Law of the State of Delaware, to make or keep funds legally available to satisfy
in full its obligations under this Certificate, including, without limitation,
those obligations arising pursuant to Section 4 hereof. The Variable Rate
Cumulative Preferred Stock shall, with respect to dividend rights and rights on
liquidation, winding-up and dissolution, rank senior in right of payment and
otherwise to all classes of common stock of the Company and each other class of
Capital Stock or series of preferred stock of the Company.
FIFTH: The Board of Directors, acting by majority vote, may alter,
amend or repeal the By-Laws of the Company.
SIXTH: A director of the Company shall not be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the Company hereunder in respect of any act
or omission occurring prior to the time of such amendment, modification or
repeal.
SEVENTH: To the fullest extent permitted by the laws of the State of
Delaware:
A. The Company shall indemnify any person (and such person's heirs,
executors or administrators) who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding (brought in the right of the Company or otherwise), whether
civil, criminal, administrative or investigative, and whether formal or
informal, including appeals, by reason of the fact that such person is or
was a director or officer of the Company or, while a director or officer of
the Company, is or was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, limited liability company or other
enterprise, for and against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person or such heirs, executors or administrators in
connection with such action, suit or proceeding, including appeals.
Notwithstanding the preceding sentence, the Company shall be required to
indemnify a person described in such sentence in connection with any
action, suit or
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proceeding (or part thereof) commenced by such person only if the
commencement of such action, suit or proceeding (or part thereof) by such
person was authorized by the Board of Directors of the Company. The Company
may indemnify any person (and such person's heirs, executors or
administrators) who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (brought
in the right of the Company or otherwise), whether civil, criminal,
administrative or investigative, and whether formal or informal, including
appeals, by reason of the fact that such person is or was an employee or
agent of the Company or, while an employee or agent of the Company, is or
was serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint
venture, trust, limited liability company or other enterprise, for and
against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person
or such heirs, executors or administrators in connection with such action,
suit or proceeding, including appeals.
B. The Company shall promptly pay expenses incurred by any person
described in the first sentence of subsection (a) of this Article Seventh,
Section (1) in defending any action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding, including appeals,
upon presentation of appropriate documentation.
C. The Company may purchase and maintain insurance on behalf of any
person described in subsection (A) of this Article Sixth, Section (1)
against any liability asserted against such person, whether or not the
Company would have the power to indemnify such person against such
liability under the provisions of this Article Seventh, Section (1) or
otherwise.
D. The provisions of this Article Seventh, Section (1) shall be
applicable to all actions, claims, suits or proceedings made or commenced
after the adoption hereof, whether arising from acts or omissions to act
occurring before or after its adoption. The provisions of this Article
Seventh, Section (1) shall be deemed to be a contract between the Company
and each director or officer who serves in such capacity at any time while
this Article Seventh, Section (1) and the relevant provisions of the laws
of the State of Delaware and other applicable law, if any, are in effect,
and any repeal or modification hereof shall not affect any rights or
obligations then existing with respect to any state of facts or any action,
suit or proceeding then or theretofore existing, or any action, suit or
proceeding thereafter brought or threatened based in whole or in part on
any such state of facts. If any provision of this Article Seventh, Section
(1) shall be
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found to be invalid or limited in application by reason of any law or
regulation, it shall not affect the validity of the remaining provisions
hereof. The rights of indemnification provided in this Article Seventh,
Section (1) shall neither be exclusive of, nor be deemed in limitation of,
any rights to which an officer, director, employee or agent may otherwise
be entitled or permitted by contract, this Restated Certificate of
Incorporation, vote of stockholders or directors or otherwise, or as a
matter of law, both as to actions in such person's official capacity and
actions in any other capacity while holding such office, it being the
policy of the Company that indemnification of any person whom the Company
is obligated to indemnify pursuant to the first sentence of subsection (A)
of this Article Seventh, Section (1) shall be made to the fullest extent
permitted by law.
E. For purposes of this Article Seventh, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer, employee or
agent of the Company which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries.
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IN WITNESS WHEREOF, Evenflo Company, Inc. has caused this Restated
Certificate of Incorporation to be signed by a duly authorized officer on August
18, 1998.
EVENFLO COMPANY, INC.
By:______________________________
Name: Robert K. Adikes
Title: Secretary
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Exhibit 3.2
EVENFLO COMPANY, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
MEETING OF STOCKHOLDERS
Section 1. Place of Meeting. Meetings of the stockholders of Evenflo
Company, Inc. (the "Corporation") shall be held at such place either within or
without the State of Delaware as the Board of Directors may determine.
Section 2. Annual Meetings. Subject to the right to act by written
consent, the annual meeting of stockholders shall be held upon not less than ten
nor more than sixty days written notice of the time, place and purposes of the
meeting. Any such annual meeting shall be held at the time and at the place
determined by the Board of Directors. At any such annual meeting, the
stockholders shall elect directors and transact any other business that properly
comes before the meeting.
Section 3. Special Meetings. A special meeting of stockholders may be
called for any purpose by a majority of the Board of Directors. The meeting
shall be held at the time and at the place determined by the president or the
board. A special meeting shall be held upon not less than ten nor more than
sixty days written notice of the time, place, and purposes of the meeting.
Section 4. Quorum. At any meeting of stockholders, the holders of
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the meeting shall have
power to adjourn the meeting from time to time until a quorum is present.
Section 5. Voting. Except as otherwise provided by law, all matters
submitted to a meeting of stockholders shall be decided by vote of the holders
of record, present in person or by proxy, of a majority of the Corporation's
issued and outstanding capital stock.
ARTICLE II
DIRECTORS
Section 1. Number, Election and Removal of Directors. The number of
Directors that shall constitute the Board of Directors shall be not less than
one nor more than seven. Upon adoption of these Amended and Restated By-laws,
the Board of Directors shall consist of six Directors. Thereafter, within the
limits specified above, the number of
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Directors shall be determined by the Directors or by the stockholders. The
Directors shall be elected by the stockholders at their annual meeting or by
action taken by written consent of the holders of stock entitled to vote at any
such meeting. Vacancies and newly created directorships resulting from any
increase in the number of Directors may be filled by a majority of the Directors
then in office, although less than a quorum, or by the sole remaining Director
or by the stockholders. A Director may be removed with or without cause by the
stockholders.
Section 2. Regular Meetings. A regular meeting of the Board of
Directors shall be held without notice immediately following and at the same
place as the annual stockholders' meeting for the purpose of electing officers
and conducting any other business that may come before the meeting. The Board of
Directors may decide to have additional regular meetings that may be held
without notice.
Section 3. Special Meetings. A special meeting of the Board of
Directors may be called for any purpose at any time by two or more Directors.
The meeting shall be held upon not less than one hour's notice if given by
telegram, orally (either by telephone or in person), or by facsimile
transmission, upon not less than three days notice if given by overnight courier
delivery service, or upon not less than five days notice if given by depositing
the notice in the United States mails, first class postage prepaid. The notice
shall be effective upon the first to occur of the following: (i) when received,
(ii) when communicated in a comprehensible manner, if given orally, (iii) on the
date shown on the return receipt signed on behalf of the addressee, if sent by
registered or certified mail, return receipt requested, or (iv) five days after
its deposit in the United States mail, as evidenced by the postmark, if mailed
postpaid and correctly addressed. The notice shall specify the time and place,
and may, but need not, specify the purposes, of the meeting.
Section 4. Action Without Meeting. The Board of Directors may act
without a meeting by written consent to the action, each member of the Board of
Directors consents in writing to the action. The written consent or consents
shall be filed in the minute book.
Section 5. Use of Communications Equipment. Any director may
participate in a meeting of the board by means of conference telephone or any
other means of communication by which all persons participating in the meeting
are able to hear each other.
Section 6. Quorum. The presence at a meeting of persons entitled to
cast a majority of the votes of the entire Board of Directors shall constitute a
quorum for the transaction of business.
Section 7. Votes Required. Any action approved by a majority of the
votes of Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors.
Section 8. Committees of Directors. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
committees, including without limitation an Executive Committee, to have and
exercise such power and
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authority as the Board of Directors shall specify. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another Director to act at
the meeting in place of any such absent or disqualified member.
ARTICLE III
WAIVERS OF NOTICE
Any notice required by these Amended and Restated By-Laws, by the
Articles of Incorporation, or by the Delaware General Corporation Law may be
waived in writing by any person entitled to notice. The waiver, or waivers, may
be executed either before or after the event with respect to which the notice is
waived. A Director's or stockholder's attendance at or participation in a
meeting (i) waives objection to lack of any required notice or defective notice
of the meeting unless such person at the beginning of the meeting (or promptly
upon arrival) objects to holding the meeting or transacting business at the
meeting and, in the case of a Board meeting, the Director does not thereafter
vote for or assent to action taken at the meeting; and (ii) waives objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the person objects
to considering the matter before action is taken on the matter.
ARTICLE IV
OFFICERS
The officers of the Corporation shall consist of a President and a
Vice President and such other additional officers with such titles as the Board
of Directors shall determine, all of whom shall be chosen by and shall serve at
the pleasure of the Board of Directors. Such officers shall have the usual
powers and shall perform all the usual duties incident to their respective
offices. All officers shall be subject to the supervision and direction of the
Board of Directors. The authority, duties or responsibilities of any officer of
the Corporation may be suspended by the President with or without cause. Any
officer elected or appointed by the Board of Directors may be removed by the
Board of Directors with or without cause.
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ARTICLE V
INDEMNIFICATION
To the fullest extent permitted by the Delaware General Corporation
Law, the Corporation shall indemnify any current or former Director or officer
of the Corporation and may, at the discretion of the Board of Directors,
indemnify any current or former employee or agent of the Corporation against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding brought by or in the right of the
Corporation or otherwise, to which he or she was or is a party or is threatened
to be made a party by reason of his or her current or former position with the
Corporation or by reason of the fact that he or she 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 or other
enterprise.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
fixed by the Board of Directors.
As adopted on the 22nd day of September, 1998.
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Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EVENFLO COMPANY, INC.
11 3/4% Senior Notes due 2006
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INDENTURE
Dated as of August 20, 1998
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MARINE MIDLAND BANK,
Trustee
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TABLE OF CONTENTS
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ARTICLE 1. Definitions and Incorporation by Reference............... 1
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitions........................................ 18
SECTION 1.03. Incorporation by Reference of Trust Indenture Act........ 19
SECTION 1.04. Rules of Construction.................................... 20
ARTICLE 2. The Securities........................................... 20
SECTION 2.01. Amount of Securities; Issuable in Series................. 20
SECTION 2.02. Form and Dating.......................................... 21
SECTION 2.03. Execution and Authentication............................. 22
SECTION 2.04. Registrar and Paying Agent............................... 22
SECTION 2.05. Paying Agent To Hold Money in Trust...................... 23
SECTION 2.06. Lists of Holders of Securities........................... 23
SECTION 2.07. Transfer and Exchange.................................... 24
SECTION 2.08. Replacement Securities................................... 24
SECTION 2.09. Outstanding Securities................................... 25
SECTION 2.10. Temporary Securities..................................... 25
SECTION 2.11. Cancellation............................................. 25
SECTION 2.12. Defaulted Interest....................................... 26
SECTION 2.13. CUSIP Numbers............................................ 26
ARTICLE 3. Redemption............................................... 27
SECTION 3.01. Notices to Trustee....................................... 27
SECTION 3.02. Selection of Securities To Be Redeemed................... 27
SECTION 3.03. Notice of Redemption..................................... 27
SECTION 3.04. Effect of Notice of Redemption........................... 28
SECTION 3.05. Deposit of Redemption Price.............................. 28
SECTION 3.06. Securities Redeemed in Part.............................. 28
ARTICLE 4. Covenants................................................ 29
SECTION 4.01. Payment of Securities.................................... 29
SECTION 4.02. SEC Reports.............................................. 29
SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock................................... 29
SECTION 4.04. Limitation on Restricted Payments........................ 33
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................ 37
SECTION 4.06. Asset Sales.............................................. 39
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SECTION 4.07. Transactions with Affiliates............................. 42
SECTION 4.08. Change of Control........................................ 43
SECTION 4.09. Compliance Certificate................................... 45
SECTION 4.10. Further Instruments and Acts............................. 45
SECTION 4.11. Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries................................. 45
SECTION 4.12. Liens.................................................... 46
ARTICLE 5. Successor Company........................................ 47
SECTION 5.01. Merger, Consolidation, or Sale of All or Substantially
All Assets.............................................. 47
ARTICLE 6. Defaults and Remedies.................................... 48
SECTION 6.01. Events of Default........................................ 48
SECTION 6.02. Acceleration............................................. 50
SECTION 6.03. Other Remedies........................................... 51
SECTION 6.04. Waiver of Past Defaults.................................. 51
SECTION 6.05. Control by Majority...................................... 51
SECTION 6.06. Limitation on Suits...................................... 52
SECTION 6.07. Rights of Holders to Receive Payment..................... 52
SECTION 6.08. Collection Suit by Trustee............................... 52
SECTION 6.09. Trustee May File Proofs of Claim......................... 52
SECTION 6.10. Priorities............................................... 53
SECTION 6.11. Undertaking for Costs.................................... 53
SECTION 6.12. Waiver of Stay or Extension Laws......................... 53
ARTICLE 7. Trustee.................................................. 53
SECTION 7.01. Duties of Trustee........................................ 53
SECTION 7.02. Rights of Trustee........................................ 55
SECTION 7.03. Individual Rights of Trustee............................. 56
SECTION 7.04. Trustee's Disclaimer..................................... 56
SECTION 7.05. Notice of Defaults....................................... 56
SECTION 7.06. Reports by Trustee to Holders............................ 56
SECTION 7.07. Compensation and Indemnity............................... 56
SECTION 7.08. Replacement of Trustee................................... 57
SECTION 7.09. Successor Trustee by Merger.............................. 58
SECTION 7.10. Eligibility; Disqualification............................ 58
SECTION 7.11. Preferential Collection of Claims Against Company........ 59
ARTICLE 8. Discharge of Indenture; Defeasance....................... 59
SECTION 8.01. Discharge of Liability on Securities; Defeasance......... 59
SECTION 8.02. Conditions to Defeasance................................. 60
SECTION 8.03. Application of Trust Money............................... 61
SECTION 8.04. Repayment to Company..................................... 62
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SECTION 8.05. Indemnity for Government Obligations..................... 62
SECTION 8.06. Reinstatement............................................ 62
ARTICLE 9. Amendments............................................... 62
SECTION 9.01. Without Consent of Holders............................... 62
SECTION 9.02. With Consent of Holders.................................. 63
SECTION 9.03. Compliance with Trust Indenture Act...................... 64
SECTION 9.04. Revocation and Effect of Consents and Waivers............ 64
SECTION 9.05. Notation on or Exchange of Securities.................... 65
SECTION 9.06. Trustee To Sign Amendments............................... 65
SECTION 9.07. Payment for Consent...................................... 65
ARTICLE 10. Miscellaneous............................................ 65
SECTION 10.01. Trust Indenture Act Controls............................. 65
SECTION 10.02. Notices.................................................. 66
SECTION 10.03. Communication by Holders with Other Holders.............. 66
SECTION 10.04. Certificate and Opinion as to Conditions Precedent....... 66
SECTION 10.05. Statements Required in Certificate or Opinion............ 67
SECTION 10.06. When Securities Disregarded.............................. 67
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar............. 67
SECTION 10.08. Legal Holidays........................................... 67
SECTION 10.09. GOVERNING LAW............................................ 67
SECTION 10.10. No Recourse Against Others............................... 68
SECTION 10.11. Successors............................................... 68
SECTION 10.12. Multiple Originals....................................... 68
SECTION 10.13. Table of Contents; Headings.............................. 68
Appendix A - Provisions Relating to Original Securities, Additional
Securities, Private Exchange
Securities and Exchange Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Certificate to be Delivered in Connection with
Transfers of Regulation S
Global Security
Exhibit D - Form of Transferee Letter of Representation
</TABLE>
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INDENTURE dated as of August 20, 1998, between Evenflo Company, Inc.,
a Delaware corporation (the "Company"), and Marine Midland Bank, a New York
banking corporation and trust company, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of (i) the Company's 11 3/4%
Senior Notes due 2006 issued on the date hereof (the "Original Securities"),
(ii) any Additional Securities (as defined herein) that may be issued on any
Issuance Date (all such Securities in clauses (i) and (ii) being referred to
collectively as the "Initial Securities"), (iii) if and when issued as provided
in the Registration Rights Agreement (as defined in Appendix A hereto (the
"Appendix")), the Company's 11 3/4% Senior Notes due 2006 issued in the
Registered Exchange Offer (as defined in the Appendix) in exchange for any
Initial Securities (the "Exchange Securities") and (iv) if and when issued as
provided in the Registration Agreement, the Private Exchange Securities (as
defined in the Appendix, and together with the Initial Securities and any
Exchange Securities issued hereunder, the "Securities") issued in the Private
Exchange (as defined in the Appendix). Except as otherwise provided herein, the
Securities will be limited to $200,000,000 in aggregate principal amount
outstanding, of which $110,000,000 in aggregate principal amount will be
initially issued on the date hereof. Subject to the conditions set forth herein,
the Company may issue up to $90,000,000 aggregate principal amount of Additional
Securities.
ARTICLE 1.
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness Incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Additional Securities" means up to $90,000,000 aggregate principal
amount of 11 3/4% Senior Notes due 2006 issued under the terms of this Indenture
subsequent to the Closing Date, other than Exchange Securities issued in
exchange for Original Securities.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10.0% or more of the voting securities of a Person
shall be deemed to be control.
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"Applicable Premium" means, with respect to a Security on any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (l) the
redemption price of such Security at August 15, 2002 (such redemption price
being described under paragraph 5 of the Securities) plus (2) all required
interest payments due on such Security through August 15, 2002 (excluding
accrued but unpaid interest), computed using a discount rate equal to the
Treasury Rate on such Redemption Date plus 50 basis points over (B) the
principal amount of such Security.
"Asset Sale" means (i) the sale, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a sale and leaseback)
of the Company or any Restricted Subsidiary (each referred to in this definition
as a "disposition") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than:
(a) a disposition of Cash Equivalents or Investment Grade Securities
or obsolete or worn out equipment in the ordinary course of business or
inventory or goods held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to Section 5.01 or any disposition
that constitutes a Change of Control pursuant to this Indenture;
(c) the making of any Restricted Payment or Permitted Investment that
is permitted to be made, and is made, pursuant to Section 4.04(a);
(d) any disposition of assets with an aggregate fair market value of
less than $1.0 million;
(e) any disposition of property or assets by a Restricted Subsidiary
to the Company or by the Company or a Restricted Subsidiary to a
Wholly-Owned Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the Code
for use in a Similar Business;
(g) any financing transaction with respect to property built or
acquired by the Company or any Restricted Subsidiary after the Closing
Date, including, without limitation, sale-leasebacks and asset
securitizations;
(h) foreclosures on assets;
(i) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility; and
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(j) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capitalized 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 and reflected as a
liability on a balance sheet (excluding the footnotes thereto) 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) U.S. dollars, (ii) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof, (iii) certificates of deposit, time deposits 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 commercial bank having capital
and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) of this
definition entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper rated A-l
or the equivalent thereof by Moody's or S&P and in each case maturing within one
year after the date of acquisition, (vi) investment funds investing 95.0% of
their assets in securities of the types described in clauses (i)-(v) above,
(vii) readily marketable direct obligations issued by any state of the United
States of America or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody's or S&P and (viii)
Indebtedness or preferred stock issued by Persons with a rating of "A" or higher
from S&P or "A2" or higher from Moody's.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, 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; or
(ii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
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13d-5(b)(1) under the Exchange Act), other than the Permitted Holders and
their Related Parties, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision) of 50.0% or more of the total
Voting Stock of the Company.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Company's shares of common stock, par value
$0.01 per share.
"consolidated" with respect to any Person refers to such Person
consolidated with its Restricted Subsidiaries, and excludes from such
consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary
were not an Affiliate of such Person.
"Consolidated Depreciation and Amortization Expense" means with
respect to any Person for any period, the total amount of depreciation and
amortization expense of such Person and its Restricted Subsidiaries for such
period on a consolidated basis and otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the
sum, without duplication, of: (a) consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Earnings (including amortization of
original issue discount, non-cash interest payments, the interest component of
Capitalized Lease Obligations, and net payments and receipts (if any) pursuant
to Hedging Obligations to the extent included in Consolidated Interest Expense,
excluding amortization of deferred financing fees) and (b) consolidated
capitalized interest of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued; provided, however, that Receivables Fees shall
be deemed not to constitute Consolidated Interest Expense.
"Consolidated Net Earnings" means, with respect to any Person for any
period, the aggregate of the Net Earnings, of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, and otherwise determined
in accordance with GAAP; provided, however, that (i) any net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto)
shall be excluded, (ii) the Net Earnings for such period shall not include the
cumulative effect of a change in accounting principles during such period, (iii)
any net after-tax earnings (loss) from discontinued operations and any net
after-tax gains or losses on disposal of discontinued operations shall be
excluded, (iv) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to asset dispositions other than in the ordinary
course of business (as determined in good faith by the Board of Directors of the
Company) shall be excluded, (v) the Net Earnings for such period of any Person
that is not a Subsidiary, or is an Unrestricted 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 or other payments paid in cash (or to
the extent converted into cash) to the referent Person or a Wholly-Owned
Restricted
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Subsidiary thereof in respect of such period, (vi) the Net Earnings of any
Person acquired in a pooling of interests transaction shall not be included for
any period prior to the date of such acquisition and (vii) the Net Earnings for
such period 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 its Net Earnings is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by the 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, unless
such restriction with respect to the payment of dividends or in similar
distributions has been legally waived.
"Contingent Obligations" means, with respect to any Person, any
obligation of such Person guaranteeing any leases, dividends or other
obligations that do not constitute Indebtedness ("primary obligations") of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor or (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation against loss in respect
thereof.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other institutional lenders or
indentures 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), letters of credit or other long-term indebtedness, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default. "Designated Noncash
Consideration" means the fair market value of noncash consideration received by
the Company or one of its Restricted Subsidiaries in connection with an Asset
Sale that is so designated as Designated Noncash Consideration pursuant to an
Officers' Certificate, setting forth the basis of such valuation, executed by
the principal executive officer and the principal financial officer of the
Company, less the amount of cash or Cash Equivalents received in connection with
a subsequent sale of such Designated Noncash Consideration.
"Designated Preferred Stock" means preferred stock of the Company
(other than Disqualified Stock) that is issued for cash (other than to a
Restricted Subsidiary) and is so designated as Designated Preferred Stock,
pursuant to an Officers' Certificate executed by the principal executive officer
and the principal financial officer of the Company, on the issuance
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date thereof, the cash proceeds of which are excluded from the calculation set
forth in Section 4.04(a)(3).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which, by its terms (or by the terms of any security into
which it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, in each case prior to the date 91 days
after the earlier of the maturity date of the Securities or the date the
Securities are no longer outstanding; provided, however, that if such Capital
Stock is issued to any employee or to any plan for the benefit of employees of
the Company or its Subsidiaries or by any such plan to such employees, such
Capital Stock shall not constitute Disqualified Stock solely because it may be
required to be repurchased by the Company or its Subsidiaries in order to
satisfy applicable statutory or regulatory obligations, provided, further, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof (or of any security into which it is convertible or for which it
is putable or exchangeable) have the right to require the issuer to repurchase
such Capital Stock (or such security into which it is convertible or for which
it is putable or exchangeable) upon the occurrence of any of the events
constituting an Asset Sale or a Change of Control shall not constitute
Disqualified Stock if such Capital Stock (and all such securities into which it
is convertible or for which it is putable or exchangeable) provides that the
issuer thereof will not repurchase or redeem any such Capital Stock (or any such
security into which it is convertible or for which it is putable or
exchangeable) pursuant to such provisions prior to compliance by the Company
with the provisions of this Indenture described under Sections 4.06 or 4.08, as
the case may be.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Earnings of such Person for such period plus (a) provision for
taxes based on income or profits of such Person for such period deducted in
computing Consolidated Net Earnings, plus (b) Consolidated Interest Expense of
such Person for such period and any Receivables Fees paid by such Person or any
of its Restricted Subsidiaries during such period, in each case to the extent
the same was deducted in calculating such Consolidated Net Earnings, plus (c)
Consolidated Depreciation and Amortization Expense of such Person for such
period to the extent such depreciation and amortization were deducted in
computing Consolidated Net Earnings, plus (d) any expenses or charges related to
any Equity Offering, Permitted Investment or Indebtedness permitted to be
Incurred by this Indenture (including such expenses or charges related to the
Transactions) or any costs incurred in the cancellation of stock options and, in
each case, deducted in such period in computing Consolidated Net Earnings, plus
(e) the amount of any restructuring charge deducted in such period in computing
Consolidated Net Earnings, plus (f) without duplication, any other non-cash
charges reducing Consolidated Net Earnings for such period (excluding any such
charge which requires an accrual of a cash reserve for anticipated cash charges
for any future period), plus (g) the amount of any minority interest expense
deducted in calculating Consolidated Net Earnings, less, without duplication (h)
non-cash items increasing Consolidated Net Earnings of such Person for such
period (excluding any items which represent the reversal of any accrual of, or
cash reserve for, anticipated cash charges in any prior period).
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"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public or private sale of common stock or
preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Excluded Contributions" means the net cash proceeds received by the
Company after the closing of the Transactions from (a) contributions to its
equity capital other than contributions from the issuance of Disqualified Stock
and (b) the sale (other than to a Subsidiary or to any Company or Subsidiary
management equity plan or stock option plan or any other management or employee
benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of
the Company, in each case designated as Excluded Contributions pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company on the date such capital
contributions are made or the date such Equity Interests are sold, as the case
may be, the cash proceeds of which are excluded from the calculation set forth
in Section 4.04(a)(3).
"Excluded Guarantee" shall have the meaning assigned to it in Section
4.11(a).
"Existing Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries in existence on the Closing Date, plus interest accruing
thereon, after application of the net proceeds of the sale of the Securities as
described the Offering Memorandum.
"Fixed Charge Coverage Ratio" means, with respect to any Person for
any period, the ratio of EBITDA of such Person for such period to the Fixed
Charges of such Person for such period. In the event that the Company or any of
its Restricted Subsidiaries Incurs, assumes, guarantees or redeems any
Indebtedness or issues or redeems Disqualified Stock or preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
Incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of Disqualified Stock or preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter period. For
purposes of making the computation referred to above, Investments, acquisitions,
dispositions, mergers, consolidations and discontinued operations (as determined
in accordance with GAAP) that have been made by the Company or any of its
Restricted Subsidiaries during the four-quarter reference period or subsequent
to such reference period and on or prior to or simultaneously with the
Calculation Date shall be calculated on a pro forma basis assuming that all such
Investments, acquisitions, dispositions, discontinued operations, mergers and
consolidations (and the reduction of any associated fixed charge obligations and
the change in EBITDA resulting
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therefrom) had occurred on the first day of the four-quarter reference period.
If since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Investment,
acquisition, disposition, discontinued operation, merger or consolidation that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto for
such period as if such Investment, acquisition, disposition, discontinued
operation, merger or consolidation had occurred at the beginning of the
applicable four-quarter period. For purposes of this definition, whenever pro
forma effect is to be given to a transaction, the pro forma calculations shall
be made in good faith by a responsible financial or accounting officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the Calculation Date had been the applicable rate for
the entire period (taking into account any Hedging Obligations applicable to
such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by a responsible financial
or accounting officer of the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP. For purposes of making the
computation referred to above, interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (a) Consolidated Interest Expense of such Person for such period and (b)
all cash dividend payments (excluding items eliminated in consolidation) on any
series of Disqualified Stock of such Person.
"Foreign Subsidiary" means a Restricted Subsidiary not organized or
existing under the laws of the United States, any State thereof, the District of
Columbia, or any territory thereof.
"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 Closing Date.
"Government Securities" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the 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
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respect to any such Government Securities or a specific payment of principal of
or interest on any such Government Securities 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 Government Securities or the specific payment
of principal of or interest on the Government Securities evidenced by such
depository receipt.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"Guarantee" means any guarantee of the obligations of the Company
under this Indenture and the Securities by any Person in accordance with the
provisions of this Indenture. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Person that Incurs a Guarantee; provided that
upon the release and discharge of such Person from its Guarantee in accordance
with this Indenture, such Person shall cease to be a Guarantor.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange or interest rates.
"Holder" or "Securityholder" means a holder of the Securities.
"Incur" means to directly or indirectly create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person, (a) any indebtedness
of such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers' acceptances (or, without double counting, reimbursement
agreements in respect thereof), (iii) representing the balance deferred and
unpaid of the purchase price of any property (including Capitalized Lease
Obligations), except any such balance that constitutes a trade payable or
similar obligation to a trade creditor, in each case accrued in the ordinary
course of business or (iv) representing any Hedging Obligations, if and to the
extent that any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet (excluding
the footnotes thereto) of such Person prepared in accordance with GAAP, (b) to
the
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extent not otherwise included, any obligation by such Person to be liable for,
or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another
Person (other than by endorsement of negotiable instruments for collection in
the ordinary course of business) and (c) to the extent not otherwise included,
Indebtedness of another Person secured by a Lien on any asset owned by such
Person (whether or not such Indebtedness is assumed by such Person); provided,
however, that Contingent Obligations Incurred in the ordinary course of business
shall be deemed not to constitute Indebtedness, and obligations under or in
respect of Receivables Facilities shall not be deemed to constitute Indebtedness
of a Person.
"Indemnity Agreement" means the agreement to be entered into between
the Company and Evenflo & Spaldings Holdings Corporation pursuant to which each
party will indemnify the other for all losses arising from the other's business
prior to the Transactions.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking firm or consultant to Persons engaged in Similar Businesses
of nationally recognized standing that is, in the reasonable judgment of the
Company's Board of Directors, qualified to perform the task for which it has
been engaged.
"Investment Grade Securities" means (i) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of loans
(including guarantees), advances or capital contributions (excluding accounts
receivable, trade credit, advances to customers, commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities issued by any other Person and investments that
are required by GAAP to be classified on the balance sheet (excluding the
footnotes thereto) of the Company in the same manner as the other investments
included in this definition to the extent such transactions involve the transfer
of cash or other property. For purposes of the definition of "Unrestricted
Subsidiary" and Section 4.04, (i) "Investments" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of a Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary
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equal to an amount (if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion (proportionate
to the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of such Subsidiary at the time of such redesignation and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issuance Date" with respect to any Initial Securities, means the date
on which such Initial Securities are originally issued.
"KKR" means Kohlberg Kravis Roberts & Co. L.P.
"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);
provided that in no event shall an operating lease be deemed to constitute a
Lien.
"Liquidated Damages" shall have the meaning assigned to it in the
Registration Rights Agreement.
"Management Group" means the group consisting of the Officers of the
Company.
"Moody's" means Moody's Investors Service, Inc.
"Net Earnings" means, with respect to any Person, the net earnings
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset Sale),
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Noncash Consideration (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions),
any relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than required by Section 4.06(b)(i)) to be paid as
a result of such transaction and any deduction of appropriate amounts to be
provided by the Company as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Company after such sale or other disposition thereof, including,
without limitation, pension and other post-employment benefit liabilities and
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liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities, and guarantees of payment of such principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Indebtedness.
"Offer Period" means the period from the date of a Change of Control
until and including the Change of Control Payment Date.
"Offering Memorandum" means the Offering Memorandum dated August 13,
1998, relating to the Company's 11 3/4% Senior Notes due 2006.
"Officer" means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer, the Controller or the Secretary of the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holders" means KKR and any of its Affiliates and the
Management Group.
"Permitted Investments" means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person that is engaged in a Similar Business if
as a result of such Investment (i) such Person becomes a Restricted Subsidiary
or (ii) such Person, in one transaction or a series of related transactions, 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; (d) any Investment in securities or other assets not
constituting cash or Cash Equivalents and received in connection with an Asset
Sale made pursuant to Section 4.06 or any other disposition of assets not
constituting an Asset Sale; (e) any Investment existing on the Closing Date; (f)
advances to employees not in excess of $5.0 million outstanding at any one time,
in the aggregate; (g) any Investment acquired by the Company or any of its
Restricted Subsidiaries (i) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (ii) as a
result
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of a foreclosure by the Company or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect to any
secured Investment in default; (h) Hedging Obligations permitted under Section
4.03(b)(x); (i) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case Incurred in the ordinary course of business; (j) any Investment in a
Similar Business (other than an Investment in an Unrestricted Subsidiary) having
an aggregate fair market value, taken together with all other Investments made
pursuant to this clause (j) that are at that time outstanding, not to exceed the
greater of (x) $25.0 million or (y) 10% of Total Assets at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value); (k)
Investments the payment for which consists of Equity Interests of the Company
(exclusive of Disqualified Stock); provided, however, that such Equity Interests
shall not increase the amount available for Restricted Payments under Section
4.04(a)(3); (l) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (l) that
are at that time outstanding, not to exceed the greater of (x) $15.0 million or
(y) 5.0% of Total Assets at the time of such Investment (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value); (m) any transaction to the extent it
constitutes an investment that is permitted by and made in accordance with the
provisions of Section 4.07(b) (except transactions described in clauses (ii) and
(vi) of such Section 4.07(b)); (n) any Investment by Restricted Subsidiaries in
other Restricted Subsidiaries and Investments by Subsidiaries that are not
Restricted Subsidiaries in other Subsidiaries that are not Restricted
Subsidiaries; (o) Investments relating to any special purpose Wholly-Owned
Subsidiary of the Company organized in connection with a Receivables Facility
that, in the good faith determination of the Board of Directors of the Company,
are necessary or advisable to effect such Receivables Facility; and (p)
guarantees (including Guarantees) of Indebtedness permitted under Section 4.03.
"Permitted Liens" means, with respect to any Person (a) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which such
Person is a party, or to secure public or statutory obligations of such Person
or deposits or cash or U.S. government bonds to secure surety or appeal bonds to
which such Person is a party, or for contested taxes or import or custom duties
or for the payment of rent, in each case incurred in the ordinary course of
business; (b) Liens imposed by law, including carriers', warehousemen's,
mechanics', materialmen and repairmen Liens, in each case for sums not yet due
or being contested in good faith by appropriate proceedings, if a reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof; (c) Liens for taxes, assessments or other
governmental charges not yet subject to penalties for non-payment or which are
being contested in good faith by appropriate proceedings provided reserves
required pursuant to GAAP have been taken on the books of the Company or its
Restricted Subsidiaries, as the case may be; (d) Liens in favor of issuers of
surety or performance bonds or bankers' acceptance or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; provided, however, that such letters of credit do not
constitute Indebtedness; (e) encumbrances, easements or reservations of, or
rights of others for, licenses, rights of way, sewers, electric lines,
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telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or liens incidental to the conduct
of the business of such Person or to the ownership of its properties which do
not in the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person; (f)
Liens securing a Hedging Obligation, so long as the related Indebtedness is, and
is permitted to be under this Indenture, secured by a Lien on the same property;
(g) leases and subleases of real property which do not materially interfere with
the ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (h) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment have not been
finally terminated or the period within which such proceedings may be initiated
has not expired; (i) Liens for the purpose of securing the payment (or the
refinancing of the payment) of all or a part of the purchase price of, or
Capitalized Lease Obligations with respect to, assets or property acquired or
constructed in the ordinary course of business provided that (x) the aggregate
principal amount of Indebtedness secured by such Liens is otherwise permitted to
be Incurred under this Indenture and does not exceed the cost of the assets or
property so acquired or constructed and (y) such Liens are created within 90
days of construction or acquisition of such assets or property and do not
encumber any other assets or property of the Company or any Restricted
Subsidiary other than such assets or property and assets affixed or appurtenant
thereto; (j) Liens arising solely by virtue of any statutory or common law
provision relating to banker's Liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a depository
institution; provided that such deposit account is not a pledged cash collateral
account; (k) Liens arising from Uniform Commercial Code financing statement
filings regarding operating leases entered into by the Company and its
Restricted Subsidiaries in the ordinary course of business; (l) Liens existing
on the Issuance Date; (m) Liens on property or shares of stock of a Person at
the time such Person becomes a Subsidiary; provided, however, that such Liens
are not created, Incurred or assumed in connection with, or in contemplation of,
such other Person becoming a Subsidiary; provided further, however, that any
such Lien may not extend to any other property owned by the Company or any
Restricted Subsidiary; (n) Liens on property at the time the Company or a
Subsidiary acquired the property, including any acquisition by means of a merger
or consolidation with or into the Company or any Restricted Subsidiary;
provided, however, that such Liens are not created, Incurred or assumed in
connection with, or in contemplation of, such acquisition; provided, further,
however, that such Liens may not extend to any other property owned by the
Company or any Restricted Subsidiary; (o) Liens securing Indebtedness or other
obligations of a Subsidiary owing to the Company or a Wholly-Owned Subsidiary;
(p) Liens securing the Securities and Guarantees; (q) Liens securing
Indebtedness incurred to refinance Indebtedness that was previously so secured,
provided that (A) such Liens are not materially less favorable to the Holders
and (B) any such Lien is limited to all or part of the same property or assets
(plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under which
the original Lien arose, could secure) the obligations to which such Liens
relate; (r) Liens on assets Incurred in connection with a Receivables Facility;
(s) Liens securing Indebtedness and other obligations under a senior credit
agreement or other senior bank facility, including, without limitation, the
Senior Credit Facility, and related Hedging Obligations and Liens on assets of
Restricted Subsidiaries securing guarantees of Indebtedness and other
obligations under a senior credit agreement or other senior
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bank facility, including, without limitation, the Senior Credit Facility,
permitted to be Incurred under this Indenture; (t) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or any Restricted Subsidiary in the ordinary course of business; (u)
Liens securing Indebtedness permitted to be Incurred pursuant to Section
4.03(b)(xiii); and (v) Liens created, Incurred or existing in respect of
unfunded pension obligations or any similar obligations of the Company or any of
its Restricted Subsidiaries or any Guarantor.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"preferred stock" means any Equity Interest with preferential rights
of payment of dividends or upon liquidation, dissolution, or winding up.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Receivables Facility" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Company and/or
any of its Restricted Subsidiaries sells its accounts receivable to a Person
that is not a Restricted Subsidiary.
"Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"Redemption Date" shall mean, with respect to any redemption of
Securities, the date of redemption with respect thereto.
"Related Parties" means any Person controlled by a Permitted Holder,
including any partnership or limited liability company of which a Permitted
Holder or its Affiliates is the general partner or managing member, as the case
may be.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company. "Restricted Investment"
means an Investment other than a Permitted Investment.
"Restricted Subsidiary" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided,
however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Senior Credit Facility" means that certain revolving credit facility
described in the Offering Memorandum among the Company and the lenders from time
to time parties thereto, including any collateral documents, instruments and
agreements executed in connection therewith, and any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any
indentures or credit facilities or commercial paper facilities with banks or
other institutional lenders that replace, refund or refinance any part of the
loans, notes, other credit facilities or commitments thereunder, including any
such replacement, refunding or refinancing facility or indenture that increases
the amount borrowable thereunder or alters the maturity thereof; provided,
however, that if at any time there is more than one facility which could
constitute the Senior Credit Facility, the Company shall designate to the
Trustee pursuant to an Officers' Certificate executed by the principal executive
officer and principal financial officer of the Company which one of such
facilities shall be the Senior Credit Facility for purposes of the subordination
and acceleration provisions of this Indenture.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Similar Business" means a business, the majority of whose revenues
are derived from the design, manufacture, import and/or distribution of juvenile
and infant products, or any line of business engaged in by the Company or its
Subsidiaries on the Closing Date, or any business or activity that is reasonably
similar thereto or a reasonable extension, development or expansion thereof or
ancillary thereto.
"Subordinated Indebtedness" means (a) with respect to the Company, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Securities and (b) with respect to any Guarantor, any
Indebtedness of such Guarantor which is by its terms subordinated in right of
payment to the Guarantee of such Guarantor.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture,
limited liability company or similar entity) of which more than 50.0% 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 of determination 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, joint venture, limited
liability company or similar entity of which (x) more than 50.0% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general,
special or limited partnership or otherwise and (y) such Person or any
Wholly-Owned Restricted Subsidiary of such Person is a controlling general
partner or otherwise controls such entity.
16
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries as shown on the most recent balance sheet (excluding
the footnotes thereto) of the Company.
"Transactions" means (i) the transactions contemplated by the stock
purchase agreement dated August 20, 1998, between KKR 1996 Fund L.P. and Lisco,
Inc., pursuant to which KKR 1996 Fund L.P. will acquire 51% of the outstanding
common stock of the Company and 100% of the outstanding preferred stock of the
Company, including the distribution of such preferred stock by the Company to
Lisco, Inc., (ii) the transactions contemplated by the stock purchase agreement
dated August 20, 1998, between Great Star Corporation and Lisco, Inc., pursuant
to which Great Star Corporation will acquire 6.6% of the outstanding common
stock of the Company, (iii) the repayment by the Company of approximately $110.0
million of intercompany debt owed to Spalding & Evenflo Companies, Inc. and its
Affiliates, (iv) the offering of $110.0 million of Securities by the Company and
(v) the entering into of the Senior Credit Facility on the Issuance Date.
"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of U.S. Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H. 15 (519) which has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to August 15, 2002;
provided, however, that if the period from the Redemption Date to August 15,
2002 is less than one year, the weekly average yield on actually traded U.S.
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
which at the time of determination is an Unrestricted Subsidiary (as designated
by the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any existing Subsidiary
and any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests of, or owns, or holds any Lien on, any property of, the Company or any
Subsidiary of
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the Company (other than any Subsidiary of the Subsidiary to be so designated),
provided that (a) any Unrestricted Subsidiary must be an entity of which shares
of the capital stock or other equity interests (including partnership interests)
entitled to cast at least a majority of the votes that may be cast by all shares
or equity interests having ordinary voting power for the election of directors
or other governing body are owned, directly or indirectly, by the Company, (b)
the Company certifies that such designation complies with Section 4.04 and (c)
each of (I) the Subsidiary to be so designated and (II) 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; provided that, immediately after giving effect to such designation,
(i) the Company could Incur $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test described in Section 4.03(a) or (ii) the Fixed
Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be
greater than such ratio for the Company and its Restricted Subsidiaries
immediately prior to such designation, in each case on a pro forma basis taking
into account such designation. Any such designation by the Board of Directors
shall be notified by the Company 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 of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing (i) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock multiplied by the amount of such payment, by
(ii) the sum of all such payments.
"Wholly-Owned Restricted Subsidiary" is any Wholly-Owned Subsidiary
that is a Restricted Subsidiary.
"Wholly-Owned Subsidiary" of any Person means a Subsidiary of such
Person, 100% of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly-Owned Subsidiaries of such Person and one
or more Wholly-Owned Subsidiaries of such Person.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction"......................................... 4.07
"Asset Sale Offer".............................................. 4.06(b)
</TABLE>
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<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Asset Sale Purchase Date"...................................... 4.06(b)
"Bankruptcy Law"................................................ 6.01
"Change of Control Offer"....................................... 4.08(a)
"Change of Control Payment"..................................... 4.08(a)
"Change of Control Payment Date"................................ 4.08(b)
"covenant defeasance option".................................... 8.01(b)
"CUSIP"......................................................... 2.13
"Custodian"..................................................... 6.01
"Event of Default".............................................. 6.01
"Excess Proceeds"............................................... 4.06(b)
"legal defeasance option"....................................... 8.01(b)
"Legal Holiday"................................................. 11.08
"non-payment default"........................................... 10.03
"Offered Price"................................................. 4.06(b)
"Paying Agent".................................................. 2.04
"Payment Blockage Notice"....................................... 10.03
"Payment Blockage Period"....................................... 10.03
"payment default"............................................... 10.03
"protected purchaser"........................................... 2.08
"Refinancing Indebtedness"...................................... 4.03(b)(xv)
"Refunding Capital Stock"....................................... 4.04(b)
"Registrar"..................................................... 2.04
"Restricted Payments"........................................... 4.04(a)
"Retired Capital Stock"......................................... 4.04(b)
"Successor Company"............................................. 5.01(a)(i)
"Successor Guarantor"........................................... 5.01(b)(i)
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, any Guarantor
and any other obligor on the indenture securities.
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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 have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(8) the principal amount of any preferred stock shall be (i) the
maximum liquidation value of such preferred stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
preferred stock, whichever is greater.
ARTICLE 2.
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is $200,000,000. The Securities may be issued in one or more
series. All Securities of any one series shall be substantially identical except
as to denomination.
With respect to any Additional Securities issued after the Closing
Date (except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Section 2.07, 2.08, 2.10 or 3.06 or the Appendix and, except for Securities
which, pursuant to Section 2.03 are deemed never to have been authenticated and
delivered hereunder), there shall be (i) established in or pursuant to a
resolution of the Board of
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Directors and (ii) (A) set forth or determined in the manner provided in an
Officer's Certificate or (B) established in one or more indentures supplemental
hereto, prior to the issuance of such Additional Securities:
(1) whether such Additional Securities shall be issued as part of a
new or existing series of Securities and the title of such Additional
Securities (which shall distinguish the Additional Securities of the series
from Securities of any other series);
(2) the aggregate principal amount of such Additional Securities which
may be authenticated and delivered under this Indenture shall be in an
aggregate principal amount not to exceed $90,000,000 (except for Securities
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the same series pursuant
to Section 2.07, 2.08, 2.10 or 3.06 or the Appendix and except for
Securities which, pursuant to Section 2.03, are deemed never to have been
authenticated and delivered hereunder);
(3) the issue price and Issuance Date of such Additional Securities,
including the date from which interest on such Additional Securities shall
accrue;
(4) if applicable, that such Additional Securities shall be issuable
in whole or in part in the form of one or more Global Securities (as
defined in the Appendix) and, in such case, the respective depositaries for
such Global Securities, the form of any legend or legends which shall be
borne by such Global Securities in addition to or in lieu of those set
forth in Exhibit A hereto and any circumstances in addition to or in lieu
of those set forth in Section 2.3 of the Appendix in which any such Global
Security may be exchanged in whole or in part for Additional Securities
registered, or any transfer of such Global Security in whole or in part may
be registered, in the name or names of Persons other than the depositary
for such Global Security or a nominee thereof; and
(5) if applicable, that such Additional Securities shall not be issued
in the form of Initial Securities as set forth in Exhibit A, but shall be
issued in the form of Exchange Securities as set forth in Exhibit B.
If any of the terms of any Additional Securities are established by
action taken pursuant to a resolution of the Board of Directors, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate or any indenture supplemental hereto
setting forth the terms of the Additional Securities.
SECTION 2.02. Form and Dating. Provisions relating to the Original
Securities, the Additional Securities, the Private Exchange Securities and the
Exchange Securities are set forth in the Appendix, which is hereby incorporated
in and expressly made a part of this Indenture. The (i) Original Securities and
the Trustee's certificate of authentication, Private Exchange Securities and the
Trustee's certificate of authentication and (ii) any Additional
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Securities (if issued as Transfer Restricted Securities (as defined in the
Appendix)) and the Trustee's certificate of authentication shall each be
substantially in the form of Exhibit A hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Exchange Securities and any
Additional Securities issued other than as Transfer Restricted Securities and
the Trustee's certificate of authentication shall each be substantially in the
form of Exhibit B hereto, which is hereby incorporated in and expressly made a
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication.
SECTION 2.03. Execution and Authentication. One or more Officers shall
sign the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
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 and make available for delivery
Securities as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Any such appointment shall be
evidenced by an instrument signed by a Trust Officer, a copy of which shall be
furnished to the Company. Unless limited by the terms of such 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 any
Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent, and the
term "Registrar" includes any co-registrars. The Company initially appoints the
Trustee as (i) Registrar and Paying Agent in connection with the Securities and
(ii) the Securities Custodian (as defined in the Appendix) with respect to the
Global Securities.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall notify the Trustee of the
name and address of any such agent. If the Company
22
<PAGE>
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.07.
The Company or any of its domestically organized Wholly-Owned Subsidiaries may
act as Paying Agent or Registrar.
The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided, however,
that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Company and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (1) above. The Registrar or Paying Agent may resign at
any time upon written notice; provided, however, that the Trustee may resign as
Paying Agent or Registrar only if the Trustee also resigns as Trustee in
accordance with Section 7.08.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent (or if the Company or a Subsidiary is acting as Paying
Agent, segregate and hold in trust for the benefit of the Persons entitled
thereto) a sum sufficient to pay such principal and interest when so becoming
due. The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders of Securities or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary of the Company acts as Paying Agent, it shall segregate the
money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.06. Lists of Holders of Securities. 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 Securityholders. If the Trustee is
not the Registrar, the Company shall furnish, or cause the Registrar to furnish,
to the Trustee, in writing at least five Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Securityholders.
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<PAGE>
SECTION 2.07. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. When a Security is presented to the Registrar with
a request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of Section 8-401(a) of the Uniform Commercial Code
are met. When Securities are presented to the Registrar with a request to
exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested if the same
requirements are met. To permit registration of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request. The Company may require payment of a sum sufficient to pay
all taxes, assessments or other governmental charges in connection with any
transfer or exchange pursuant to this Section. The Company shall not be required
to make and the Registrar need not register transfers or exchanges of Securities
selected for redemption (except, in the case of Securities to be redeemed in
part, the portion thereof not to be redeemed) or any Securities for a period of
15 days before a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent and the Registrar may deem
and treat the Person in whose name a Security is registered as the absolute
owner of such Security for the purpose of receiving payment of principal of and
interest, if any, on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the Trustee,
the Paying Agent or the Registrar shall be affected by notice to the contrary.
Any Holder of a Global 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 (i) the Holder of
such Global Security (or its agent) or (ii) any Holder of a beneficial interest
in such Global Security, and that ownership of a beneficial interest in such
Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.08. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Company or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Company, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge the Holder for their expenses in
24
<PAGE>
replacing a Security. In the event any such mutilated, lost, destroyed or
wrongfully taken Security has become or is about to become due and payable, the
Company in its discretion may pay such Security instead of issuing a new
Security in replacement thereof.
Every replacement Security is an additional obligation of the Company.
The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.09. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a Redemption Date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.10. Temporary Securities. In the event that Definitive
Securities (as defined in the Appendix) are to be issued under the terms of this
Indenture, until such Definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities and deliver them in exchange for temporary
Securities upon surrender of such temporary Securities at the office or agency
of the Company, without charge to the Holder. In addition, the Temporary
Regulation S Global Security (as defined in the Appendix) may also be issued in
temporary form.
SECTION 2.11. Cancellation. The Company 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 registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver canceled Securities to the Company pursuant to written
direction by an Officer. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
The Trustee shall not
25
<PAGE>
authenticate Securities in place of canceled Securities other than pursuant to
the terms of this Indenture.
SECTION 2.12. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, the Company shall pay the defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the Persons who are
Holders of Securities on a subsequent special record date. The Company shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause to be
mailed to each Holders of Securities a notice that states the special record
date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee after the Company becomes aware, through written
notice, of a change in the "CUSIP" numbers.
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<PAGE>
ARTICLE 3.
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the Redemption Date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not fewer than 15 days after
the date of notice to the Trustee. Any such notice may be canceled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby
be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which such Securities are listed, or, if such
Securities are not so listed, on a pro rata basis, by lot or by such other
method as the Trustee shall deem fair and appropriate (and in such manner as
complies with applicable legal requirements); provided that no Securities of
$1,000 or less shall be purchased or redeemed in part. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than
60 days before a date for redemption of Securities, the Company, or the Trustee
at the Company's direction, shall mail a notice of redemption by first-class
mail, postage prepaid, to each Holder of Securities to be redeemed at such
Holder's registered address; provided that in the event the Trustee is to mail
such notice, the Company shall deliver to the Trustee, at least 45 days prior to
the Redemption Date, an Officer's Certificate requesting that the Trustee give
such notice and setting forth the information to be stated in such notice as
provided in the following items.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest to the
Redemption Date;
(3) the name and address of the Paying Agent;
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<PAGE>
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed (or the portion thereof);
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities (or portion thereof) called for redemption
ceases to accrue on and after the Redemption Date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the Redemption Date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the Redemption
Date; provided, however, that if the Redemption Date is after a regular record
date or a special record date and on or prior to the interest payment date, the
accrued interest shall be payable to the Securityholder of the redeemed
Securities registered on the relevant record date. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of the notice
to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on the
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Company to the
Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. A new Security in principal
amount equal to the unredeemed portion of any Security redeemed in part will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date unless the Company defaults in
payment of the redemption price, interest shall cease to accrue on Securities or
portions thereof called for redemption.
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ARTICLE 4.
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Commencing with the period ended September
30, 1998, whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and each Holder and to prospective purchasers of Securities identified
to the Company by the Initial Purchasers, within 15 days after it is or would
have been required to file such with the SEC, (a) within 90 days after the end
of each fiscal year, annual reports on Form 10-K (or any successor or comparable
form) containing the information required to be contained therein (or required
in such successor or comparable form); (b) within 45 days after the end of each
of the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or
any successor or comparable form); (c) promptly from time to time after the
occurrence of an event required to be therein reported, such other reports on
Form 8-K (or any successor or comparable form); and (d) any other information,
documents and other reports which the Company would be required to file with the
Commission if it were subject to Section 13 or 15(d) of the Exchange Act.
Notwithstanding the foregoing, such requirements shall be deemed satisfied prior
to the Exchange Offer or the effectiveness of the Shelf Registration Statement
by the filing with the Commission of an exchange offer registration statement
and/or a shelf registration statement as required by the Registration Rights
Agreement (as defined in the Appendix), and any amendments thereto, with such
financial information that satisfies Regulation S-X of the Securities Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to Incur any Indebtedness (including Acquired Indebtedness) and the
Company shall not issue
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any shares of Disqualified Stock and shall not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may Incur Indebtedness (including Acquired Indebtedness) or issue shares
of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's and
its Restricted Subsidiaries' most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date
on which such additional Indebtedness is Incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1.0, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been Incurred, or the Disqualified Stock had been
issued, as the case may be, and the application of proceeds therefrom had
occurred at the beginning of such four-quarter period.
(b) The foregoing limitations shall not apply to:
(i) the Incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under Credit Facilities and the issuance and creation of
letters of credit and bankers' acceptances thereunder (with letters of
credit and bankers' acceptances being deemed to have a principal amount
equal to the face amount thereof) up to an aggregate principal amount of
$100.0 million outstanding at any one time;
(ii) the Incurrence by the Company of Indebtedness represented by the
Securities issued on the Closing Date;
(iii) Existing Indebtedness (other than Indebtedness described in
clauses (i) and (ii));
(iv) Indebtedness (including Capitalized Lease Obligations) Incurred
by the Company or any of its Restricted Subsidiaries, to finance the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets) in an aggregate principal amount which, when
aggregated with the principal amount of all other Indebtedness then
outstanding and Incurred pursuant to this clause (iv) and including all
Refinancing Indebtedness Incurred to refund, refinance or replace any other
Indebtedness Incurred pursuant to this Section 4.03(b)(iv), does not exceed
the greater of (x) $15.0 million or (y) 10.0% of Total Assets;
(v) Indebtedness Incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the Incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or Incurrence;
(vi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar
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obligations, in each case, Incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such
acquisition; provided, however, that (a) such Indebtedness is not reflected
as a dollar amount on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements shall not be deemed to be reflected on such balance sheet for
purposes of this clause (a)) and (b) the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross proceeds
including noncash proceeds (the fair market value of such noncash proceeds
being measured at the time received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(vii) Indebtedness of the Company to a Restricted Subsidiary; provided
that any such Indebtedness is made pursuant to an intercompany note and is
subordinated in right of payment to the Securities; provided further that
any subsequent issuance or transfer of any Capital Stock or any other event
which will result in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case to be an Incurrence of such Indebtedness;
(viii) shares of preferred stock of a Restricted Subsidiary issued to
the Company or another Restricted Subsidiary; provided that any subsequent
issuance or transfer of any Capital Stock or any other event which results
in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any other subsequent transfer of any such shares of preferred stock (except
to the Company or another Restricted Subsidiary) shall be deemed, in each
case, to be an issuance of such shares of preferred stock;
(ix) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary; provided that (a) any such Indebtedness is made
pursuant to an intercompany note and (b) if a Guarantor Incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of such
Guarantor; provided further that any subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case, to be an Incurrence of such Indebtedness;
(x) Hedging Obligations that are Incurred in the ordinary course of
business (a) for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of this
Indenture to be outstanding or (b) for the purpose of fixing or hedging
currency exchange rate risk with respect to any currency exchanges;
(xi) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(xii) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
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(xiii) Indebtedness and Disqualified Stock of the Company and
Indebtedness and preferred stock of any of its Restricted Subsidiaries not
otherwise permitted under this Section 4.03 in an aggregate principal
amount or liquidation preference, which when aggregated with the principal
amount and liquidation preference of all other Indebtedness and
Disqualified Stock then outstanding and Incurred pursuant to this Section
4.03 (b)(xiii), does not exceed $20.0 million at any one time outstanding;
provided, however, that Indebtedness of Foreign Subsidiaries, which when
aggregated with the principal amount of all other Indebtedness of Foreign
Subsidiaries then outstanding and Incurred pursuant to this Section
4.03(b)(xiii), does not exceed $15.0 million (or the equivalent thereof in
any other currency) at any one time outstanding (it being understood that
any Indebtedness Incurred pursuant to this Section 4.03(b)(xiii) shall
cease to be deemed Incurred or outstanding for purposes of this Section
4.03(b)(xiii) but shall be deemed to be Incurred for purposes of Section
4.03(a) from and after the first date on which the Company could have
Incurred such Indebtedness under Section 4.03(a) without reliance on this
Section 4.03(b)(xiii);
(xiv) (a) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the Incurrence
of such Indebtedness Incurred by such Restricted Subsidiary is permitted
under the terms of this Indenture and (b) any Excluded Guarantee of a
Restricted Subsidiary;
(xv) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness which serves to refund, refinance or
restructure any Indebtedness Incurred as permitted under Section 4.03(a)
and clauses (ii) and (iii) of this Section 4.03(b), this clause (xv) and
clause (xvi) below or any Indebtedness issued to so refund, refinance or
restructure such Indebtedness including additional Indebtedness Incurred to
pay premiums and fees in connection therewith (the "Refinancing
Indebtedness") prior to its respective maturity; provided, however, that
such Refinancing Indebtedness (a) has a Weighted Average Life to Maturity
at the time such Refinancing Indebtedness is Incurred which is not less
than the remaining Weighted Average Life to Maturity of Indebtedness being
refunded or refinanced, (b) to the extent such Refinancing Indebtedness
refinances Indebtedness subordinated or pari passu to the Securities, such
Refinancing Indebtedness is subordinated or pari passu to the Securities at
least to the same extent as the Indebtedness being refinanced or refunded
and (c) shall not include (1) Indebtedness of a Subsidiary that refinances
Indebtedness of the Company or (2) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary;
(xvi) Indebtedness or Disqualified Stock of Persons that are acquired
by the Company or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of this Indenture;
provided that such Indebtedness or Disqualified Stock is not Incurred in
contemplation of such acquisition or merger; and provided further that
after giving effect to such acquisition or merger, either (a) the Company
would be permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in Section
4.03(a) or (b) the Fixed
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Charge Coverage Ratio is greater than immediately prior to such acquisition
or merger; and
(xvii) Indebtedness Incurred in respect of the Indemnity Agreement.
(c) For purposes of determining compliance with this Section 4.03, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of permitted Indebtedness described in clauses (i) through (xvii)
of Section 4.03(b) or is entitled to be Incurred pursuant to Section 4.03(a),
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.03 and such item of Indebtedness
shall be treated as having been Incurred pursuant to only one of such clauses or
pursuant to Section 4.03(a) except as otherwise set forth in Section
4.03(b)(xiii). Accrual of interest, the accretion of accreted value and the
payment of interest in the form of additional Indebtedness shall not be deemed
to be an Incurrence of Indebtedness for purposes of this Section 4.03.
SECTION 4.04. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests, including any dividend or distribution payable
in connection with any merger or consolidation (other than (A) dividends or
distributions by the Company payable in Equity Interests (other than
Disqualified Stock) of the Company or (B) dividends or distributions by a
Restricted Subsidiary so long as, in the case of any dividend or distribution
payable on or in respect of any class or series of securities issued by a
Subsidiary other than a Wholly-Owned Subsidiary, the Company or a Restricted
Subsidiary receives at least its pro rata share of such dividend or distribution
in accordance with its Equity Interests in such class or series of securities);
(ii) purchase, redeem, defease or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent of the Company;
(iii) make any principal payment on, or redeem, repurchase, defease or otherwise
acquire or retire for value in each case, prior to any scheduled repayment, or
maturity, any Subordinated Indebtedness (other than Indebtedness permitted under
clauses (vii) and (ix) of Section 4.03(b)); or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a pro forma
basis, the Company could Incur $1.00 of additional Indebtedness pursuant to
Section 4.03(a); and
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(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (v) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that could have been paid pursuant to such clause if $2.5 million and $5.0
million were substituted in such clause for $5.0 million and $10.0 million,
respectively), (vi) and (ix) of Section 4.04(b), but excluding all other
Restricted Payments permitted by Section 4.04(b)), is less than the sum of
(i) 50% of the Consolidated Net Earnings of the Company for the period
(taken as one accounting period) from the fiscal quarter that first begins
after the Closing Date to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, in the case such Consolidated Net
Earnings for such period is a deficit, minus 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds and the fair market value, as
determined in good faith by the Board of Directors, of marketable
securities received by the Company since immediately after the closing of
the Transactions from the issue or sale of Equity Interests of the Company
(including Retired Capital Stock, but excluding cash proceeds and
marketable securities received from the sale of Equity Interests to members
of management, directors or consultants of the Company and its Subsidiaries
after the Closing Date to the extent such amounts have been applied to
Restricted Payments made in accordance with Section 4.04(b)(v) and
excluding Excluded Contributions) or debt securities of the Company that
have been converted into such Equity Interests of the Company (other than
Refunding Capital Stock or Equity Interests or convertible debt securities
of the Company sold to a Restricted Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) 100% of the aggregate amount of cash and
marketable securities contributed to the capital of the Company following
the Closing Date (excluding Excluded Contributions), plus (iv) 100% of the
aggregate amount received in cash and the fair market value of marketable
securities (other than Restricted Investments) received from (A) the sale
or other disposition (other than to the Company or a Restricted Subsidiary)
of Restricted Investments made by the Company and its Restricted
Subsidiaries or (B) a dividend from, or the sale (other than to the Company
or a Restricted Subsidiary) of the stock of, an Unrestricted Subsidiary
(other than an Unrestricted Subsidiary the Investment in which was made by
the Company or a Restricted Subsidiary pursuant to Section 4.04(b)(vii) or
Section 4.04(b)(x)).
(b) The foregoing provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of this Indenture;
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(ii) (a) the redemption, repurchase, retirement or other acquisition
of any Equity Interests (the "Retired Capital Stock") or Subordinated
Indebtedness of the Company in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of,
Equity Interests of the Company (other than any Disqualified Stock) (the
"Refunding Capital Stock"), and (b) if immediately prior to the retirement
of Retired Capital Stock, the declaration and payment of dividends thereon
was permitted under Section 4.04(b)(vi), the declaration and payment of
dividends on the Refunding Capital Stock in an aggregate amount per year no
greater than the aggregate amount of dividends per annum that was
declarable and payable on such Retired Capital Stock immediately prior to
such retirement; provided, however, that at the time of the declaration of
any such dividends, no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(iii) distributions or payments of Receivables Fees;
(iv) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of, new Indebtedness of
the Company so long as (A) the principal amount of such new Indebtedness
does not exceed the principal amount of the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired for value (plus the amount of
any premium required to be paid under the terms of the instrument governing
the Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired), (B) such Indebtedness is subordinated to the Securities at least
to the same extent as such Subordinated Indebtedness so purchased,
exchanged, redeemed, repurchased, acquired or retired for value, (C) such
Indebtedness has a final scheduled maturity date equal to or later than the
final scheduled maturity date of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired and (D) such Indebtedness has a
Weighted Average Life to Maturity equal to or greater than the remaining
Weighted Average Life to Maturity of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired;
(v) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of the
Company held by any future, present or former employee, director or
consultant of the Company, any Subsidiary of the Company or Evenflo &
Spalding Holdings Corporation or any subsidiary thereof pursuant to any
management equity plan or stock option plan or any other management or
employee benefit plan or agreement; provided, however, that the aggregate
Restricted Payments made under this Section 4.04(b)(v) does not exceed in
any calendar year $5.0 million (with unused amounts in any calendar year
being carried over to succeeding calendar years subject to a maximum
(without giving effect to the following proviso) of $10.0 million in any
calendar year); provided further that such amount in any calendar year may
be increased by an amount not to exceed (A) the cash proceeds from the sale
of Equity Interests of the Company to members of management, directors or
consultants of the Company and its Subsidiaries that occurs after the
Closing Date (to the extent the cash proceeds from the sale of such Equity
Interest have not
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otherwise been applied to the payment of Restricted Payments by virtue of
Section 4.04(a)(3)) plus (B) the cash proceeds of key man life insurance
policies received by the Company and its Restricted Subsidiaries after the
Closing Date less (C) the amount of any Restricted Payments previously made
pursuant to clauses (A) and (B) of this Section 4.04(b)(v); and provided
further that cancellation of Indebtedness owing to the Company from members
of management of the Company or any of its Restricted Subsidiaries in
connection with a repurchase of Equity Interests of the Company shall not
be deemed to constitute a Restricted Payment for purposes of this Section
4.04 or any other provision of this Indenture;
(vi) the declaration and payment of dividends to holders of any class
or series of Designated Preferred Stock (other than Disqualified Stock)
issued after the Closing Date (including, without limitation, the
declaration and payment of dividends on Refunding Capital Stock in excess
of the dividends declarable and payable thereon pursuant to Section
4.04(b)(ii)); provided, however, that for the most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date of issuance of such Designated Preferred
Stock or the declaration of such excess dividends on Refunding Capital
Stock, after giving effect to such issuance or declaration on a pro forma
basis, the Company and its Restricted Subsidiaries would have had a Fixed
Charge Coverage Ratio of at least 2.0 to 1.0;
(vii) Investments in Unrestricted Subsidiaries having an aggregate
fair market value, taken together with all other Investments made pursuant
to this Section 4.04(b)(vii) that are at that time outstanding, not to
exceed $10.0 million at the time of such Investment (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value);
(viii) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options;
(ix) the payment of dividends on the Company's Common Stock, following
the first public offering of the Company's Common Stock after the Closing
Date, of up to 6.0% per annum of the net proceeds received by the Company
in such public offering, other than public offerings with respect to the
Company's Common Stock registered on Form S-8;
(x) Investments in Restricted Subsidiaries that are made with Excluded
Contributions;
(xi) the payment of dividends on Disqualified Stock which is issued in
accordance with Section 4.03;
(xii) other Restricted Payments in an aggregate amount not to exceed
$10.0 million; provided, however, that at the time of, and after giving
effect to, any Restricted Payment permitted under clauses (iv), (v), (vi),
(vii), (viii), (ix), (xi), and (xii), no Default or Event of Default shall
have occurred and be continuing or would occur as a
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consequence thereof; and provided further that for purposes of determining
the aggregate amount expended for Restricted Payments in accordance with
Section 4.04(a)(3), only the amounts expended under clauses (i), (ii) (with
respect to the payment of dividends on Refunding Capital Stock pursuant to
clause (b) thereof), (v) (only to the extent that amounts paid pursuant to
such clause are greater than amounts that would have been paid pursuant to
such clause if $2.5 million and $5.0 million were substituted in such
clause for $5.0 million and $10.0 million, respectively), (vi) and (ix)
shall be included; and
(xiii) the repurchase, redemption or other acquisition or retirement
for value of preferred stock or Subordinated Indebtedness of the Company or
any of its Restricted Subsidiaries pursuant to a "change of control" or
"asset sale" covenant set forth in the indenture or certificate of
designations pursuant to which the same is issued; provided that such
repurchase, redemption or other acqusition or retirement for value shall
only me permitted if all of the terms and conditions in such provisions
have been complied with and such repurchases, redemptions or other
acquisitions or retirements for value are made in accordance with such
indenture or certificate of designations pursuant to which the same is
issued and provided further that the Company has repurchased all Securities
required to be repurchased by the Company pursuant to the terms and
conditions described under Sections 4.06 and 4.08, as the case may be,
prior to the repurchase, redemption or other acquisition or retirement for
value of such preferred stock or Subordinated Indebtedness pursuant to the
"change of control" or "asset sale" covenant included in such indenture or
certificate of designations.
As of the Closing Date, all of the Company's Subsidiaries shall be
Restricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the second to
last sentence of the definition of "Unrestricted Subsidiary." For purposes of
designating any Restricted Subsidiary as an Unrestricted Subsidiary, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid) in the Subsidiary so designated shall be deemed to be
Restricted Payments in an amount determined as set forth in the last sentence of
the definition of "Investments." Such designation shall be permitted only if a
Restricted Payment in such amount would be permitted at such time (whether
pursuant to Section 4.04(a) or under clauses (vii), (x) and (xii) of Section
4.04(b)) and if such Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. Unrestricted Subsidiaries shall not be subject to any
of the restrictive covenants set forth in this Indenture.
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to:
(a) (i) 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 (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries;
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(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Closing Date, including pursuant to the Senior Credit Facility and its
related documentation;
(2) this Indenture, the Securities and the provisions of the
Company's certificate of incorporation relating to the preferred stock
of the Company to be issued on the Issuance Date and any certificate
of designations or revision to the certificate of incorporation
relating to preferred stock issued in exchange for, or as a
refinancing, refunding or replacement of, the preferred stock issued
on the Issuance Date;
(3) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
discussed in clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), 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;
(6) contracts for the sale of assets, including, without
limitation, customary restrictions with respect to a Subsidiary
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets
of such Subsidiary;
(7) secured Indebtedness otherwise permitted to be Incurred
pursuant to Sections 4.03 and 4.12 that limit the right of the debtor
to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business;
(9) other Indebtedness or preferred stock of Restricted
Subsidiaries permitted to be Incurred subsequent to the Closing Date
pursuant to Section 4.03;
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(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(11) customary provisions contained in leases and other
agreements entered into in the ordinary course of business;
(12) restrictions created in connection with any Receivables
Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such
Receivables Facility; or
(13) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) of this Section 4.05 imposed by any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the
contracts, instruments or obligations referred to in clauses (1)
through (12) above, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the
Company's Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
SECTION 4.06. Asset Sales.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, cause, make or suffer to exist an Asset Sale, unless (x)
the Company, or its Restricted Subsidiaries, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by the Company) of the assets
sold or otherwise disposed of and (y) at least 75.0% of the consideration
therefor received by the Company, or such Restricted Subsidiary, as the
case may be, is in the form of cash or Cash Equivalents; provided that the
amount of (i) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the
Company or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Securities), that are assumed by the
transferee of any such assets, (ii) any notes or other obligations received
by the Company or such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash (to the
extent of the cash received) within 180 days following the closing of such
Asset Sale and (iii) any Designated Noncash Consideration received by the
Company or any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (iii) that is at
that time outstanding, not to exceed the greater of (x) $25.0 million or
(y) 10% of Total Assets at the time of the receipt of such Designated
Noncash Consideration (with the fair market value of each item of
Designated Noncash Consideration being measured at the time received and
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without giving effect to subsequent changes in value), shall be deemed to
be cash for purposes of this provision and for no other purpose.
(b) Within 365 days after the Company's or any Restricted Subsidiary's
receipt of the Net Proceeds of any Asset Sale, the Company or such
Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at
its option, (i) to permanently reduce (x) Obligations under the Senior
Credit Facility (and to correspondingly reduce commitments with respect
thereto) or other Indebtedness (other than Subordinated Indebtedness)
(provided that if the Company shall so reduce Obligations under such
Indebtedness, it shall equally and ratably reduce Obligations under the
Securities if the Securities are then prepayable or, if the Securities may
not be then prepaid, the Company shall make an offer (in accordance with
the procedures set forth below for an Asset Sale Offer) to all Holders to
purchase the amount of Securities that would otherwise be prepaid at a
price in cash equal to 100% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of
purchase) or (y) Indebtedness of a Wholly-Owned Restricted Subsidiary
(other than Indebtedness owed to the Company or another Restricted
Subsidiary), (ii) to an investment in any one or more businesses, capital
expenditures or acquisitions of other assets in each case, used or useful
in a Similar Business and/or (iii) to make an investment in properties or
assets that replace the properties and assets that are the subject of such
Asset Sale. Pending the final application of any such Net Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness
under a revolving credit facility, if any, or otherwise invest such Net
Proceeds in Cash Equivalents or Investment Grade Securities. Any Net
Proceeds from the Asset Sale that are not invested or applied as provided
and within the time period set forth in the first sentence of this Section
4.06(b) shall be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company shall make an
offer to all Holders (an "Asset Sale Offer") to purchase the maximum
principal amount of Securities, that is an integral multiple of $1,000,
that may be purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100.0% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, to the date fixed for
the closing of such offer (the "Offered Price"). Within 10 Business Days
after the date on which the aggregate amount of Excess Proceeds exceeds
$10.0 million, the Company shall give to each Holder, with a copy to the
Trustee, a notice stating:
(i) that the Holder has the right to require the Company to
repurchase such Holder's Securities at the Offered Price, subject to
proration in the event the Excess Proceeds are less than the aggregate
Offered Price of all Securities tendered;
(ii) the date of purchase of Securities pursuant to the Asset
Sale Offer (the "Asset Sale Purchase Date"), which shall be no earlier
than 30 days nor later than 60 days from the date such notice is
mailed;
(iii) that the Offered Price will be paid to Holders electing to
have Securities purchased on the Asset Sale Purchase Date, provided
that a Holder must surrender its
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Security to the Paying Agent at the address specified in the notice
prior to the close of business at least five Business Days prior to
the Asset Sale Purchase Date;
(iv) any Security not tendered will continue to accrue interest
pursuant to its terms;
(v) that unless the Company defaults in the payment of the
Offered Price, any Security accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest on and after the Asset Sale
Purchase Date;
(vi) that Holders will be entitled to withdraw their tendered
Securities and their election to require the Company to purchase such
Securities, provided that the Company receives, not later than the
close of business on the third Business Day preceding the Asset Sale
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Securities tendered for purchase, and a statement that such Holder is
withdrawing its election to have such Securities purchased;
(vii) that the Holders whose Securities are being purchased only
in part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; which unpurchased
portion must be equal to $1,000 in principal amount or an integral
multiple thereof; and
(viii) the instructions a Holder must follow in order to have his
Securities purchased in accordance with this Section 4.06.
(c) To the extent that the aggregate amount of Securities tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Securities surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Securities to be purchased in the manner described in Section
4.06(d). Upon completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
(d) If more Securities are tendered pursuant to an Asset Sale Offer
than the Company is required to purchase, selection of such Securities for
purchase shall be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which such
Securities are listed, or, if such Securities are not so listed, on a pro
rata basis, by lot or by such other method as the Trustee shall deem fair
and appropriate (and in such manner as complies with applicable legal
requirements); provided that no Securities of $1,000 or less shall be
purchased in part.
(e) Notices of purchase shall be mailed by first class mail, postage
prepaid, at least 30 but not more than 60 days before the Asset Sale
Purchase Date to each Holder of Securities to be purchased at such Holder's
registered address. If any Security is to be purchased in part only, any
notice of purchase that relates to such Security shall state the
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portion of the principal amount thereof that has been or is to be
purchased. A new Security in principal amount equal to the unpurchased
portion of any Security purchased in part shall be issued in the name of
the Holder thereof upon cancellation of the original Security. On and after
the Asset Sale Purchase Date unless the Company defaults in payment of the
Offered Price, interest shall cease to accrue on Securities or portions
thereof purchased.
(f) The Company shall 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 or regulations are applicable in connection with
the repurchase of the Securities pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict
with the provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.07. Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Company (each of the foregoing, an
"Affiliate Transaction") involving aggregate consideration in excess of
$5.0 million, unless (i) such Affiliate Transaction is on terms that are
not materially less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by
the majority of the Board of Directors of the Company approving such
Affiliate Transaction and set forth in an Officers' Certificate certifying
that such Affiliate Transaction complies with Section 4.07(a)(i).
(b) The foregoing provisions shall not apply to the following: (i)
transactions between or among the Company and/or any of its Restricted
Subsidiaries; (ii) Restricted Payments permitted by Section 4.04; (iii) the
payment of customary annual management, consulting and advisory fees and
related expenses to KKR and its Affiliates; (iv) the payment of reasonable
and customary fees paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Restricted
Subsidiary; (v) payments by the Company or any of its Restricted
Subsidiaries to KKR and its Affiliates made for any financial advisory,
financing, underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in connection
with acquisitions or divestitures which payments are approved by a majority
of the Board of Directors of the Company in good faith; (vi) transactions
in which the Company or any of its Restricted Subsidiaries, as the case may
be, delivers to
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the Trustee a letter from an Independent Financial Advisor stating that
such transaction is fair to the Company or such Restricted Subsidiary from
a financial point of view or meets the requirements of Section 4.07(a)(i);
(vii) payments or loans to employees or consultants which are approved by a
majority of the Board of Directors of the Company in good faith; (viii) any
agreement as in effect as of the Closing Date or any amendment thereto (so
long as any such amendment is not disadvantageous to the Holders of the
Securities in any material respect) or any transaction contemplated
thereby; (ix) the existence of, or the performance by the Company or any of
its Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the
Closing Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Company
or any of its Restricted Subsidiaries of obligations under any future
amendment to any such existing agreement or under any similar agreement
entered into after the Closing Date shall only be permitted by this clause
(ix) to the extent that the terms of any such amendment or new agreement
are not otherwise disadvantageous to the Holders of the Securities in any
material respect; (x) the Transactions and the payment of all fees and
expenses related to the Transactions; (xi) transactions with customers,
clients, suppliers, or purchasers or sellers of goods or services, in each
case in the ordinary course of business and otherwise in compliance with
the terms of this Indenture which are fair to the Company or its Restricted
Subsidiaries, in the reasonable determination of the Board of Directors of
the Company or the senior management thereof, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party; (xii) sales of accounts receivable, or participations
therein, in connection with any Receivables Facility; and (xiii) the
issuance of Equity Interests (other than Disqualified Stock) of the Company
to any Permitted Holder and their Related Parties.
SECTION 4.08. Change of Control.
(a) Upon the occurrence of a Change of Control, unless the Company has
elected to redeem the Securities in connection with such Change of Control
pursuant to paragraph 5 of the Securities, the Company shall make an offer
to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of the Securities pursuant to the offer described below (the
"Change of Control Offer") at a price in cash (the "Change of Control
Payment") equal to 101.0% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (subject to the rights of holders of record on the relevant record
date to receive interest due on the relevant interest payment date).
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder, with a copy to the Trustee, with the
following information: (1) a Change of Control Offer is being made pursuant
to this Section 4.08 and that all Securities properly tendered pursuant to
such Change of Control Offer will be accepted for payment; (2) the purchase
price and the purchase date, which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed, except as may be
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otherwise required by applicable law (the "Change of Control Payment
Date"); (3) any Security not properly tendered will remain outstanding and
continue to accrue interest; (4) unless the Company defaults in the payment
of the Change of Control Payment, all Securities accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest on
the Change of Control Payment Date; (5) Holders electing to have any
Securities purchased pursuant to a Change of Control Offer will be required
to surrender the Securities, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Securities completed, to the Paying
Agent specified in the notice at the address specified in the notice prior
to the close of business on the third Business Day preceding the Change of
Control Payment Date; (6) Holders will be entitled to withdraw their
tendered Securities and their election to require the Company to purchase
such Securities, provided that the Paying Agent receives, not later than
the close of business on the last day of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities tendered for purchase, and a
statement that such Holder is withdrawing his tendered Securities and his
election to have such Securities purchased; and (7) that Holders whose
Securities are being purchased only in part will be issued new Securities
equal in principal amount to the unpurchased portion of the Securities
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof.
(c) On the Change of Control Payment Date, the Company shall, to the
extent permitted by law, (1) accept for payment all Securities or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the aggregate Change of
Control Payment in respect of all Securities or portions thereof so
tendered and (3) deliver, or cause to be delivered, to the Trustee for
cancellation the Securities so accepted together with an Officers'
Certificate stating that such Securities or portions thereof have been
tendered to and purchased by the Company. The Paying Agent shall promptly
mail to each Holder the Change of Control Payment for such Securities, and
the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Security equal in principal
amount to any unpurchased portion of the Securities surrendered, if any,
provided, that each such new Security shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce
the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(d) The Company shall 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 or regulations are applicable in connection with
the repurchase of the Securities pursuant to a Change of Control Offer. To
the extent that the provisions of any securities laws or regulations
conflict with the provisions of this Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed
to have breached its obligations described in this Indenture by virtue
thereof.
(e) Prior to complying with the provisions of this covenant, but in
any event within 30 days following a Change of Control, the Company shall
either repay all
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outstanding obligations under the Senior Credit Facility or obtain the
requisite consents thereunder to permit the purchase of the Securities
required by this covenant.
SECTION 4.09. Compliance Certificate. The Company shall (i) deliver to
the Trustee within 120 days after the end of each fiscal year of the Company,
commencing with the fiscal year ending on December 31, 1998, an Officers'
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company they would normally have knowledge of
any Default and whether or not the signers know of any Default that occurred
during such period and (ii) within five Business Days, upon becoming aware of
any Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Company or any Guarantor, deliver to
the Trustee a statement specifying such Default or Event of Default. The
certificate or statement shall describe the Default, if any, its status and what
action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries.
(a) The Company shall not permit any Restricted Subsidiary to
guarantee the payment of any Indebtedness of the Company or any other
Restricted Subsidiary unless (i) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing
for a Guarantee of payment of the Securities by such Restricted Subsidiary
except that if such Indebtedness is by its express terms subordinated in
right of payment to the Securities, any such guarantee of such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated in right
of payment to such Restricted Subsidiary's Guarantee with respect to the
Securities substantially to the same extent as such Indebtedness is
subordinated to the Securities; (ii) such Restricted Subsidiary waives and
shall not in any manner whatsoever claim or take the benefit or advantage
of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company or any other Restricted Subsidiary as a result
of any payment by such Restricted Subsidiary under its Guarantee; and (iii)
such Restricted Subsidiary shall deliver to the Trustee an Opinion of
Counsel to the effect that (A) such Guarantee of the Securities has been
duly executed and authorized and (B) such Guarantee of the Securities
constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be limited by
bankruptcy, insolvency or similar laws (including, without limitation, all
laws relating to fraudulent transfers) and except insofar as enforcement
thereof is subject to general principles of equity; provided that this
Section 4.11(a) shall not be applicable to any guarantee of any Restricted
Subsidiary (x) that (A) existed at the time such Person became a Restricted
Subsidiary of the Company and (B) was not Incurred in connection with, or
in contemplation of, such Person becoming a Restricted Subsidiary of the
Company or (y)
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that guarantees the payment of Obligations of the Company or any Restricted
Subsidiary under the Senior Credit Facility or any other Credit Facility
(other than in respect of Subordinated Indebtedness) and any refunding,
refinancing or replacement thereof, in whole or in part, provided that such
refunding, refinancing or replacement thereof constitutes Indebtedness that
is not Subordinated Indebtedness and is not Incurred pursuant to a
registered offering of securities under the Securities Act or a private
placement of securities (including under Rule 144A) pursuant to an
exemption from the registration requirements of the Securities Act, which
private placement provides for registration rights under the Securities Act
(any guarantee excluded by operation of this clause (y) being an "Excluded
Guarantee").
(b) Notwithstanding the provisions of Section 4.11(a) and the other
provisions of this Indenture, any Guarantee by a Restricted Subsidiary of
the Securities shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited
by this Indenture) or (ii) the release or discharge of the guarantee which
resulted in the creation of such Guarantee, except a discharge or release
by or as a result of payment under such guarantee.
SECTION 4.12. Liens.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, Incur or suffer to exist
any Lien (other than Permitted Liens) upon any of its property or assets
(including Capital Stock), whether owned on the date of this Indenture or
thereafter acquired, securing any Indebtedness, unless contemporaneously
therewith effective provision is made to secure the Indebtedness due under
this Indenture and the Securities or, in respect of Liens on any Restricted
Subsidiary's property or assets, any Guarantee of such Restricted
Subsidiary, equally and ratably with (or prior to in the case of Liens with
respect to Subordinated Indebtedness) the Indebtedness secured by such Lien
for so long as such Indebtedness is so secured.
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ARTICLE 5.
Successor Company
SECTION 5.01. Merger, Consolidation, or Sale of All or Substantially
All Assets.
(a) The Company shall not consolidate or merge with or into or wind up
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to any Person unless:
(i) the Company is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation
organized or existing under the laws of the United States, any state
thereof, the District of Columbia, or any territory thereof (the
Company or such Person, as the case may be, being herein called the
"Successor Company");
(ii) the Successor Company (if other than the Company) expressly
assumes all the obligations of the Company under this Indenture and
the Securities pursuant to a supplemental indenture or other documents
or instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) immediately after giving pro forma effect to such
transaction, as if such transaction had occurred at the beginning of
the applicable four-quarter period, (A) the Successor Company would be
permitted to Incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a)
or (B) the Fixed Charge Coverage Ratio for the Successor Company and
its Restricted Subsidiaries would be greater than such Ratio for the
Company and its Restricted Subsidiaries immediately prior to such
transaction;
(v) each Guarantor, if any, unless it is the other party to the
transactions described above, in which case Section 5.01(b) shall
apply, shall have by supplemental indenture confirmed that its
Guarantee shall apply to such Person's obligations under this
Indenture and the Securities; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, the
Company under this Indenture and the Securities. Notwithstanding the
foregoing Section 5.01 (a)(iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or
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part of its properties and assets to the Company and (b) the Company may
merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another State of the United States so long
as the amount of Indebtedness of the Company and its Restricted
Subsidiaries is not increased thereby.
(b) Each Guarantor, if any, shall not, and the Company shall not
permit a Guarantor to, consolidate or merge with or into or wind up into
(whether or not such Guarantor is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to, any Person unless:
(i) such Guarantor is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation
organized or existing under the laws of the United States, any state
thereof, the District of Columbia, or any territory thereof (such
Guarantor or such Person, as the case may be, being herein called the
"Successor Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor)
expressly assumes all the obligations of such Guarantor under this
Indenture and such Guarantor's Guarantee pursuant to a supplemental
indenture or other documents or instruments in form reasonably
satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists; and
(iv) the Guarantor shall have delivered or caused to be delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture.
The Successor Guarantor shall succeed to, and be substituted for, such
Guarantor under this Indenture and such Guarantor's Guarantee.
ARTICLE 6.
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in payment when due and payable, upon
redemption, acceleration or otherwise, of principal of, or premium, if any,
on the Securities;
(2) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Securities and such default
continues for a period of 30 days;
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(3) the Company or any Guarantor defaults in the performance, or
breaches any covenant, warranty or other agreement contained in this
Indenture or any Guarantee (other than a default in the performance, or
breach of a covenant, warranty or agreement which is specifically dealt
with in clauses (1) or (2) of this Section 6.01) and such default or breach
continues for a period of 30 days after the notice specified below;
(4) default under any mortgage, indenture or instrument under which
there is issued or by which there is secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries or
the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries (other than Indebtedness owed to the Company or a Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is
created after the Closing Date, if both (A) such default either (1) results
from the failure to pay any such Indebtedness at its stated final maturity
(after giving effect to any applicable grace periods) or (2) relates to an
obligation other than the obligation to pay principal of any such
Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior
to its stated maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at stated final maturity (after giving
effect to any applicable grace periods), or the maturity of which has been
so accelerated, aggregate $10.0 million or more at any one time
outstanding;
(5) failure by the Company or any Significant Subsidiary or group of
Restricted Subsidiaries that, taken together (as of the latest audited
consolidated financial statements for the Company and its Subsidiaries)
would constitute a Significant Subsidiary to pay final judgments
aggregating in excess of $10.0 million (net of any amounts with respect to
which a reputable and creditworthy insurance company has acknowledged
liability in writing), which judgments are not paid, discharged or stayed
for a period of 60 days;
(6) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
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(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that remains unstayed and in effect for 60 days and:
(A) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case;
(B) appoints a Custodian of the Company or any of its Significant
Subsidiaries or for all or substantially all of the property of the
Company or any of its Significant Subsidiaries; or
(C) orders the winding up or liquidation of the Company or any of
its Significant Subsidiaries,
provided that clauses (A), (B) and (C) shall not apply to an Unrestricted
Subsidiary, unless such action or proceeding has a material adverse effect on
the interests of the Company or any of its Significant Subsidiaries; or
(8) any Guarantee shall for any reason cease to be in full force and
effect or be declared null and void or any responsible officer of the
Company or any Guarantor denies that it has any further liability under any
Guarantee or gives notice to such effect (other than by reason of the
termination of this Indenture or the release of any such Guarantee in
accordance with this Indenture).
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (3) above is not an Event of Default until the
Trustee or the Holders of at least 30% in principal amount of the outstanding
Securities notify the Company of the Default and the Company does not cure such
Default within the time specified in clause (3) after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (4) or (8) and any event which with the giving
of notice or the lapse of time would become an Event of Default under clause (3)
or (5), its status and what action the Company is taking or proposes to take
with respect thereto.
SECTION 6.02. Acceleration. If any Event of Default (other than of a
type specified in clause Section 6.01(6) or (7)) occurs and is continuing under
this Indenture, the
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Trustee or the Holders of at least 30.0% in principal amount of the then
outstanding Securities may declare the principal, premium, if any, interest and
any other monetary obligations on all the then outstanding Securities to be due
and payable immediately. Upon the effectiveness of such declaration, such
principal and interest shall be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising under Section 6.01(6) or
(7), all outstanding Securities shall ipso facto become due and payable without
further action or notice.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of 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.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the then outstanding Securities issued thereunder
by notice to the Trustee may on behalf of the Holders of all of such Securities
waive any existing Default or Event of Default and its consequences except (i) a
continuing Default or Event of Default in the payment of interest on, premium,
if any, or the principal of any such Security held by a non-consenting Holder,
(ii) a Default arising from the failure to redeem or purchase any Security when
required pursuant to the terms of this Indenture or (iii) a Default in respect
of a provision that under Section 9.02 cannot be amended without the consent of
each Securityholder affected. In the event of any Event of Default specified in
Section 6.01(4), such Event of Default and all consequences thereof (including
without limitation any acceleration or resulting payment default) shall be
annulled, waived and rescinded, automatically and without any action by the
Trustee or the Holders, if within 20 days after such Event of Default arose (x)
the Indebtedness or guarantee that is the basis for such Event of Default has
been discharged, or (y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event of
Default, or (z) if the default that is the basis for such Event of Default has
been cured. When a Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be
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entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 30.0% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and liquidated damages and interest on the Securities
held by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
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 and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary or
any Guarantor, their creditors or their property and, unless prohibited by law
or applicable regulations, may vote on behalf of the Holders in any election of
a trustee in bankruptcy or other Person performing similar functions and may
participate as a member, voting or otherwise, of any official committee of
creditors appointed in
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such matter, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated damages
without preference or priority of any kind, according to the amounts due and
payable on the Securities for principal, any liquidated damages and interest,
respectively; and
THIRD: to the Company or any other obligor on the Securities.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10.0% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
nor any Guarantor (to the extent it may lawfully do so) shall at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7.
Trustee
SECTION 7.01. Duties of Trustee.
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(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of such
Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture, but shall not be obligated to
recalculate or verify the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of Section 7.01(b);
(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; and
(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 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur 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 to believe that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
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(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the
TIA.
(i) In the event that the Trustee is also acting as Registrar or
Paying Agent hereunder, the protections of this Article 7 shall also be
afforded to such Registrar or Paying Agent.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance
on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, 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 in 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.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, note or other paper or document unless requested in
writing to do so by the Holders of not less than a majority in principal
amount of the Securities at the time outstanding, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee
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reasonable security or indemnity against the costs, expenses and
liabilities which might reasonably be incurred by it in compliance with
such request or direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within the earlier of 90 days after it
occurs or 30 days after it is known to a Trust Officer. Except in the case of a
Default in payment of principal of or interest on any Security (including
payments pursuant to the mandatory redemption provisions of such Security, if
any), the Trustee may withhold the notice if and so long as a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each June 30 beginning with the June 30 following the first
anniversary of this Indenture, and in any event prior to August 31 in each
subsequent year, the Trustee shall mail to each Securityholder a brief report
dated as of June 30 that complies with Section 313(a) of the TIA. The Trustee
shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company and each Guarantor, if any, jointly and severally shall
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by or in connection with the administration
of this trust and the performance of its duties hereunder. The Trustee shall
notify the Company of any claim for which it may seek indemnity promptly upon
obtaining actual
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knowledge thereof; provided, however, that any failure so to notify the Company
shall not relieve the Company or any Guarantor of its indemnity obligations
hereunder. The Company shall defend the claim and the indemnified party shall
provide reasonable cooperation at the Company's expense in the defense of such
claim. Such indemnified parties together may have one separate counsel and the
Company and any Guarantor, as applicable, shall pay the fees and expenses of
such counsel; provided, however, that the Company shall not be required to pay
such fees and expenses if it assumes such indemnified parties' defense and, in
such indemnified parties' reasonable judgment, there is no conflict of interest
between the Company and any Guarantor, as applicable, and such parties in
connection with such defense. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own willful misconduct, negligence or bad faith.
The Trustee's right to receive payment of any amounts due under this
Section 7.07 shall not be subordinated to any other liability or indebtedness of
the Company (even though the Securities may be so subordinated).
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(6) or (7) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall 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 otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in
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such event being referred to herein as the retiring Trustee), the Company shall
promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10.0% in principal amount of the 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 the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Section 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
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SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8.
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.
(a) Subject to Section 8.01(c), this Indenture shall be discharged and
shall cease to be of further effect as to all Securities issued hereunder,
when either (a) all such Securities theretofore authenticated and delivered
(except lost, stolen or destroyed Securities which have been replaced or
paid and Securities for whose payment money has theretofore been deposited
in trust) have been delivered to the Trustee for cancellation; or (b) (i)
all such Securities not theretofore delivered to such Trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within one
year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name and at the expense of the Company and the Company or
any Guarantor has irrevocably deposited or caused to be deposited with such
Trustee as trust funds in trust solely for the benefit of the Holders, cash
in U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient without consideration of any
reinvestment of interest and Liquidated Damages, if any, to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation for principal, premium, if any,
and accrued interest to the date of maturity or redemption; (ii) no Default
or Event of Default shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such deposit
will not result in a breach or violation of, or constitute a default under,
any other instrument to which the Company or any Guarantor is a party or by
which the Company or any Guarantor is bound; (iii) the Company or any
Guarantor has paid or caused to be paid all sums payable by it under this
Indenture and the Securities; and (iv) the Company has delivered
irrevocable instructions to the Trustee under this Indenture to apply the
deposited money toward the payment of such Securities at maturity or the
Redemption Date, as the case may be. In addition, the Company must deliver
an Officers' Certificate and an Opinion of Counsel to the Trustee stating
that all conditions precedent to satisfaction and discharge have been
satisfied. The Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of the Indenture upon
the occurrence of the foregoing.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all of its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and
4.12 and the operation of Sections 5.01, 6.01(3), 6.01(4),
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6.01(5) (with respect to Significant Subsidiaries of the Company only),
6.01(6) (with respect to Significant Subsidiaries of the Company only),
6.01(7) and 6.01(8) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of
its covenant defeasance option. In the event that the Company terminates
all of its obligations under the Securities and this Indenture by
exercising either its legal defeasance option or its covenant defeasance
option, the obligations under any Guarantee shall each be terminated
simultaneously with the termination of such obligations.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(3) (as such
Section relates to Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09,
4.10, 4.11 and 4.12), 6.01(4), 6.01(5) (with respect to Significant Subsidiaries
of the Company only), 6.01(6) (with respect to Significant Subsidiaries of the
Company only), 6.01(7) and 6.01(8) or because of the failure of the Company to
comply with Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 6.07,
7.07, 7.08 and in this Article 8 shall survive until the Securities have
been paid in full. Thereafter, the Company's obligations in Sections 7.07,
8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. In order to exercise either
Legal Defeasance or Covenant Defeasance with respect to the Securities:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
due on the outstanding Securities on the stated maturity date or on the
applicable Redemption Date, as the case may be, of such principal, premium,
if any, or interest on the outstanding Securities;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States confirming that,
subject to customary assumptions and exclusions, (A) the Company has
received from, or there has been published by, the U.S. Internal Revenue
Service a ruling or (B) since the Closing Date, there has been a change in
the applicable U.S. federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel in the United States shall
confirm that, subject to customary assumptions and exclusions, the Holders
will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Legal
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Defeasance and will be subject to U.S. 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
confirming that, subject to customary assumptions and exclusions, the
Holders will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
such 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 or, with respect to certain
bankruptcy or insolvency Events of Default, on the 91st day after such date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the Senior Credit
Facilities or any other material agreement or instrument (other than this
Indenture) to which, the Company or any Guarantor is a party or by which
the Company or any Guarantor is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions 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 under
any applicable U.S. federal or state law, and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which Opinion
of Counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or Government Securities deposited with it pursuant to this Article
8. It shall apply the deposited money and the money from Government Securities
through the Paying Agent and in accordance with this Indenture to the payment of
principal of and interest on the Securities.
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SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited Government Securities or the principal and
interest received on such Government Securities.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or Government Securities in accordance with this Article 8 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such money or Government Securities in accordance with
this Article 8; provided, however, that, if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or Government Securities
held by the Trustee or Paying Agent.
ARTICLE 9.
Amendments
SECTION 9.01. Without Consent of Holders. The Company, any Guarantor
(with respect to a Guarantee or the supplemental indenture to which it is a
party) and the Trustee may amend this Indenture, the Securities or the
Guarantees without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(3) to comply with Article 5;
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(4) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders;
(5) to add Guarantees with respect to the Securities or to secure the
Securities;
(6) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
under this Indenture of any such Holder;
(7) to add to the covenants for the benefit of the Holders or to
surrender any right or power herein conferred upon the Company;
(8) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(9) to evidence and provide for the acceptance and appointment under
this Indenture of a successor Trustee pursuant to Article 7; or
(10) to provide for the issuance of the Exchange Securities or
Additional Securities, which shall have terms substantially identical in
all material respects to the Original Securities (except that the transfer
restrictions contained in the Original Securities shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Original Securities, as a single issue of securities.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company, any Guarantor and
the Trustee may amend this Indenture, the Securities or the Guarantees without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Securities) and, subject to Article 6, any existing default or compliance
with any provision of this Indenture or the Securities may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a purchase of or
tender offer or exchange offer for Securities). However, without the consent of
each Securityholder affected, an amendment may not (with respect to any
Securities held by a non-consenting Holder):
(i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
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(ii) reduce the principal of or change the fixed maturity of any
Security or alter or waive the provisions with respect to the redemption of
the Securities (other than provisions relating to Sections 4.06 or 4.08);
(iii) reduce the rate of or change the time for payment of interest on
any Security;
(iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Securities (except a rescission
of acceleration of the Securities by the Holders of at least a majority in
aggregate principal amount of such Securities and a waiver of the payment
default that resulted from such acceleration), or in respect of a covenant
or provision contained in this Indenture, any Guarantee or the Securities
which cannot be amended or modified without the consent of all Holders;
(v) make any Security payable in money other than that stated in such
Securities;
(vi) make any change to Section 6.04 or 6.07;
(vii) make any change to the second sentence of this Section 9.02; or
(viii) impair the right of any Holder to receive payment of principal
of, or interest on such Holder's Securities on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such Holder's Securities.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder. An amendment or
waiver becomes effective once both (i) the requisite number of consents have
been received by the Company or the
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Trustee and (ii) such amendment or waiver has been executed by the Company and
the Trustee.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, 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. SECTION 9.05. Notation on or Exchange of
Securities.
If an amendment 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 regarding the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company 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 to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Company and any Guarantors
enforceable against them in accordance with its terms, subject to customary
exceptions, and complies with the provisions hereof (including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
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 to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10.
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
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SECTION 10.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attention of: General Counsel
if to the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention of: Corporate Trust Services/Evenflo
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the registration books of the
Registrar and shall be sufficiently given 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.
Notices to the Trustee shall be deemed effective only upon actual
receipt.
SECTION 10.03. Communication by Holders with Other Holders. Holders
may communicate pursuant to TIA Section 312(b) with other Holders with respect
to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
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(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 10.06. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, any Guarantor or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any Guarantor shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded. Subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 10.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 10.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
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SECTION 10.10. No Recourse Against Others. No director, officer,
employee, incorporator or stockholder of the Company or any Guarantor, shall
have any liability for any obligations of the Company or the Guarantors under
the Securities, the Guarantees or this Indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities. 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.
SECTION 10.11. Successors. All agreements of the Company and each
Guarantor in this Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 10.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 10.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
EVENFLO COMPANY, INC.
By
------------------------------------------
Name:
Title:
MARINE MIDLAND BANK, as Trustee,
By
------------------------------------------
Name:
Title:
<PAGE>
APPENDIX A
PROVISIONS RELATING TO ORIGINAL SECURITIES,
ADDITIONAL SECURITIES, PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1. Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Temporary or Permanent Regulation S Global Security or
beneficial interest therein, the rules and procedures of the Depositary for such
Global Security, Euroclear and Cedel, in each case to the extent applicable to
such transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security (bearing the Restricted Securities Legend if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Effectiveness Target Date" shall have the meaning assigned to it in
the Registration Rights Agreement.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Global Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill, Lynch, Pierce, Fenner & Smith Incorporated and BancAmerica
Robertson Stephens.
"Private Exchange" means an offer by the Company, pursuant to the
Registration Rights Agreement, to issue and deliver to certain purchasers, in
exchange for the Initial Securities held by such purchasers as part of their
initial distribution, a like aggregate principal amount of Private Exchange
Securities.
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"Private Exchange Securities" means the Securities of the Company
issued in exchange for Initial Securities pursuant to this Indenture in
connection with the Private Exchange pursuant to the Registration Rights
Agreement.
"Purchase Agreement" means (i) the Purchase Agreement dated August 13,
1998, among the Company and the Initial Purchasers and (ii) any other similar
Purchase Agreement relating to Additional Securities.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for their Initial Securities,
a like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Default" shall have the meaning assigned to it in the
Registration Rights Agreement.
"Registration Rights Agreement" means (i) the Registration Rights
Agreement dated as of August 20, 1998, among the Company and the Initial
Purchasers and (ii) any other similar Registration Rights Agreement relating to
Additional Securities.
"Regulation S" means Regulation S under the Securities Act, as
amended.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S.
"Restricted Period," with respect to any Securities, means the period
of 40 consecutive days beginning on and including the later of (i) the day on
which such Securities are first offered to persons other than distributors (as
defined in Regulation S under the Securities Act) in reliance on Regulation S
and (ii) the Issuance Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
"Rule 501" means Rule 50l(a)(l), (2), (3) or (7) under the Securities
Act.
"Rule 144A" means Rule 144A under the Securities Act, as amended.
"Rule 144A Securities" means all Initial Securities offered and sold
to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary) or any successor person thereto, who
shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement filed by
the Company in connection with the offer and sale of Initial Securities pursuant
to the Registration Rights Agreement.
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"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the Restricted Securities
Legend.
1.2. Other Definitions
<TABLE>
<CAPTION>
Term: Defined in Section:
----- -------------------
<S> <C>
"Agent Members".............................................................................................2.1(b)
"IAI Global Security".......................................................................................2.1(a)
"Global Securities".........................................................................................2.1(a)
"Permanent Regulation S Global Security"....................................................................2.3(d)
"Regulation S Global Securities"............................................................................2.1(a)
"Rule 144A Global Security".................................................................................2.1(a)
"Temporary Regulation S Global Security"....................................................................2.1(a)
</TABLE>
2. The Securities
2.1. Form and Dating
The Initial Securities issued on the date hereof will be (i) offered
and sold by the Company pursuant to the Purchase Agreement and (ii) resold,
initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than
U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such
Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501. Additional Securities offered after the date hereof
may be offered and sold by the Company from time to time pursuant to one or more
Purchase Agreements in accordance with applicable law.
(a) Global Securities. Rule 144A Securities shall be issued initially
in the form of one or more permanent global Securities in definitive, fully
registered form (collectively, the "Rule 144A Global Security") and Regulation S
Securities shall be issued initially in the form of one or more temporary global
Securities (collectively, the "Temporary Regulation S Global Security"), in each
case without interest coupons and bearing the Global Securities Legend and
Restricted Securities Legend, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as provided in
this Indenture. One or more global securities in definitive, fully registered
form without interest coupons and bearing the Global Securities Legend and the
Restricted Securities Legend (collectively, the "IAI Global Security") shall
also be issued on the Closing Date, deposited with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as provided in this
Indenture to accommodate transfers of beneficial interests in the Securities to
IAIs subsequent to the initial distribution. Except as set forth in Section 2.3,
beneficial ownership interests in the Temporary Regulation S Global Security
will not be exchangeable for interests in the Rule 144A Global Security, the IAI
Global Security, a Permanent Regulation S Global Security (as defined below) or
any other Security without a Restricted Securities Legend until the expiration
of the Restricted Period. Upon the expiration of the Restricted Period,
beneficial interests in the Securities represented by the Temporary Regulation S
Global Security may be exchanged for interests in the Permanent Regulation S
Global Security as described below in Section 2.3(d). The Rule 144A Global
Security, the IAI Global Security, the Temporary Regulation S Global Security
and the Permanent Regulation S Global Security are each referred to herein as a
Global Security and are collectively referred to herein as "Global Securities."
The Temporary Regulation S Global Security and the
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Permanent Regulation S Global Security are referred to herein as "Regulation S
Global Securities." The aggregate principal amount of the Global Securities may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
Section 2.2 and pursuant to an order of the Company, authenticate and deliver
initially one or more Global Securities that (a) shall be registered in the name
of the Depositary for such Global Security or Global Securities or the nominee
of such Depositary and (b) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions or held by the Trustee as
Securities Custodian.
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 by the Trustee as Securities Custodian or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2. Authentication. The Trustee shall authenticate and make available for
delivery upon a written order of the Company signed by two Officers (1) Original
Securities for original issue on the date hereof in an aggregate principal
amount of $110,000,000, (2) subject to the terms of this Indenture, Additional
Securities in an aggregate principal amount of up to $90,000,000 and (3) the (A)
Exchange Securities for issue only in a Registered Exchange Offer and (B)
Private Exchange Securities for issue only in the Private Exchange, in the case
of each of (A) and (B) pursuant to the Registration Rights Agreement and for a
like principal amount of Initial Securities exchanged pursuant thereto. Such
order shall specify the amount of the Securities to be authenticated, the date
on which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Exchange Securities or Private Exchange
Securities. The aggregate principal amount of Securities outstanding at any time
may not exceed $200,000,000 except as provided in Section 2.08 of this
Indenture.
2.3. Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar with a
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that the
Definitive Securities surrendered for transfer or exchange:
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(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) are accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse side of the Initial Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Company so requests, an Opinion of
Counsel or other evidence reasonably satisfactory to it as to the
compliance with the restrictions set forth in the legend set forth in
Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive Security for a Beneficial
Interest in a Global Security. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Company and the Registrar, together with:
(i) certification (in the form set forth on the reverse side of the
Initial Security) that such Definitive Security is being transferred (A) to
a QIB in accordance with Rule I44A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit D or (C)
outside the United States in an offshore transaction within the meaning of
Regulation S and in compliance with Rule 904 under the Securities Act
together with a letter substantially in the form of Exhibit C; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
5
<PAGE>
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities.
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depositary therefor. A
transferor of a beneficial interest in a Global Security shall deliver a
written order given in accordance with the Depositary's procedures
containing information regarding the participant account of the Depositary
to be credited with a beneficial interest in such Global Security or
another Global Security and such account shall be credited in accordance
with such order with a beneficial interest in the applicable Global
Security and the account of the Person making the transfer shall be debited
by an amount equal to the beneficial interest in the Global Security being
transferred. Transfers by an owner of a beneficial interest in the Rule
144A Global Security or the IAI Global Security to a transferee who takes
delivery of such interest through the Regulation S Global Security, whether
before or after the expiration of the Restricted Period, will be made only
upon receipt by the Trustee of a certification from the transferor to the
effect that such transfer is being made in accordance with Regulation S or
(if available) Rule 144 under the Securities Act and that, if such transfer
is being made prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear
or Cedel. In the case of a transfer of a beneficial interest in either the
Temporary Regulation S Global Security or the Rule 144A Global Security for
an interest in the IAI Global Security, the transferee must furnish a
signed letter substantially in the form of Exhibit D to the Trustee. In the
case of a transfer of an interest in either the Temporary Regulation S
Global Security or the Permanent Regulation S Global Security to an
interest in a Rule 144A Global Security or IAI Global Security, the
transferor must furnish a letter substantially in the form of Exhibit C to
the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global Security,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iv) In the event that a Global Security is exchanged for Definitive
Securities pursuant to Section 2.4 prior to the consummation of the
Registered Exchange Offer or the effectiveness of the Shelf Registration
Statement with respect to such Securities, such Securities may be exchanged
only in accordance with such procedures as are substantially consistent
with
6
<PAGE>
the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities intended to
ensure that such transfers comply with Rule 144A, Regulation S or such
other applicable exemption from registration under the Securities Act, as
the case may be) and such other procedures as may from time to time be
adopted by the Company.
(d) Restrictions on Transfer of Temporary Regulation S Global
Security.
(i) Prior to the expiration of the Restricted Period, interests in the
Temporary Regulation S Global Security may only be held through Euroclear
or Cedel. During the Restricted Period, beneficial ownership interests in
the Temporary Regulation S Global Security may only be sold, pledged or
transferred through Euroclear or Cedel in accordance with the Applicable
Procedures and only (A) to the Company, (B) so long as such security is
eligible for resale pursuant to Rule 144A, to a person whom the selling
holder reasonably believes is a QIB that purchases for its own account or
for the account of a QIB to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption
from registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, (E) to an IAI purchasing for its own
account, or for the account of such an IAI, in a minimum principal amount
of Securities of $250,000 or (F) 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. Prior to the
expiration of the Restricted Period, transfers by an owner of a beneficial
interest in the Temporary Regulation S Global Security to a transferee who
takes delivery of such interest through the Rule 144A Global Security or
the IAI Global Security will be made only in accordance with Applicable
Procedures and upon receipt by the Trustee of a written certification from
the transferor of the beneficial interest in the form provided on the
reverse of the Initial Security to the effect that such transfer is being
made to (i) a person whom the transferor reasonably believes is a QIB
within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A or (ii) an IAI purchasing for its own account, or for the
account of such an IAI, in a minimum principal amount of the Securities of
$250,000. Such written certification will no longer be required after the
expiration of the Restricted Period. In the case of a transfer of a
beneficial interest in the Regulation S Global Security for an interest in
the IAI Global Security, the transferee must furnish a signed letter
substantially in the form of Exhibit D to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Temporary Regulation S Global Security may be
exchanged for interests in a permanent global security in definitive, fully
registered form without the Restricted Security Legend (the "Permanent
Regulation S Global Security") upon certification to the Trustee that such
interests are owned either by non-U.S. persons or U.S. persons who
purchased such interests pursuant to an exemption from, or transfer not
subject to, the registration requirements of the Securities Act. Upon the
expiration of the Restricted Period, the Company shall prepare and execute
the Permanent Regulation S Global Security in accordance with the terms of
this Indenture and deliver it to the Trustee for authentication. The
Trustee shall retain the Permanent Regulation S Global Security as
Securities Custodian. Any transfers of beneficial ownership interests in
the Temporary Regulation S Global Security made in reliance on Regulation S
shall thenceforth be recorded by the Trustee by making an appropriate
increase in the principal amount of the Permanent Regulation S Global
Security and a corresponding decrease in the principal amount of the
Temporary Regulation S Global Security. At such time as the principal
amount of the
7
<PAGE>
Temporary Regulation S Global Security has been reduced to zero, the
Trustee shall cancel the Temporary Regulation S Global Security and deliver
it to the Company.
(d) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form (each defined term in the legend being defined as such for purposes of
the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) IN AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 903 OR 904 OF REGULATION S, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 50l(a)(l), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (E) OR (F) TO REQUIRE THE
8
<PAGE>
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."
Each Definitive Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legends set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security if the Holder certifies
in writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on the
reverse of the Initial Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to the
Restricted Securities Legend on such Initial Securities or such Private
Exchange Securities will cease to apply and any requirements that any such
Initial Securities or such Private Exchange Securities be issued in global
form will continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to Initial Securities that Initial
Securities be issued in global form will continue to apply, and Exchange
Securities in global form without the Restricted Securities Legend will be
available to Holders that exchange such Initial Securities in such
Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Original or Additional Securities pursuant to which Holders of such
Original or Additional Securities are offered Private Exchange Securities
in exchange for their Original or Additional Securities, all requirements
pertaining to such Original or Additional Securities that Original or
Additional Securities be issued in global form will continue to apply, and
Private Exchange Securities in global form with the Restricted Securities
Legend will be available to Holders that exchange such Original or
Additional Securities in such Private Exchange.
(vi) Upon a sale or transfer after the expiration of the Restricted
Period of any Initial Security acquired pursuant to Regulation S, all
requirements that such Initial Security bear the Restricted Securities
Legend will cease to apply and the requirements requiring any such Initial
Security be issued in global form will continue to apply.
(vii) Any Additional Securities sold in a registered offering shall
not be required to bear the Restricted Securities Legend.
9
<PAGE>
(f) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancellation or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate, Definitive Securities and
Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Section 3.06, 4.06, 4.08 and 9.05).
(iii) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent or the Registrar
may deem and treat the person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent or the Registrar shall be affected
by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or any other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption or repurchase) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to
the Holders and all payments to be made to Holders under the Securities
shall be given or made only to the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
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<PAGE>
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4. Definitive Securities
(a) A Global Security deposited with the Depositary or with the
Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Security or if
at any time the Depositary ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount of Definitive Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security in the form of a Definitive Security delivered
in exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered Holder
of a 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.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of Definitive Securities in fully registered
form without interest coupons.
11
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCHAS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR 904 OF
REGULATION S, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 50l(a)(l), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED
12
<PAGE>
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
[Each Definitive Security will also bear the following additional legend:]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
13
<PAGE>
<TABLE>
<S> <C>
No. $
------------
11 3/4% Senior Note due 2006
CUSIP No.
-------
</TABLE>
EVENFLO COMPANY, INC., a Delaware corporation, promises to pay to Cede
& Co., or registered assigns, the principal sum [of ________ Dollars] [listed on
the Schedule of Increases or Decreases in Global Security attached hereto]1 on
August 15, 2006.
Interest Payment Dates: February 15 and August 15.
Record Dates: February 1 and August 1.
- --------
1 Use the Schedule of Increases and Decreases language if Note is in Global
Form.
14
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
EVENFLO COMPANY, INC.,
by:
------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
MARINE MIDLAND BANK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:
---------------------------------
Authorized Signatory
15
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
11 3/4% Senior Note due 2006
1. Interest
(a) EVENFLO COMPANY, INC., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will pay
interest semiannually on February 15 and August 15 of each year, commencing
February 15, 1999. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
August 20, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue principal at the
rate borne by the Securities, and it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
(b) Liquidated Damages. The holder of this Security is entitled to the
benefits of a Registration Rights Agreement, dated as of August 20, 1998, among
the Company and the Initial Purchasers named therein (the "Registration Rights
Agreement"). Capitalized terms used in this paragraph (b) but not defined herein
have the meanings assigned to them in the Registration Rights Agreement. If (a)
the Company fails to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 30 Business Days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages (as
defined in the Registration Rights Agreement) to each Holder of Securities.
Liquidated Damages will accrue, at an annual rate of 0.25% of the aggregate
principal amount of the Transfer Restricted Securities, on the date of such
Registration Default, payable in cash semi-annually in arrears on each interest
payment date, commencing on the date of such Registration Default. All accrued
Liquidated Damages will be paid by the Company on each interest payment date
until cured or waived to the Global Security Holder by wire transfer of
immediately available funds and to Holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease. For
purposes of the foregoing, "Transfer Restricted Securities" means each Security
until (i) the date on which such Security has been exchanged by a Person for a
Security in the Exchange Offer, (ii) the date on which such Security has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Security
is distributed to the public pursuant to Rule 144 under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company shall make available,
for a period of 90 days after the consummation of the Exchange Offer, a
prospectus meeting the requirements of the Securities Act to any broker-dealer
for use in connection with any resale of the Exchange Securities. The Liquidated
Damages due shall be payable on each interest payment date to the record holder
entitled to receive the interest payment to be made on such date.
16
<PAGE>
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the February 1 or August 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security (including principal, premium and interest),
by mailing a check to the registered address of each Holder thereof, provided,
however, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 15 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Marine Midland Bank, a New York banking corporation and
trust company (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
August 20, 1998 (the "Indenture"), between the Company and the Trustee. 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.
ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are senior unsecured obligations of the Company limited
to $200,000,000 aggregate principal amount at any one time outstanding (subject
to Sections 2.01 and 2.08 of the Indenture). This Security is one of the
Original Securities referred to in the Indenture issued in an aggregate
principal amount of $110,000,000. The Securities include the Initial Securities
and any Exchange Securities issued in exchange for Initial Securities. The
Initial Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
make certain Investments and other Restricted Payments, incur Indebtedness and
issue Disqualified Stock, enter into consensual restrictions upon the payment of
certain dividends and distributions by such Restricted Subsidiaries, enter into
or permit certain transactions with Affiliates, create or incur Liens, make
asset sales or guarantee Indebtedness. The Indenture also imposes limitations on
the ability of the Company to consolidate or merge with or into any other Person
or convey, transfer or lease all or substantially all of the property of the
Company.
17
<PAGE>
5. Optional Redemption
Except as described below, the Securities will not be redeemable at
the Company's option prior to August 15, 2002. From and after August 15, 2002,
the Securities shall be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, to the
applicable Redemption Date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on August 15 of each
of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2002........................................................................................ 105.875%
2003........................................................................................ 103.917%
2004........................................................................................ 101.958%
2005 and thereafter......................................................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to August
15, 2001, the Company may, at its option, redeem up to 35% of the aggregate
principal amount of Securities originally issued under the Indenture on the
Closing Date at a redemption price equal to 111.75% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the Redemption Date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), with the net proceeds of one or more Equity Offerings; provided that at
least 65% of the aggregate principal amount of Securities originally issued
under the Indenture on the Closing Date (including the applicable Exchange
Securities) remains outstanding immediately after the occurrence of each such
redemption; provided further that each such redemption occurs within 60 days of
the date of closing of each such Equity Offering.
At any time on or prior to August 15, 2002, the Securities may also be
redeemed as a whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption shall be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the Redemption
Date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
18
<PAGE>
8. Change of Control
Upon a Change of Control, unless the Company has elected to redeem the
Securities in connection with such Change of Control, the Company shall, subject
to certain conditions specified in the Indenture, make an offer to repurchase
all of the Securities then outstanding at a purchase price in cash equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or Government Securities for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
13. Amendment, Waiver
Subject to certain exceptions, the Company, any Guarantor and the
Trustee may amend the Indenture, the Securities or the Guarantees with the
written consent of the Holders of at least a majority in principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange for the Securities) and, subject to Article 6, any
existing default or compliance with any provision of this Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents obtained
in connection with a purchase of or tender offer or exchange offer for
Securities). Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity,
19
<PAGE>
omission, defect or inconsistency; to comply with Article 5 of the Indenture; to
provide for uncertificated Securities in addition to or in place of certificated
Securities; provided, however, that the uncertificated Securities are issued in
registered form for purposes of Section 163(f) of the Code or in a manner such
that the uncertificated Securities are described in Section 163(f)(2)(B) of the
Code; to provide for the assumption of the Company's or any Guarantor's
obligations to Holders; to add Guarantees with respect to the Securities or to
secure the Securities; to make any change that would provide any additional
rights or benefits to the Holders or that does not adversely affect the legal
rights under the Indenture of any such Holder; to add to the covenants for the
benefit of the Holders or to surrender any right or power herein conferred upon
the Company; to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, the Indenture under the TIA; to
evidence and provide for the acceptance and appointment under the Indenture of a
successor Trustee pursuant to Article 7 of the Indenture; or to provide for the
issuance of the Exchange Securities or Additional Securities, which shall have
terms substantially identical in all material respects to the Original
Securities (except that the transfer restrictions contained in the Original
Securities shall be modified or eliminated, as appropriate), and which shall be
treated, together with any outstanding Original Securities, as a single issue of
securities.
14. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company)
and is continuing, the Trustee or the Holders of at least 30% in principal
amount of the outstanding Securities may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs, the principal of and interest on all the Securities shall
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Under certain circumstances, the Holders of
a majority in principal amount of the outstanding Securities may rescind any
such acceleration with respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 30% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
20
<PAGE>
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, 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 and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
No director, officer, employee, incorporator or stockholder of the
Company or of any Guarantor, shall have any liability for any obligations of the
Company or the Guarantors under the Securities, the Guarantees or the Indenture
or for any claim based on, in respect of, or by reason of such obligations or
their creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Securities. 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.
17. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
21
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. see. or tax I.D. No.)
and irrevocably appoint _________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
- ----------------------------------------------------------------
Date: Your Signature:
--------------- ---------------
- ---------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
22
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $__________ principal amount of Securities held in
(check applicable space) ______ book-entry or _______ definitive form by the
undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated
above);
/ / has equested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act of 1933, the undersigned confirms that such
Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) / / inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A,
in each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(4) / / outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act of 1933
in compliance with Rule 904 under the Securities Act of
1933; or
(5) / / to an institutional "accredited investor" (as defined in
Rule 50l(a)(l), (2), (3) or (7) under the Securities Act of
1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements; or
(6) / / pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof, provided, however, that if box (4), (5) or
(6) is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other information as
the Company has reasonably
23
<PAGE>
requested 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 of 1933.
<TABLE>
<S> <C>
---------------------------------------
Your Signature
Signature Guarantee:
Date:
------------------------------ ---------------------------------------
Signature must be guaranteed by a Signature of Signature
participantin a recognized signature Guarantee
guaranty medallion rogram or other
signature guarantor acceptable to
the Trustee
</TABLE>
24
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) 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 of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
------------------------------ ---------------------------------------
NOTICE: To be executed by an
executive officer
25
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ]. The
following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal amount of Signature of
in Principal in Principal amount this Global Security authorized signature
Date of Amount of this of this Global following such of Trustee or
Exchange Global Security Security decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
26
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, check the box:
Asset Sale / / Change of Control / /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: Your Signature:
------------------------------ ------------------------
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:
-----------------------------------------------------------
Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor acceptable to the Trustee
27
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
No. $_______
11 3/4% Senior Note due 2006
CUSIP No. ________
EVENFLO COMPANY, INC., a Delaware corporation, promises to pay to Cede
& Co., or registered assigns, the principal sum [of ______ Dollars] [listed on
the Schedule of Increases or Decreases in Global Security attached hereto]2 on
August 15, 2006.
Interest Payment Dates: February 15 and August 15.
Record Dates: February 1 and August 1.
- ----------
2 Use the Schedule of Increases and Decreases language if Note is in Global
Form.
28
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
EVENFLO COMPANY, INC.,
by
---------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
MARINE MIDLAND BANK,
as Trustee, certifies
that this is one of the
Securities referred to in
the Indenture.
By:
--------------------------------
Authorized Signatory
- ----------
* If the Security is to be issued in global form, add the Global Securities
Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO
GLOBAL SECURITIES--SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY.
29
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
11 3/4% Senior Note due 2006
1. Interest
EVENFLO COMPANY, INC., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semiannually on February 15 and August 15 of each year, commencing
February 15, 1999. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
August 20, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue principal at the
rate borne by the Securities, and it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the February 1 or August 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security (including principal, premium and interest),
by mailing a check to the registered address of each Holder thereof, provided,
however, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 15 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Marine Midland Bank, a New York banking corporation and
trust company (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
August 20, 1998 (the "Indenture"), between the Company and the Trustee. 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.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are
30
<PAGE>
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms.
The Securities are senior unsecured obligations of the Company limited
to $200,000,000 million aggregate principal amount at any one time outstanding,
of which $110,000,000 in aggregate principal amount will be initially issued on
the Closing Date. Subject to the conditions set forth in the Indenture, the
Company may issue up to an additional $90,000,000 million aggregate principal
amount of Additional Securities. This Security is one of the Initial Securities
referred to in the Indenture. The Securities include the Original Securities,
the Additional Securities and any Exchange Securities and Private Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture. The Original Securities, the Additional Securities, the Exchange
Securities and the Private Exchange Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
make certain Investments and other Restricted Payments, incur Indebtedness and
issue Disqualified Stock, enter into consensual restrictions upon the payment of
certain dividends and distributions by such Restricted Subsidiaries, enter into
or permit certain transactions with Affiliates, create or incur Liens, make
asset sales or guarantee Indebtedness. The Indenture also imposes limitations on
the ability of the Company to consolidate or merge with or into any other Person
or convey, transfer or lease all or substantially all of the property of the
Company.
5. Optional Redemption
Except as described below, the Securities will not be redeemable at
the Company's option prior to August 15, 2002. From and after August 15, 2002,
the Securities shall be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, to the
applicable Redemption Date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on August 15 of each
of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2002................................................... 105.875%
2003................................................... 103.917%
2004................................................... 101.958%
2005 and thereafter.................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to August
15, 2001, the Company may, at its option, redeem up to 35% of the aggregate
principal amount of Securities originally issued under the Indenture on the
Closing Date at a redemption price equal to 111.75% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date), with
the net proceeds of one or more Equity Offerings; provided that at least 65% of
the aggregate principal amount of Securities originally issued under the
Indenture on the Closing Date (including the applicable Exchange Securities)
remains outstanding immediately after the occurrence of each such redemption;
provided further that each such redemption occurs within 60 days of the date of
closing of each such Equity Offering.
31
<PAGE>
At any time on or prior to August 15, 2002, the Securities may also be
redeemed as a whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption shall be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the Redemption
Date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Change of Control
Upon a Change of Control, unless the Company has elected to redeem the
Securities in connection with such Change of Control, the Company shall, subject
to certain conditions specified in the Indenture, make an offer to repurchase
all of the Securities then outstanding at a purchase price in cash equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
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11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or Government Securities for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
13. Amendment, Waiver
Subject to certain exceptions, the Company, any Guarantor and the
Trustee may amend the Indenture, the Securities or the Guarantees with the
written consent of the Holders of at least a majority in principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange for the Securities) and, subject to Article 6, any
existing default or compliance with any provision of this Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents obtained
in connection with a purchase of or tender offer or exchange offer for
Securities). Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency; to comply with Article 5 of the Indenture; to provide for
uncertificated Securities in addition to or in place of certificated Securities;
provided, however, that the uncertificated Securities are issued in registered
form for purposes of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the Code; to
provide for the assumption of the Company's or any Guarantor's obligations to
Holders; to add Guarantees with respect to the Securities or to secure the
Securities; to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights under
the Indenture of any such Holder; to add to the covenants for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; to
comply with any requirements of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; to evidence and
provide for the acceptance and appointment under the Indenture of a successor
Trustee pursuant to Article 7 of the Indenture; or to provide for the issuance
of the Exchange Securities or Additional Securities, which shall have terms
substantially identical in all material respects to the Original Securities
(except that the transfer restrictions contained in the Original Securities
shall be modified or eliminated, as appropriate), and which shall be treated,
together with any outstanding Original Securities, as a single issue of
securities.
14. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company)
and is continuing, the Trustee or the Holders of at least 30% in principal
amount of the outstanding Securities may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs, the principal of and
33
<PAGE>
interest on all the Securities shall become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 30% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, 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 and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
No director, officer, employee, incorporator or stockholder of the
Company or of any Guarantor, shall have any liability for any obligations of the
Company or the Guarantors under the Securities, the Guarantees or the Indenture
or for any claim based on, in respect of, or by reason of such obligations or
their creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Securities. 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.
17. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
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18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
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<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. see. or tax I.D. No.)
and irrevocably appoint _________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
----------------------- ------------------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, check the box:
Asset Sale / / Change of Control / /
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: Your Signature:
----------------------- ------------------------------------
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:
------------------------------------------------------------
Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor acceptable to the Trustee.
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EXHIBIT C
Form of Certificate to be Delivered in Connection
with Transfers of Regulation S Global Security
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention of: Corporate Trust Services/Evenflo
Re: EVENFLO COMPANY, INC. (the "Company")
11 3/4% Senior Notes due 2006 (the "Securities")
------------------------------------------------
Dear Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Securities, we confirm that such sale has been effect
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), 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 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; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------------------------
Authorized Signature
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EXHIBIT D
Form of
Transferee Letter of Representation
Evenflo Company, Inc.
c/o Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention of: Corporate Trust Services/Evenflo
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$________ principal amount of the 11 3/4% Senior Notes due 2006 (the
"Securities") of Evenflo Company, Inc. (the "Company").
Upon transfer, the Securities would be registered in the name
of the new beneficial owner as follows:
Name:
--------------------------------
Address:
-----------------------------
Taxpayer ID Number:
------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
50l(a)(l), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We, and any accounts for which we are acting, are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a person we reasonably believe
is a qualified institutional investor under Rule 144A (a "QIB") that purchases
for its own account or for the account of a QIB and to whom notice is given that
the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional
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<PAGE>
"accredited investor" within the meaning of Rule 50l(a)(l), (2), (3) or (7)
under the Securities Act that is purchasing for its own account or for the
account of such an institutional "accredited investor," in each case in a
minimum principal amount of Securities of $250,000, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
50l(a)(l), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to the offer, sale or other transfer prior to the Resale
Termination Date of the Securities pursuant to clause (d), (e) or (f) above to
require the delivery of an Opinion of Counsel, certifications or other
information satisfactory to the Company and the Trustee.
TRANSFEREE: ,
---------------------------
by:
-----------------------------------
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<PAGE>
Exhibit 4.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Execution Copy
REGISTRATION RIGHTS AGREEMENT
Dated as of August 20, 1998
by and among
EVENFLO COMPANY, INC.
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
and
BANCAMERICA ROBERTSON STEPHENS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 20, 1998, by and among Evenflo Company, Inc., a
Delaware corporation (the "Company"), and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Merrill Lynch, Pierce Fenner & Smith
Incorporated ("Merrill") and BancAmerica Robertson Stephens ("BA" and, together
with DLJ and Merrill, the "Initial Purchasers"), who have agreed to purchase the
Company's 11 3/4% Series A Senior Notes due 2006 (the "Notes") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated August
13, 1998, (the "Purchase Agreement"), by and among the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to purchase the Notes, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers to purchase the Notes as set forth in the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, dated as of August 20,
1998, between the Company and Marine Midland Bank, as Trustee, relating to the
Notes and the Series B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Security, as defined in the
Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Notes tendered by Holders
thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the
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outstanding principal amount of Notes that are tendered by such Holders in
connection with such exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 11 3/4% Series B Senior Notes due 2006 to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until (i) the date on which
such Note has been exchanged by a person for a Note in the Exchange Offer, (ii)
the date on which such Note has been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Act.
SECTION 2. HOLDERS
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<PAGE>
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable law
or applicable interpretation of the Staff of the Commission, the Company shall
(i) cause the Exchange Offer Registration Statement to be filed with the
Commission on or prior to 135 days after the Closing Date (such 135th day being
the "Filing Deadline"), (ii) use its best efforts to cause such Exchange Offer
Registration Statement to become effective no later than 240 days after the
Closing Date (such day being the "Effectiveness Deadline"), (iii) in connection
with the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Notes that are Transfer Restricted Securities and (ii)
resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Notes acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than twenty (20)
Business Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Series B Notes shall be included in the Exchange Offer Registration Statement.
Unless the Exchange Offer would not be permitted by applicable law or Commission
policy the Company shall use its best efforts to cause the Exchange Offer to be
Consummated on or prior to thirty (30) Business Days thereafter (such 30th day
being the "Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Notes acquired directly from
the Company or any Affiliate of the Company), may exchange such Transfer
Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement or as otherwise required by the Commission.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus
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<PAGE>
contained in the Exchange Offer Registration Statement is available for sales of
Series B Notes by Broker-Dealers, the Company agrees to use its reasonable best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Section 6(a) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period the earlier of
(a) 90 days from the Consummation of the Exchange Offer and (b) such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto. The Company shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law or applicable interpretation of the Staff of the Commission or
(ii) if any Holder of Transfer Restricted Securities shall notify the Company
within twenty (20) days following the Consummation Deadline that (A) such Holder
was prohibited by law or Commission policy from participating in the Exchange
Offer or (B) such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes
acquired directly from the Company or any of its Affiliates, then the Company
shall:
(x) use its best reasonable efforts to cause to be filed, on or prior to 75
days after the earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of clause
(a)(i) above and (ii) the date on which the Company receives the notice
specified in clause (a)(ii) above, (such earlier date, the "Filing Deadline"), a
shelf registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities, and
(y) shall use its best reasonable efforts to cause such Shelf Registration
Statement to become effective on or prior to 60 days after the Filing Deadline
for the Shelf Registration Statement (such 60th day the "Effectiveness
Deadline").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement
is available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), the Company shall use its best
reasonable efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years from the Closing Date (as extended pursuant to
Section 6(c)(i)) following the Closing Date, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto or any change in law that
would permit the earlier free transferability of the Transfer Restricted
Securities; provided that the Company may issue a notice that
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<PAGE>
the Shelf Registration Statement is unusable pending the announcement of a
material corporate transaction and may issue any notice suspending the use of
the Shelf Registration Statement required under applicable securities laws to be
issued.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within ninety (90)
Business Days by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective within two (2) Business
Days of filing such post-effective amendment to such Registration Statement
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then the Company hereby agrees to pay to each Holder of Transfer
Restricted Securities affected thereby Liquidated Damages. Liquidated Damages
shall accrue at an annual rate of 0.25% of the aggregate principal amount of
Transfer Restricted Securities on the date of such Registration Default, payable
in cash semi-annually in arrears on each Interest Payment Date. Notwithstanding
anything to the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
Notwithstanding the provisions of the prior paragraph, the Company may
issue a notice that the Shelf Registration Statement is unusable pending the
announcement of a material corporate transaction and may issue any notice
suspending use of the Shelf Registration Statement required under applicable
securities laws to be issued and, in the event the aggregate number of days in
any consecutive 12-month period exceeds 30 days in the aggregate, then the
Company will be obligated to pay liquidated damages to each Holder of the
Transfer Restricted Securities in an amount equal to 0.25% per annum. Upon the
Company declaring that the Shelf Registration Statement is usable after the
period of time described in the preceding sentence, the accrual of liquidated
damages shall cease; provided however, that if after any such cessation of the
accrual of liquidated damages the Shelf Registration Statement again ceases to
be usable beyond and the period permitted above, liquidated damages will again
accrue pursuant to the foregoing provision.
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All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated damages with respect to securities shall survive until
such time as such obligations with respect to such securities shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its reasonable best efforts to effect such exchange
and to permit the resale of Series B Notes by Broker-Dealers that tendered in
the Exchange Offer for Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Notes acquired directly from the Company or any of its Affiliates)
being sold in accordance with the intended method or methods of distribution
thereof, and (z) comply with all of the following provisions:
(i) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange
Offer, a written representation to the Company (which may be contained
in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate
of the Company, (B) it is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in
the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. As a condition to its participation in the
Exchange Offer each Holder using the Exchange Offer to participate in a
distribution of the Series B Notes shall acknowledge and agree that, if
the resales are of Series B Notes obtained by such Holder in exchange
for Notes acquired directly from the Company or an Affiliate thereof,
it (1) could not, under Commission policy as in effect on the date of
this Agreement, rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K.
(ii) Prior to effectiveness of the Exchange Offer Registration
Statement, if the Commission so requests, the Company shall provide a
supplemental letter to the Commission (A) stating that the Company is
registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993 and (B) including a representation that the Company has
not entered into any arrangement or understanding with any Person to
distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B
Notes received in the Exchange Offer.
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(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall (i) comply with all applicable
provisions of Section 6(c) below and use its reasonable best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to Section
4(b) hereof), and pursuant thereto the Company will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Notes sold pursuant to the Shelf Registration
Statement and surrendered to the Company for cancellation; the Company shall
register Series B Notes on the Shelf Registration Statement for this purpose and
issue the Series B Notes to the purchaser(s) of securities subject to the Shelf
Registration Statement in the names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
(except as set forth below) and any related Prospectus required by this
Agreement, the Company shall:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its reasonable best efforts to cause such amendment to be
declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise each Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material
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fact made in the Registration Statement, the Prospectus, any amendment
or supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest practicable time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) in the case of a Shelf Registration Statement, use its
reasonable best efforts to make available, at reasonable times, for
inspection by a representative of Holders of at least 20% in aggregate
principal amount of the Transfer Restricted Securities and any attorney
or accountant retained by such Holders, all financial and other
records, pertinent corporate documents of the Company and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, attorney or accountant in
connection with such Shelf Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness; provided, however, that such representatives, attorneys
and accountants shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities
laws in connection with the filing of such Shelf Registration Statement
or the use of any Prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such person or (iv) such
information becomes available to such person from a source other than
the Company and its subsidiaries and such source is not known, after
due inquiry, by the relevant Holder to be bound by a confidentiality
agreement; provided further, any such confidential information shall be
available from such representative to such Holders so long as any
Holder agrees to be bound by such confidentiality agreement;
(vi) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to
have included relating to the "Plan of Distribution" of the Transfer
Restricted Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
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(vii) furnish to each Holder in connection with such exchange
or sale, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference);
(viii) deliver to each Holder without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling
Holder in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(ix) in the case of a Shelf Registration Statement, upon the
request of Holders of a majority aggregate principal amount of the
Transfer Restricted Securities, enter into such agreements (including
underwriting agreements) and make such representations and warranties
and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Shelf Registration Statement contemplated by
this Agreement as may be reasonably requested by such Holders or their
counsel in connection with any sale or resale pursuant to any Shelf
Registration Statement, including (i) the delivery of an opinion of its
counsel in customary form in the case of an underwritten offering, (ii)
customary officers' certificates, (iii) delivery of a comfort letter in
customary form from its independent accountants, subject to receipt of
appropriate documentation and only if permitted by SAS No.72 and (iv)
deliver such other documents and certificates as may be reasonably
requested by the selling Holders to evidence compliance with the
matters covered in this clause (ix) above and with any customary
conditions contained in the any agreement entered into by the Company
pursuant to this clause (ix);
(x) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xi) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least three (3) Business Days prior to such sale of Transfer Restricted
Securities;
(xii) use its reasonable best efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (x)
above;
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(xiii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xiv) otherwise use its reasonable best efforts to make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act); and
(xv) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its reasonable best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof or of the issuance of a
notice described in the second paragraph of Section 5 (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses, messenger and
delivery services and telephone; (iv) all reasonable fees and disbursements of
counsel for the Company in the case of a Shelf Registration Statement and,
subject to the limitations set forth in Section 7(b), the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Series B Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof in the event the Company
elects to do so; and (vi) all reasonable fees and disbursements
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of independent certified public accountants of the Company (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Notes into in the Exchange Offer and/or selling or reselling Notes or
Series B Notes pursuant to the "Plan of Distribution" contained in the Exchange
Offer Registration Statement or the Shelf Registration Statement, as applicable,
for the reasonable fees and disbursements of not more than one counsel, who
shall be Latham & Watkins, unless another firm shall be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
(c) Each Initial Purchaser and Holder shall pay all expenses of its
counsel other than as set forth in Section 7(a) and (b), underwriting discounts
and commissions (prior to reduction for selling concessions, if any) and
transfer taxes, if any, relating to the sale or disposition of such Initial
Purchaser's or Holder's Transfer Restricted Securities.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments, caused
by any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, preliminary prospectus or Prospectus (or any
amendment or supplement thereto) provided by the Company to any Holder or any
prospective purchaser of Series B Notes or registered Notes, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent
as the foregoing indemnity from the Company set forth in section (a) above, but
only with reference to information relating to such Holder furnished in writing
to the Company by such Holder expressly for use in any Registration Statement.
In no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
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(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party or (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party. In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys (in
addition to one separate firm of local counsel in each such jurisdiction) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than forty (40) Business Days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
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omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and judgments referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of Section
8(a), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. MISCELLANEOUS
(a) Remedies. The Liquidated Damages contemplated hereby shall be the
exclusive remedy available to Holders of Transfer Restricted Securities for any
failure by the Company to comply with the registration requirements of this
Agreement.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
debt securities to any Person. The rights granted to the Holders hereunder do
not in any way conflict with and are not inconsistent with the rights granted to
the holders of the Company's securities under any agreement in effect on the
date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities (excluding Transfer Restricted Securities held by
the Company or its Affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being tendered
pursuant to the Exchange Offer, and that does not affect directly or indirectly
the rights of other Holders whose Transfer Restricted Securities are not being
tendered pursuant to such Exchange Offer, may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
subject to such Exchange Offer.
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(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Evenflo Company, Inc.
Northwoods Business Center II
Vandalia, Ohio 45377
Telecopier No.:
Attention: Daryle A. Lovett
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 455-2502
Attention: Arthur D. Robinson
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five (5) Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement and the
Indenture, and such Person shall be entitled to receive the benefits hereof.
14
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Signature page(s) follow]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EVENFLO COMPANY, INC.
-----------------------------------
By:
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
BY: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
--------------------------------
Name:
Title:
Registration Rights Agreement signature page
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BancAmerica Robertson Stephens
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Evenflo Company, Inc.
11 3/4% Senior Notes due 2006
Date: ___, 199_
For your information only (NO ACTION REQUIRED):
Today, ______, 199_, we filed [an A/B Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
Business Days of the date hereof.
<PAGE>
Exhibit 10.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$100,000,000
REVOLVING CREDIT AGREEMENT
Dated as of August 20, 1998
among
EVENFLO COMPANY, INC.,
as Borrower,
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Lead Arranger and
Syndication Agent,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent,
DLJ CAPITAL FUNDING, INC.,
as Documentation Agent,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Lenders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms................................... 3
SECTION 1.02. Other Interpretive Provisions........................... 34
SECTION 1.03. Accounting Principles................................... 35
ARTICLE II
THE CREDITS
SECTION 2.01. Amounts and Terms of Commitments........................ 35
SECTION 2.02. Revolving Loan Accounts................................. 36
SECTION 2.03. Procedure for Borrowing................................. 37
SECTION 2.04. Conversion and Continuation Elections................... 39
SECTION 2.05. Special Provisions for Swing Line Loans................. 40
SECTION 2.06. Voluntary Termination or Reduction of Revolving,
Swing Line and/or Special Facility Commitments........ 43
SECTION 2.07. Optional Prepayments.................................... 43
SECTION 2.08. Mandatory Prepayments of Revolving Loans and
Reductions of Commitments............................. 44
SECTION 2.09. Repayment............................................... 46
SECTION 2.10. Interest................................................ 46
SECTION 2.11. Fees.................................................... 47
SECTION 2.12. Computation of Fees and Interest........................ 48
SECTION 2.13. Payments by Borrower.................................... 48
SECTION 2.14. Payments by the Lenders to the Administrative Agent..... 49
SECTION 2.15. Sharing of Payments, etc................................ 50
ARTICLE III
LETTERS OF CREDIT AND ACCEPTANCES
SECTION 3.01. Letter of Credit and Acceptance Subfacilities........... 51
</TABLE>
- ----------
* This Table of Contents and all section headings herein are provided for
convenience of reference only and shall not for any purpose be considered a
part of this Agreement.
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.02. Issuance, Amendment and Renewal of Letters of Credit.... 53
SECTION 3.03. Creation of Acceptances................................. 56
SECTION 3.04. Letter of Credit/Acceptance Participations, Drawings
and Reimbursements.................................... 57
SECTION 3.05. Repayment of Participations............................. 60
SECTION 3.06. Role of the Fronting Lender............................. 61
SECTION 3.07. Obligations Absolute.................................... 62
SECTION 3.08. Letter of Credit and Acceptance Fees.................... 64
SECTION 3.09. Borrower's Guaranty of Special Facility Obligations
of the Restricted Subsidiaries........................ 65
SECTION 3.10. No Waiver with Respect to Acceptances................... 67
SECTION 3.11. Uniform Customs and Practice............................ 67
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
SECTION 4.01. Taxes................................................... 68
SECTION 4.02. Illegality.............................................. 71
SECTION 4.03. Increased Costs and Reduction of Return................. 72
SECTION 4.04. Funding Losses.......................................... 73
SECTION 4.05. Inability to Determine Rates............................ 74
SECTION 4.06. Notice from Lenders..................................... 74
SECTION 4.07. Change of Lending Office................................ 75
SECTION 4.08. Notice of Certain Costs................................. 75
SECTION 4.09. Replacement of Lenders.................................. 75
SECTION 4.10. Survival................................................ 76
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions of Initial Credit Extensions................. 76
SECTION 5.02. Conditions to All Credit Extensions..................... 82
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Corporate Existence and Power........................... 83
SECTION 6.02. Corporate Authorization; No Contravention;
Binding Effect........................................ 83
SECTION 6.03. Governmental Authorization.............................. 84
SECTION 6.04. Litigation.............................................. 84
SECTION 6.05. ERISA Compliance........................................ 85
SECTION 6.06. Regulatory Matters...................................... 85
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.07. Title to Properties..................................... 85
SECTION 6.08. Taxes................................................... 86
SECTION 6.09. Financial Condition..................................... 86
SECTION 6.10. Trademarks, Copyrights, Patents and Licenses, etc....... 87
SECTION 6.11. Subsidiaries............................................ 87
SECTION 6.12. Full Disclosure......................................... 87
SECTION 6.13. Compliance with Environmental Laws...................... 87
SECTION 6.14. Year 2000............................................... 88
ARTICLE VII
AFFIRMATIVE COVENANTS
SECTION 7.01. Financial Statements.................................... 89
SECTION 7.02. Certificates; Other Information......................... 90
SECTION 7.03. Notices................................................. 91
SECTION 7.04. Preservation of Corporate Existence, etc................ 91
SECTION 7.05. Maintenance of Property................................. 92
SECTION 7.06. Insurance............................................... 92
SECTION 7.07. Payment of Taxes........................................ 92
SECTION 7.08. Compliance with Statutes, etc........................... 92
SECTION 7.09. Inspection of Property and Books and Records............ 93
SECTION 7.10. Use of Proceeds......................................... 93
SECTION 7.11. Future Subsidiaries..................................... 93
SECTION 7.12. Transactions with Affiliates............................ 94
SECTION 7.13. Change in Business...................................... 95
SECTION 7.14. End of the Fiscal Year.................................. 95
SECTION 7.15. Pledged Stock of Foreign Subsidiaries................... 96
ARTICLE VIII
NEGATIVE COVENANTS
SECTION 8.01. Limitation on Liens..................................... 96
SECTION 8.02. Consolidations and Mergers; Sales of Assets............. 100
SECTION 8.03. Loans, Acquisitions and Investments..................... 101
SECTION 8.04. Limitation on Indebtedness.............................. 104
SECTION 8.05. Restricted Payments..................................... 108
SECTION 8.06. Financial Covenants..................................... 110
SECTION 8.07. Capital Expenditures.................................... 111
SECTION 8.08. Amendments.............................................. 112
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. Event of Default........................................ 113
SECTION 9.02. Remedies................................................ 116
SECTION 9.03. Rights Not Exclusive.................................... 117
ARTICLE X
THE AGENTS
SECTION 10.01. Appointment and Authorization; Administrative
Agent................................................. 117
SECTION 10.02. Delegation of Duties.................................... 118
SECTION 10.03. Limitation on Liability of Agents and
Agent-Related Persons................................. 118
SECTION 10.04. Reliance by Administrative Agent........................ 119
SECTION 10.05. Notice of Default....................................... 119
SECTION 10.06. Credit Decision......................................... 120
SECTION 10.07. Indemnification of Agents and Agent-Related
Persons............................................... 121
SECTION 10.08. Agents in Individual Capacity........................... 121
SECTION 10.09. Successor Administrative Agent.......................... 122
SECTION 10.10. Withholding Tax......................................... 123
SECTION 10.11. Collateral Matters...................................... 124
SECTION 10.12. Copies, etc............................................. 125
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments and Waivers.................................. 125
SECTION 11.02. Notices................................................. 126
SECTION 11.03. No Waiver; Cumulative Remedies.......................... 127
SECTION 11.04. Costs and Expenses...................................... 127
SECTION 11.05. Borrower Indemnification................................ 128
SECTION 11.06. Marshalling; Payments Set Aside......................... 129
SECTION 11.07. Successors and Assigns.................................. 130
SECTION 11.08. Assignments, Participations, etc........................ 130
SECTION 11.09. Confidentiality......................................... 133
SECTION 11.10. Set-off................................................. 134
SECTION 11.11. Notification of Addresses, Lending Offices, etc......... 135
SECTION 11.12. Counterparts............................................ 135
SECTION 11.13. Severability............................................ 135
SECTION 11.14. No Third Parties Benefited.............................. 135
SECTION 11.15. Governing Law and Jurisdiction.......................... 135
SECTION 11.16. Waiver of Jury Trial.................................... 136
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 11.17. Entire Agreement........................................ 136
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule A Guarantors
Schedule B Material Subsidiaries
Schedule C Existing Letters of Credit and Acceptances
Schedule 2.01 Lenders, Commitments and Total Percentages
Schedule 5.01(l) Other Indebtedness
Schedule 6.03 Governmental Authorizations
Schedule 6.04 Litigation
Schedule 6.05 ERISA
Schedule 6.11 Subsidiaries
Schedule 7.12 Transactions with Affiliates
Schedule 8.03 Existing Investments
Schedule 8.04 Permitted Indebtedness
Schedule 11.02 Offshore and Domestic Lending Offices,
Addresses for Notices
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Notice of L/C Issuance/Amendment
Exhibit E Form of Guaranty
Exhibit F Form of Pledge Agreement
Exhibit G Form of Legal Opinion of Simpson Thacher & Bartlett,
Special Counsel to the Obligors
Exhibit H Form of Borrower Solvency Certificate
Exhibit I Form of Note
Exhibit J Form of Assignment and Acceptance
Exhibit K Form of Swing Line Loan Participation Certificate
Exhibit L Form of Security Agreement
</TABLE>
vi
<PAGE>
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT, dated as of August 20, 1996, among EVENFLO
COMPANY, INC., a Delaware corporation ("Borrower"), the several financial
institutions from time to time party to this Agreement (collectively, the
"Lenders" and, individually, a "Lender") and MERRILL LYNCH & CO., MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, as lead arranger and syndication agent for
the Lenders (the "Lead Arranger"), together with BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent") and as Fronting Lender, and DLJ CAPITAL
FUNDING, INC., as documentation agent for the Lenders (the "Documentation Agent"
and together with the Lead Arranger and the Administrative Agent, the "Agents").
Certain capitalized terms are defined in Section 1.01.
WITNESSETH:
WHEREAS, KKR 1996 Fund L.P. ("KKR L.P."), an affiliate of Kohlberg
Kravis Roberts & Co. L.P. ("KKR"), and Lisco, Inc. ("Lisco"), a Delaware
corporation and a wholly owned subsidiary of Evenflo & Spalding Holdings
Corporation ("Spalding"), are parties to a stock purchase agreement dated as of
August 20, 1998 (the "KKR Stock Purchase Agreement"), pursuant to which KKR L.P.
will acquire (the "KKR Stock Acquisition") from Lisco 51.0% of the outstanding
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Borrower for approximately $25.5 million in cash;
WHEREAS, Abarco N.V., a Netherlands Antilles corporation or one of its
Affiliates ("Abarco"), and Lisco are parties to a stock purchase agreement dated
as of August 20, 1998 (the "Abarco Stock Purchase Agreement" and, together with
the KKR Stock Purchase Agreement, the "Stock Purchase Agreements"), pursuant to
which Abarco will acquire (the "Abarco Stock Acquisition" and, together with the
KKR Stock Acquisition, the "Stock Acquisitions") from Lisco 6.6% of the
outstanding shares of Common Stock for approximately $3.3 million in cash;
WHEREAS, pursuant to the KKR Stock Purchase Agreement, KKR L.P. will
acquire from Lisco 400,000 shares of Cumulative Preferred Stock (the "Preferred
Stock") of Borrower for $40.0 million in cash, representing 100% of the
outstanding Preferred Stock (the "Preferred Stock Investment");
WHEREAS, concurrently with the Stock Acquisitions and the Preferred
Stock Investment, Borrower will issue $110.0 million aggregate principal amount
of unsecured senior notes due 2006 (the "Senior Notes") having no scheduled
principal payments prior to
<PAGE>
maturity (the "Note Issuance" and, together with the initial Credit Extensions
hereunder, the "Financings");
WHEREAS, Borrower will apply the proceeds of the Financings to repay
approximately $110.0 million of indebtedness of Borrower owing to Spalding (the
"Debt Repayment") and to pay related fees and expenses of approximately $10.0
million;
WHEREAS, in order to (a) provide a portion of the financing for the
Debt Repayment, (b) pay costs and expenses related to the transactions described
above and the other transactions contemplated hereby and (c) provide financing
for the working capital and other general corporate purposes of Borrower and its
Subsidiaries following the consummation of the Transactions, Borrower has
requested that the Lenders make available to Borrower (A) a Revolving Commitment
pursuant to which Revolving Loans may be borrowed from time to time from and
after the Closing Date to the Revolving Commitment Termination Date and (B) as
subfacilities of the Revolving Commitment, (1) a Swing Line Facility and (2) a
Special Facility pursuant to which letters of credit may be issued and/or
bankers acceptances may be created from time to time from and after the Closing
Date to the Revolving Commitment Termination Date; provided, however, that in no
event shall (x) the aggregate amount of all Revolving Loans, Swing Line Loans
and Special Facility Obligations exceed $100,000,000 at any one time; (y) the
aggregate amount of all Special Facility Obligations exceed $55,000,000 (and the
aggregate amount of all Acceptances $30,000,000); and (z) the aggregate amount
of all Swing Line Loans exceed $5,000,000;
WHEREAS, all Obligations hereunder and under the other Loan Documents
will be guaranteed by each Domestic Subsidiary named on Schedule A hereto and
each Domestic Subsidiary hereafter created or acquired; and
WHEREAS, all Obligations hereunder and under the other Loan Documents
will be secured by a perfected first priority lien on and pledge of (A) all
issued and outstanding capital stock of each Subsidiary named on Schedule B
hereto and each Subsidiary hereafter created or acquired as required by Section
7.11; provided, however, that such pledge with respect to Foreign Subsidiaries
shall be limited to 65% of the capital stock of "first tier" Foreign
Subsidiaries; and (B) all inventory, accounts receivable and intangibles
(including patents, trademarks, trade names, copyrights and other intellectual
property) of Borrower and its Domestic Subsidiaries all to the extent set forth
herein and in the Security Documents.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto hereby agree as follows:
2
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. The following terms have the
following meanings:
"Abarco" has the meaning specified in the second recital to this
Agreement.
"Abarco Stock Acquisition" has the meaning specified in the second
recital to this Agreement.
"Abarco Stock Purchase Agreement" has the meaning specified in the
second recital to this Agreement.
"Acceptance" means an acceptance created by the Fronting Lender under
the Special Facility Commitment in accordance with Article III, at the request
of, and for the account of, Borrower or any Restricted Subsidiary conforming to
the requirements for eligibility for discount and purchase by the Federal
Reserve Banks of the United States. Acceptances shall include all those set
forth on Schedule C hereto which were in existence prior to the date hereof.
"Acceptance Obligations" means the sum of (a) the aggregate face
amount of all unmatured Acceptances plus (b) the aggregate face amount of all
unreimbursed matured Acceptances, including all outstanding Special Facility
Borrowings in respect of matured Acceptances.
"Acceptance Reference Rate" means, relative to any term for any
Acceptance, the rate per annum equal to the sum of (i) the rate quoted by the
Fronting Lender to the Administrative Agent as its then current discount rate
per annum for prime bankers' acceptances eligible for discount and purchase with
the Federal Reserve Banks of the United States of a tenor and face amount
substantially equal to that of the Acceptance or Acceptances to be created by
the Fronting Lender, and (ii) 0.15%.
"Account Party" means Borrower or any Restricted Subsidiary for the
account of which a Letter of Credit is Issued or an Acceptance is created in
accordance with Article III hereof.
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess
3
<PAGE>
of 50% of the capital stock, partnership interests, membership interests or
equity of any Person, or otherwise causing any Person to become a Subsidiary,
(c) a merger or consolidation or any other combination with another Person
(other than with a Person that is a Restricted Subsidiary); provided, however,
that Borrower or a Restricted Subsidiary is the surviving entity or (d) an
Unrestricted Subsidiary becoming a Restricted Subsidiary.
"Administrative Agent" means BofA in its capacity as administrative
agent for the Lenders hereunder and under the other Loan Documents, together
with any successor administrative agent appointed in accordance with Section
10.09.
"Administrative Agent's Payment Office" means the address for payments
set forth on Schedule 11.02 or such other address as the Administrative Agent
may from time to time specify in writing.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power (a) to vote 10%
or more of the securities having ordinary voting power for the election of
directors of such other Person or (b) to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, membership interests, by contract or otherwise. Each
Unrestricted Subsidiary shall be deemed an affiliate of Borrower and each
Restricted Subsidiary.
"Agent-Related Persons" means the Agents, together with their
respective Affiliates, and the officers, directors, employees and agents of each
of the foregoing Persons and Affiliates.
"Agents" has the meaning specified in the preamble.
"Agreement" means this Credit Agreement, as amended, supplemented,
amended and restated or otherwise modified from time to time in accordance with
its terms.
"Applicable Margin" means, with respect to the Revolving Loans or the
Commitment Fee, as of any date, the rate per annum determined pursuant to the
following pricing grid (expressed as a percentage), subject to the provisions of
this definition set forth below:
<TABLE>
<CAPTION>
Leverage Eurodollar Rate Base Rate
Ratio Margin Margin Commitment Fees
- --------------------- --------------- --------- ---------------
<S> <C> <C> <C>
Less than 3.0:1.0 1.000% 0.000% 0.300%
Less than 3.5:1.0 but
Greater than or equal
to 3.0:1.0 1.250% 0.000% 0.300%
Less than 4.0:1.0 but
Greater than or equal
to 3.5:1.0 1.500% 0.250% 0.375%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Leverage Eurodollar Rate Base Rate
Ratio Margin Margin Commitment Fees
- --------------------- --------------- --------- ---------------
<S> <C> <C> <C>
Less than 4.5:1.0 but
Greater than or equal
to 4.0:1.0 1.750% 0.500% 0.375%
Less than 5.0:1.0 but
Greater than or equal
to 4.5:1.0 2.000% 0.750% 0.425%
Less than 6.0:1.0 but
Greater than or equal
to 5.0:1.0 2.250% 1.000% 0.500%
Greater than or equal
to 6.0:1.0 2.500% 1.250% 0.500%
</TABLE>
At all times that the Applicable Margin is determined by reference to
the table above, the "Leverage Ratio" refers to the ratio of Consolidated Total
Debt to Consolidated EBITDA for the last four quarters, which ratio shall be (I)
prior to the delivery of the first Compliance Certificate or, in the case of the
Fiscal Quarters ending September 30, 1998 and December 31, 1998, Interest Rate
Certificate, after the Closing Date pursuant to Section 7.02(b), deemed to be
5.5:1.0; and (II) thereafter, determined based upon the Compliance Certificate
or Interest Rate Certificate most recently delivered pursuant to clause (b) of
Section 7.02 and shall remain in effect until such time as the next Compliance
Certificate or Interest Rate Certificate shall be delivered (and, at such time,
the Applicable Margin shall change based on such next Compliance Certificate or
Interest Rate Certificate); provided, however, that if (i) any such Compliance
Certificate or Interest Rate Certificate is not delivered to the Administrative
Agent on or prior to the date required pursuant to clause (b) of Section 7.02
and (ii) such Compliance Certificate or Interest Rate Certificate indicates a
Leverage Ratio that would result in an Applicable Margin which is greater than
the Applicable Margin then in effect, then (A) such greater Applicable Margin
shall be deemed to be in effect for all purposes of this Agreement from the date
such Compliance Certificate or Interest Rate Certificate was required to be
delivered to the Administrative Agent pursuant to clause (b) of Section 7.02 and
(B) in furtherance of the other terms of this proviso, if Borrower shall have
made any payment in respect of interest or fees during the period from the date
such Compliance Certificate or Interest Rate Certificate was required to be
delivered to the actual date of delivery of such Compliance Certificate or
Interest Rate Certificate, then Borrower shall pay in the form of a supplemental
payment of interest and/or fees, an amount which equals the difference between
the amount of interest and/or fees that would otherwise have been paid
determined as if such Compliance Certificate or Interest Rate Certificate was
delivered on the date such Compliance Certificate or Interest Rate Certificate
was required to be delivered and the amount of such interest and/or fees so
paid, which supplemental payment of interest and/or fees shall be due and
payable on the actual date of delivery of such Compliance Certificate or
Interest Rate Certificate.
"Assignment and Acceptance" has the meaning specified in Section
11.08(a).
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
5
<PAGE>
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in effect for
such day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by BofA
based upon various factors including BofA'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 BofA shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Revolving Loan or Special Facility Borrowing
that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
"Borrower" has the meaning specified in the preamble.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans
of the same Type made to Borrower on the same day by the Lenders under Article
II, and, in the case of Eurodollar Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.03.
"Business Day" means (a) any day other than a Saturday, Sunday or
other day on which commercial lenders in New York City, Chicago, Illinois or San
Francisco, California are authorized or required by law to close and (b) if the
applicable Business Day relates to any Eurodollar Loan, a Business Day described
in the preceding clause (a) on which dealings are also carried on in the
applicable offshore dollar 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, in each case,
regarding capital adequacy of any Lender or of any corporation controlling a
Lender.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including in
all events all amounts expended or capitalized under Capital Leases, but
excluding any amount representing capitalized interest) by Borrower and the
Restricted Subsidiaries during such period that, in conformity with GAAP, are or
are required to be included as additions during such period to property, plant
or equipment reflected in the consolidated balance sheet of Borrower and the
Restricted Subsidiaries; provided, however, that the term "Capital Expenditures"
shall not include (a) expenditures
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made in connection with the replacement, substitution or restoration of assets
(i) to the extent financed from insurance proceeds paid on account of the loss
of or damage to the assets being replaced or restored or (ii) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced; (b) the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment to the extent that the
gross amount of such purchase price is reduced by the credit granted by the
seller of such equipment for the equipment being traded in at such time; (c) the
purchase of plant, property or equipment made within one year of the sale of any
asset to the extent purchased with the proceeds of such sale; and (d) the
portion of the purchase price in connection with any Acquisition that would
otherwise be included as additions to property, plant or equipment.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is, or is required to be, accounted for as a capital lease
on the balance sheet of that Person.
"capital stock" means, with respect to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock of, or ownership interests in, such Person, including, if such
Person is a partnership, partnership interests (whether general or limited) and
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,
such partnership.
"Capitalized Lease Liabilities" means all obligations under Capital
Leases of Borrower or the Restricted Subsidiary, in each case taken at the
amount thereof accounted as a capital lease obligation in accordance with
GAAP.
"Cash Equivalents" means:
(a) securities issued or unconditionally guaranteed by the United
States government or any agency or instrumentality thereof, in each case
having maturities of not more than 24 months from the date of acquisition
thereof;
(b) securities issued by any state of the United States of America or
any political subdivision of any such state or any public instrumentality
thereof or any political subdivision of any such state or any public
instrumentality thereof having maturities of not more than 24 months from
the date of acquisition thereof and, at the time of acquisition, having an
investment grade rating generally obtainable from either Rating Agency (or,
if at any time neither Rating Agency shall be rating such obligations, then
from another nationally recognized rating agency);
(c) commercial paper issued by any Lender or any holding company
owning any Lender;
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(d) commercial paper maturing no more than 12 months after the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-2 or P-2 from either Rating Agency (or, if at any time neither
Rating Agency shall be rating such obligations, then from another
nationally recognized rating agency);
(e) domestic and eurodollar certificates of deposit or banker's
acceptances maturing no more than two years after the date of acquisition
thereof issued by any Lender or any other banks having combined capital and
surplus of not less than $250,000,000 (or in the case of foreign banks, the
Dollar equivalent thereof);
(f) repurchase agreements with a term of not more than 30 days for
underlying securities of the type described in clauses (a), (b) and (e)
above entered into with any bank meeting the qualifications specified in
clause (e) above or securities dealers of recognized national standing;
(g) shares of investment companies that are registered under the
Investment Company Act of 1940 and invest solely in one or more of the
types of securities described in clauses (a) through (f) above; and
(h) short-term, liquid investments made by a Foreign Subsidiary in the
ordinary course of managing its cash consistent with past practice.
"CERCLA" has the meaning specified in the definition of "Environmental
Laws".
"Change of Control" means, and shall be deemed to have occurred if:
(a) at any time Continuing Directors shall not constitute a majority of the
Board of Directors of Borrower; (b) KKR, its successors and its Affiliates and
management of Borrower shall cease to own in the aggregate, directly or
indirectly, beneficially and of record, a majority of the voting power of the
outstanding Voting Stock of Borrower (other than as the result of (i) one or
more public offerings of common stock of Borrower or (ii) a widely distributed
private placement of common stock of Borrower that does not provide any special
director designation or special election rights or other special corporate
governance rights to the holders of such shares, in each case whether by
Borrower or another Person); or (c) any Person or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act) shall at any time have acquired
direct or indirect beneficial ownership of a percentage of the voting power of
the outstanding Voting Stock of Borrower that exceeds in the aggregate the
percentage of such voting power of the Voting Stock then beneficially owned,
directly or indirectly, by KKR, its successors and its Affiliates and management
of Borrower.
"Closing Date" means the date on which Credit Extensions are first
made hereunder.
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"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral Account" has the meaning specified in Section 2.08(e).
"Commitment" means, (a) as to each Lender, the obligation of such
Lender to make Revolving Loans and participate in Special Facility Obligations
and make Special Facility Advances; (b) the obligation of the Swing Line Lender
to make Swing Line Loans; and (c) the obligation of the Fronting Lender to issue
Letters of Credit and create Acceptances; collectively as to all Lenders, the
Swing Line Lender and the Fronting Lender, the "Commitments".
"Commitment Fee" means the fee set forth in Section 2.11(b).
"Commitment Letter" means the commitment letter among Borrower and the
Agents dated August 6, 1998 .
"Common Stock" has the meaning specified in the first recital to this
Agreement.
"Compliance Certificate" means a certificate in substantially the form
of Exhibit C or such other form as shall be approved by the Lead Arranger and
Borrower.
"Computerized Request" has the meaning specified in Section 3.02(h).
"Confidential Information" has the meaning specified in Section 11.09.
"Consolidated EBITDA" means, with respect to Borrower for any period,
the sum for such period of (a) Consolidated Net Income plus (b) to the extent
deducted in arriving at such Consolidated Net Income, the sum, without
duplication, of (i) Consolidated Interest Expense and non-cash interest expense,
(ii) taxes computed on the basis of income, (iii) depreciation expense, (iv)
amortization expense, including amortization of deferred financing fees, (v) any
expenses or charges resulting from the Transactions or from any equity offering
or incurrence of Indebtedness, (vi) the amount of any restructuring charge or
reserve, (vii) non-cash charges and (viii) non-recurring charges minus (c) to
the extent included in such Consolidated Net Income, the sum, without
duplication, of (i) non-recurring gains and (ii) non-cash gains in each case
determined for Borrower and the Restricted Subsidiaries on a consolidated basis
in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to Borrower for
any period, cash interest expense (including that attributable to Capital Leases
in accordance with GAAP), net of cash interest income, of Borrower and the
Restricted Subsidiaries on a consolidated
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<PAGE>
basis with respect to all outstanding Indebtedness of Borrower and the
Restricted Subsidiaries, including all commissions, discounts and other fees and
charges owed with respect to letters of credit and banker's acceptance financing
and net costs under Swap Contracts (other than currency swap agreements,
currency future or option contracts and other similar agreements), but
excluding, however, amortization of deferred financing costs and any other
amounts of non-cash interest, all as calculated on a consolidated basis in
accordance with GAAP; provided, however, that, other than for purposes of the
definition of Consolidated EBITDA, Consolidated Interest Expense for the Test
Period ending on or about March 31, 1999, and June 30, 1999, shall be determined
by multiplying (a) Consolidated Interest Expense for the period commencing on
the Closing Date and ending on the last day of such Test Period by (b) 365 days
divided by the number of days elapsed from the Closing Date to the last day of
such Test Period.
"Consolidated Net Income" means, with respect to Borrower for any
period, the aggregate of the Net Income of Borrower and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that (i) any net after-tax extraordinary gains or
losses (less all fees and expenses relating thereto) shall be excluded, (ii) any
net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to asset dispositions other than in the ordinary course of business
shall be excluded, (iii) the Net Income for such period of any Person that is
not a Subsidiary of Borrower, or is an Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting, shall be included only to the
extent of dividends or distributions or other payments paid in cash (or to the
extent converted into cash) to Borrower or a wholly-owned Restricted Subsidiary
(except for directors' qualifying shares) and to the extent of the actual Net
Income of such Person in respect of such period, (iv) the Net Income of any
Person acquired in a pooling of interests transaction shall be excluded for any
period prior to the date of such acquisition, (v) the Net Income for such period
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 its Net Income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained) or,
directly or indirectly, by the 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, unless
such restriction with respect to the payment of dividends or in similar
distributions has been legally waived, and (vi) any net currency loss (gain)
shall be excluded.
"Consolidated Total Debt" means, with respect to Borrower at any time,
the sum of all amounts comprising items (a), (c) (to the extent in respect of
drawn but unreimbursed letters of credit or matured but unreimbursed banker's
acceptances), and (d) of the definition of Indebtedness contained in this
Agreement for Borrower and the Restricted Subsidiaries at such time, determined
on a consolidated basis in accordance with GAAP; provided, however, that
Consolidated Total Debt shall not include Indebtedness in respect of
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Swing Line Loans (and Revolving Loans which replace such Swing Line Loans
pursuant to Section 2.05(a)(i)) the proceeds of which are used to satisfy
reimbursement obligations arising from drawings under documentary Letters of
Credit for the period from the date on which such Revolving Loan was made until
the date the Acceptances intended to refinance such financing are scheduled to
be created (irrespective of whether such Acceptances are in fact created).
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or without
recourse, guaranteeing or intended to guarantee any Indebtedness (the "primary
obligations") of another Person (the "primary obligor") in any manner, including
any obligation of that Person (a) to purchase, repurchase or otherwise acquire
such primary obligations or any security therefor, (b) to advance or provide
funds for the payment or discharge of any such primary obligation or to maintain
working capital or equity capital of the primary obligor or otherwise to
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. 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 maximum stated or determinable amount of such Contingent
Obligation) or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder), as determined by such Person in good faith. Notwithstanding
the foregoing, the term "Contingent Obligation" shall not include (a)
endorsements of instruments for deposit or collection in the ordinary course of
business, (b) guarantees made by a Person of the obligations of a Restricted
Subsidiary of such Person that do not constitute Indebtedness of such Restricted
Subsidiary and are incurred in the ordinary course of business of such
Restricted Subsidiary and (c) obligations arising from agreements providing for
indemnification or adjustment of purchase price (or from guarantees supporting
any obligations pursuant to any such agreements) incurred in connection with the
disposition of any business or assets or Restricted Subsidiary.
"Continuing Director" means, at any date, an individual (a) who is a
member of the Board of Directors of Borrower, as the case may be, on the Closing
Date, (b) who, as at such date, has been a member of such Board of Directors for
at least the 12 preceding months (or, for the period comprising the first 12
months after the Closing Date, has been a member of such Board of Directors at
least since the Closing Date), or (c) who has been nominated to be a member of
such Board of Directors, directly or indirectly, by KKR or Persons nominated by
KKR or has been nominated to be a member of such Board of Directors by a
majority of the other Continuing Directors then in office.
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"Contractual Obligation" 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/Continuation Date" means any date on which, under Section
2.04, Borrower (a) converts Revolving Loans of one Type to another Type or (b)
continues as Revolving Loans of the same Type, but with a new Interest Period,
Revolving Loans having Interest Periods expiring on such date.
"Creation Date" has the meaning specified in Section 3.01(a).
"Credit Extension" means and includes (a) the making (but not
conversion or continuation) of any Revolving Loan (other than Revolving Loans
which replace Swing Line Loans pursuant to Section 2.05(a)(i)) hereunder, (b)
the Issuance of any Letter of Credit hereunder and (c) the creation of any
Acceptance hereunder.
"Credit Extension Date" means any Borrowing Date, any date on which a
Letter of Credit is Issued under Section 3.02 or any date on which an Acceptance
is created under Section 3.03.
"Cumulative Consolidated Net Income" means, at any time, Consolidated
Net Income for the period (taken as one accounting period) commencing on the
Closing Date and ending on the last day of the Fiscal Quarter then last ended
for which financial statements and the Compliance Certificate relating thereto
have been delivered to the Administrative Agent pursuant to Sections 7.01 and
7.02.
"Cumulative Consolidated Net Income Basket" means, at any date, with
respect to any Investment pursuant to Section 8.03(h) or any Restricted Payment
pursuant to Section 8.05(f), the excess (if any) of (A) 50% of Cumulative
Consolidated Net Income at such date over (B) the aggregate amount of all
Investments made pursuant to Section 8.03(h) and Restricted Payments made
pursuant to Section 8.05(f) and 8.05(g) during the period from the Closing Date
through the time immediately prior to the time of the making of such Investment
or Restricted Payment; provided, however, that solely for purposes of any
Investment made pursuant to Section 8.03(h) or any Senior Note Redemption made
pursuant to Section 8.05(f), Cumulative Consolidation Net Income Available to
Common Stockholders at any date shall be calculated without giving effect to any
amortization of goodwill.
"Debt Repayment" has the meaning set forth in the fifth recital to
this Agreement.
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"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.
"Disposition" means the sale, conveyance, issuance or other
disposition (including by way of merger, consolidation, sale-leaseback or
otherwise) of any property, business or assets by Borrower or any Restricted
Subsidiary (including receivables and capital stock of or owned by Borrower or
such Restricted Subsidiary, and in all cases whether now owned or hereafter
acquired), other than (a) the issuance of capital stock of Borrower, (b) sales,
conveyances or other dispositions in the ordinary course of business (including
sales, conveyances or other dispositions of inventory in the ordinary course),
and (c) any Acquisition or Investment permitted by Section 8.03.
"Documentation Agent" means DLJ Capital Funding, Inc., in its capacity
as documentation agent for the Lenders hereunder and under the other Loan
Documents.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"Domestic Subsidiary" means any Restricted Subsidiary that is not a
Foreign Subsidiary. Each reference to a Domestic Subsidiary shall, unless the
context otherwise requires, be to a Domestic Subsidiary of Borrower.
"Eligible Assignee" means and includes each Lender (and any Affiliate
thereof), any commercial bank, any financial institution, any fund that is
regularly engaged in making, purchasing or investing in loans or any Person that
would satisfy the requirements of an "accredited investor" (as defined in SEC
Regulation D, but excluding a natural person), in each case that is not a direct
competitor of Borrower or engaged in the same or similar business as Borrower or
any Restricted Subsidiary and is not an Affiliate of any such competitor of
Borrower or any Restricted Subsidiary.
"Environmental Laws" means any and all present and future laws,
statutes, ordinances, rules, regulations, requirements, restrictions, permits,
orders, and determinations of any governmental authority that have the force and
effect of law, pertaining to pollution (including hazardous, toxic or dangerous
substances), natural resources or the environment, whether federal, state, or
local, including environmental response laws such as the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, and as the same may be
further amended (hereinafter collectively called "CERCLA").
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"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with Borrower within the meaning of Section
414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code).
"ERISA Event" means any of the following if such event or occurrence
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect: (a) the failure to make a required contribution to a
Pension Plan if such failure is sufficient to give rise to a Lien under Section
302(f) of ERISA; (b) a withdrawal by Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA or the commencement of proceedings by the PBGC to terminate a Pension Plan
or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon Borrower or any ERISA Affiliate.
"Eurodollar Loan" means a Loan that bears interest based on the
Eurodollar Rate.
"Eurodollar Rate" means, with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate of interest per annum
determined on the basis of the rate for deposits in Dollars for a period equal
to such Interest Period commencing on the first day of such Interest Period
appearing on Dow Jones Page 3750 (formerly known as Page 3750 of the Telerate
Service) as of 11:00 a.m., London time, two Business Days prior to the beginning
of such Interest Period. In the event that such rate does not appear on Dow
Jones Page 3750 (or otherwise on such service), "Eurodollar Rate" for the
purposes of this paragraph shall be determined by reference to such other
publicly available service for displaying eurodollar rates as may be agreed upon
by the Administrative Agent and Borrower or, in the absence of such agreement,
"Eurodollar Rate" for the purposes of this paragraph shall instead be the rate
per annum equal to the arithmetic average of the respective rates notified to
the Administrative Agent by each of the Reference Lender as the rate at which
such Reference Lender is offered Dollar deposits at or about 11:00 a.m., London
time, two Business Days prior to the beginning
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of such Interest Period, in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations in respect of its Eurodollar Loans
are then being conducted for delivery.
"Event of Default" means any of the events or circumstances specified
in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Facilities" means the credit facilities hereunder to provide
Revolving Loans, Acceptances and Letters of Credit.
"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 Bank of New York (including any
such successor, "H.15(519)") opposite the caption "Federal Funds (Effective)";
or, if for any relevant day such rate is not so published, the rate for such day
will be the arithmetic mean as determined by the Administrative Agent 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 selected by the Administrative Agent.
"Fee Letters" has the meaning specified in Section 2.11(a).
"Financings" has the meaning specified in the fourth recital to this
Agreement.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" has the meaning specified in Section 7.14.
"Fiscal Year End" has the meaning specified in Section 7.14.
"Foreign Subsidiary" means any Subsidiary of Borrower (a) which is
organized under the laws of any jurisdiction outside of the United States, (b)
which conducts the major portion of its business outside of the United States
and (c) all or substantially all of the property and assets of which are located
outside of the United States.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
"Fronting Lender" means BofA in its capacity as the Fronting Lender
which shall Issue Letters of Credit and create Acceptances at the request of,
and for the account of,
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Borrower and the Restricted Subsidiaries, together with any replacement Fronting
Lender appointed in accordance with Section 10.01(b) or Section 10.09.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time; it being understood and agreed
that determinations in accordance with GAAP for purposes of Article VIII,
including defined terms as used therein, are subject (to the extent provided
therein) to the immediately succeeding sentence. Except as otherwise
specifically provided herein, all computations determining compliance with
Article VIII, including definitions used therein, shall utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the historical financial statements of
Borrower described in Section 6.09. At any time the computations determining
compliance with Article VIII utilize accounting principles different from those
utilized in the financial statements furnished to the Lenders pursuant to
Section 7.01 such financial statements shall be accompanied by reconciliation
work-sheets.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranteed Obligations" has the meaning specified in Section 3.09(a).
"Guarantors" means, collectively, at any time, the guarantors parties
at such time to the Guaranty.
"Guaranty" means the Guaranty to be duly executed and delivered by
each Domestic Subsidiary set forth on Schedule A hereto pursuant to this
Agreement, in substantially the form of Exhibit E, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Hazardous Materials" means any substance that is defined or listed as
a hazardous, toxic or dangerous substance under any present or future
Environmental Law or that is otherwise regulated or prohibited or subject to
investigation or remediation under any present or future Environmental Law
because of its hazardous, toxic, or dangerous properties, including (a) any
substance that is a "hazardous substance" under CERCLA and (b) petroleum wastes
or products.
"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 that in
accordance with GAAP would be shown on the liability side of the balance sheet
of such Person; (c) obligations incurred in connection with
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banker's acceptances and the face amount of all letters of credit issued for the
account of such Person and, without duplication, all drafts drawn thereunder;
(d) all Capitalized Lease Liabilities; (e) all Indebtedness referred to in
clauses (a) through (d) above secured by any Lien upon or in property owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness; (f) all monetary obligations of such Person under
Swap Contracts; and (g) without duplication, all Contingent Obligations of such
Person; provided that Indebtedness shall not include trade payables and accrued
expenses, in each case arising in the ordinary course of business.
"Indemnified Liabilities" has the meaning specified in Section
11.05(a).
"Indemnified Person" has the meaning specified in Section 11.05(a).
"Independent Auditor" has the meaning specified in Section 7.01(a).
"Insolvency Proceeding" means, with respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, rehabilitation, dissolution, winding up or relief of
debtors 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 or any substantial portion of its creditors, undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Eurodollar Loan, the last day
of each Interest Period applicable to such Revolving Loan and, as to any Base
Rate Loan, the last Business Day of each calendar quarter; provided, however,
that if any Interest Period exceeds three months, each date that falls at
three-month intervals after the beginning of such Interest Period until the end
of such Interest Period is also an Interest Payment Date.
"Interest Period" means, as to any Eurodollar Loan, the period
commencing on the Borrowing Date of such Revolving Loan or on the
Conversion/Continuation Date on which the Revolving Loan is converted into or
continued as an Eurodollar Loan, and ending on the date one, two, three or six
months thereafter (or ending nine or 12 months thereafter if available to all
Lenders making such Revolving Loans as determined by such Lenders in good faith
based on prevailing market conditions) as selected by Borrower in its Notice of
Borrowing or Notice of Conversion/Continuation; provided, however, that:
(i) Borrower shall not be permitted to select Interest Periods to be
in effect at any one time which have expiration dates occurring on more
than 10 different dates;
(ii) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless
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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 preceding Business Day;
(iii) 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 at the end of such Interest
Period; and
(iv) no Interest Period for any Revolving Loan shall extend beyond the
Revolving Commitment Termination Date.
"Interest Rate Certificate" means a certificate signed by a
Responsible Officer setting forth the Leverage Ratio for Borrower as of the end
of the Fiscal Quarters ending September 30, 1998 and December 31, 1998 and
attaching thereto all relevant financial statements and the calculation of the
Leverage Ratio.
"Investments" has the meaning specified in Section 8.03.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in Section 3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"KKR" has the meaning specified in the first recital to this
Agreement.
"KKR L.P." has the meaning specified in the first recital to this
Agreement.
"KKR Stock Acquisition" has the meaning specified in the first recital
to this Agreement.
"KKR Stock Purchase Agreement" has the meaning specified in the first
recital to this Agreement.
"L/C Obligations" means, at any time, the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding plus (b) the aggregate
amount of all unreimbursed drawings under all Letters of Credit, including all
outstanding Special Facility Borrowings in respect of drawn Letters of Credit.
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"Lead Arranger" means Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated in its capacity as lead arranger and syndication
agent for the Lenders hereunder and under the other Loan Documents.
"Legal Requirements" means all applicable laws, rules, orders and
regulations made by any governmental body or regulatory authority having
jurisdiction over Borrower or a Restricted Subsidiary.
"Lender" and "Lenders" have the meaning specified in the preamble,
including each financial institution identified on Schedule 2.01 and each
permitted successor or assign thereof.
"Lender Default" means (a) the refusal (which has not been retracted)
of a Lender to make available its portion of any Borrowing or to fund its
portion of any unreimbursed payment under Section 3.04 or (b) a Lender having
notified the Administrative Agent and/or Borrower that it does not intend to
comply with its obligations under Section 2.01 or under Section 3.04, in the
case of either clause (a) or clause (b) 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.
"Lending Office" means, as to any Lender, the office or offices of
such Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office," as the case may be, on Schedule 11.02, or such other
office or offices as such Lender may from time to time notify Borrower and the
Administrative Agent.
"Letters of Credit" means any standby or documentary letter of credit
Issued by the Fronting Lender pursuant to Article III, at the request of, and
for the account of, an Account Party. Letters of Credit shall include all those
listed on Schedule C hereto which were in existence prior to the date hereof.
"Leverage Ratio" has the meaning specified in Section 8.06(b).
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, charge, lien (statutory or other), escrow or similar encumbrance
of any kind, or any other type of similar preferential arrangement (including
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof).
"Lisco" has the meaning specified in the first recital to this
Agreement.
"Loan Documents" means this Agreement, any Notes, the Guaranty, the
Pledge Agreement, the Security Agreement and the Fee Letters.
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"Material Adverse Change" means any change in the business, assets,
operations, properties or financial condition of Borrower and the Restricted
Subsidiaries taken as a whole that would materially adversely affect the ability
of Borrower and the other Obligors taken as a whole to perform their obligations
under this Agreement and the other Loan Documents taken as a whole.
"Material Adverse Effect" means a circumstance or condition affecting
the business, assets, operations, properties or financial condition of Borrower
and the Restricted Subsidiaries taken as a whole that would materially adversely
affect (a) the ability of Borrower and the other Obligors taken as a whole to
perform their obligations under this Agreement and the other Loan Documents
taken as a whole or (b) the rights and remedies of the Agents and the Lenders
under this Agreement and the other Loan Documents taken as a whole.
"Material Subsidiary" means, at any date, each Restricted Subsidiary
having at such date either (a) net sales (on a consolidated basis, including
each of its Subsidiaries that constitute Restricted Subsidiaries, but excluding
revenues received by any Restricted Subsidiary from Borrower or any other
Restricted Subsidiary) for the Test Period ended on or immediately prior to such
date in excess of 5% (or, in the case of Foreign Subsidiaries for purposes of
Section 7.11 only, 10%) of the net sales of Borrower and the Restricted
Subsidiaries for such Test Period or (b) total assets (on the same consolidated
basis, including each of its Subsidiaries that constitute Restricted
Subsidiaries), as of the last day of the Fiscal Quarter ended on or immediately
prior to such date, constituting in excess of 5% (or, in the case of Foreign
Subsidiaries for purposes of Section 7.11 only, 10%) of the total assets of
Borrower and the Restricted Subsidiaries as of such day, in each case, based
upon Borrower's most recent annual or quarterly financial statements delivered
to the Administrative Agent under Section 7.01 in accordance with GAAP (it being
acknowledged and understood that, in the event the determination of whether a
Restricted Subsidiary is a Material Subsidiary is to be made on or about the
date such Restricted Subsidiary was created or acquired (or, thereafter, prior
to the time it was a Restricted Subsidiary for the entire applicable Test Period
or Fiscal Quarter, as the case may be) such determination shall be made on a pro
forma basis as if such Restricted Subsidiary were a Restricted Subsidiary at the
commencement of such Test Period for the purposes of clause (a) above and on the
last day of such Fiscal Quarter for the purposes of clause (b) above).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan," within the meaning
of Section 4001(a)(3) of ERISA, with respect to which Borrower or any ERISA
Affiliate may have any liability.
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"NAIC" means the National Association of Insurance Commissioners or
any successor thereto with similar authority.
"Net Disposition Proceeds" means, as to any Disposition by a Person
(other than a Disposition permitted pursuant to clause (a), (b) or (c) of
Section 8.02), proceeds in cash as and when received by such Person, net of (a)
the costs and expenses relating to such Disposition, (b) the amount of all taxes
paid or reasonably estimated to be payable by such Person in connection
therewith, but Net Disposition Proceeds shall include the excess, if any, of the
estimated taxes payable in connection with such Disposition over the actual
amount of taxes paid, immediately after the payment of such taxes, (c) amounts
required to be applied to repay principal, interest and prepayment premiums and
penalties on Indebtedness secured by a Lien on the asset which is the subject of
such Disposition, and (d) the amount of any reasonable reserve established in
accordance with GAAP against any liabilities (other than any taxes deducted
pursuant to clause (b) above) associated with the assets sold or disposed of and
retained by Borrower or any Restricted Subsidiary (provided that the amount of
any subsequent reduction of such reserve (other than in connection with a
payment in respect of any such liability) shall be deemed to be Net Disposition
Proceeds realized on the date of such reduction).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with GAAP
before any reduction in respect of preferred stock dividends.
"Net Issuance Proceeds" means, as to any issuance of indebtedness for
borrowed money or incurrence of Capitalized Lease Liabilities by any Person,
cash proceeds received by such Person in connection therewith, net of costs and
expenses paid or incurred in connection therewith.
"Non-Defaulting Lender" means and includes each Lender other than a
Defaulting Lender.
"Non-U.S. Lender" has the meaning specified in Section 4.01(d).
"Non-U.S. Participant" means a Participant that is not incorporated or
organized in or under the laws of the United States of America or a state
thereof.
"Note" means a promissory note, if any, executed by Borrower in favor
of a Lender pursuant to Section 2.02(b), in substantially the form of Exhibit I,
and also means all promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Note Issuance" has the meaning set forth in the fourth recital to
this Agreement.
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"Notice of Borrowing" means a notice in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice in substantially
the form of Exhibit B.
"Notice of L/C Issuance/Amendment" means a notice in substantially the
form of Exhibit D.
"Obligations" means, at any time, all monetary obligations of any type
or description owing at such time by Borrower and any other Obligor to any
Lender, including the Fronting Lender, any Agent or any Indemnified Person under
this Agreement, any Letter of Credit, any Acceptance, any other Loan Document or
any Swap Contract, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising.
"Obligor" means Borrower, each Guarantor and each Account Party.
"Organization Documents" means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation.
"Originating Lender" has the meaning specified in Section 11.08(e).
"Other Taxes" means any present or future stamp, court 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,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Document.
"Participant" has the meaning specified in Section 11.08(e).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan) with
respect to which Borrower or any ERISA Affiliate may have any liability.
"Permitted Acquisition" has the meaning specified in Section 8.03(h).
"Permitted Liens" has the meaning specified in Section 8.01.
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"Person" means an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower or any of its Subsidiaries sponsors or maintains or to
which Borrower or any of its Subsidiaries makes, is making or is obligated to
make contributions and includes any Pension Plan.
"Pledge Agreement" means the Pledge Agreement to be duly executed and
delivered by Borrower, in substantially the form of Exhibit F, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Preferred Stock" has the meaning specified in the third recital of
this Agreement.
"Preferred Stock Investment" has the meaning specified in the third
recital to this Agreement.
"Pro Forma Balance Sheet" has the meaning specified in Section
5.01(o).
"Pro Forma Basis" means, with respect to financial statements required
to be delivered pursuant to a provision hereof in connection with a proposed
Subject Transaction (or, for purposes of clause (b) of Section 8.06, Subject
Transactions that have been consummated), on a pro forma basis for the period
specified in such provision based on assumptions believed by Borrower in good
faith to be reasonable for such period, after giving effect to such Subject
Transaction (and all other Subject Transactions made after the last day of such
period) as if such Subject Transaction (and all other such Subject
Transactions), together with all transactions related thereto (including
Indebtedness assumed or incurred or that would be assumed or incurred in
connection with such Subject Transactions), had been consummated on the first
day of such period.
"Projections" has the meaning specified in Section 5.01(o).
"Rating Agency" means S&P or Moody's; collectively, the "Rating
Agencies".
"Reference Lender" means BofA.
"Register" has the meaning specified in Section 11.08(c).
"Reimbursement Date" has the meaning specified in Section 3.04(b).
"Replaced Lender" has the meaning specified in Section 4.09.
"Replacement Lender" has the meaning specified in Section 4.09.
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"Required Lenders" means, at any time, Non-Defaulting Lenders having
or holding (a) at least 51% of the sum of the aggregate Revolving Commitments at
such time (excluding Revolving Commitments of Defaulting Lenders) or (b) if the
Revolving Commitments shall have been terminated or expire or for purposes of
acceleration pursuant to clause (b) of Section 9.02, at least 51% of the
aggregate principal amount of the Revolving Loans outstanding and the Special
Facility Obligations outstanding at such time (excluding Special Facility
Obligations held by Defaulting Lenders).
"Requirement of Law" means, as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.
"Responsible Officer" means, with respect to any Person, its chief
executive officer, its president or any vice president, managing director,
treasurer, controller or other officer thereof having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer, the treasurer or the controller of
Borrower, or any other officer having substantially the same authority and
responsibility.
"Restricted Payment" has the meaning specified in Section 8.05.
"Restricted Subsidiary" means each Subsidiary of Borrower that is not
an Unrestricted Subsidiary.
"Revolving Borrowing" means a Borrowing consisting of Revolving Loans
of the same Type made to Borrower on the same day by the Lenders under Section
2.0l(a), and in the case of Eurodollar Loans, having the same Interest Period.
"Revolving Commitment" has the meaning specified in Section 2.01(a);
collectively, for all Lenders, the "Revolving Commitments".
"Revolving Commitment Termination Date" means the earlier to occur of:
(a) the Business Day immediately preceding August 20, 2005; and
(b) the date on which the Revolving Commitments terminate in
accordance with the provisions of this Agreement.
"Revolving Loan" and "Revolving Loans" have the respective meanings
specified in Section 2.01(a), and may be a Base Rate Loan or a Eurodollar Loan
(each, a "Type" of Revolving Loan).
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"Revolving Loan Percentage" means, as to any Lender, the percentage
which (a) the amount of such Lender's Revolving Commitment (or, after
termination of the Revolving Commitments, the outstanding principal amount of
such Lender's Revolving Loans) is of (b) the aggregate amount of all Revolving
Commitments (or, after termination of the Revolving Commitments, the outstanding
principal amount of all Revolving Loans).
"S&P" means Standard & Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Security Agreement" means the Security Agreement to be duly executed
and delivered by Borrower and each Domestic Subsidiary, in substantially the
form of Exhibit L, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"Senior Indenture" means the Indenture, dated August 20, 1998, between
Borrower and Marine Midland Bank, as trustee pursuant to which the Senior Notes
were issued.
"Senior Note Redemption" has the meaning specified in Section 8.05(c).
"Senior Notes" has the meaning set forth in the fourth recital to this
Agreement and includes any notes issued in exchange therefor pursuant to the
Senior Indenture and the other documentation therefor in connection with a
registered exchange offer as described in the offering memorandum dated August
13, 1998 pertaining to the Senior Notes.
"Solvency Certificate" means the solvency certificate to be duly
executed and delivered by the chief financial officer of Borrower, in
substantially the form of Exhibit H.
"Spalding" has the meaning specified in the first recital to this
Agreement.
"Special Facility" means the facility hereunder to Issue Letters of
Credit and create Acceptances.
"Special Facility Advance" means each Lender's participation in any
Special Facility Borrowing in accordance with its Revolving Loan Percentage.
"Special Facility Borrowing" means an extension of credit resulting
from a drawing under any Letter of Credit or the maturity of an Acceptance, as
the case may be, which shall not have been reimbursed with the proceeds of a
Borrowing of Swing Line Loans.
"Special Facility Commitment" means the maximum aggregate principal
amount of Special Facility Obligations that may be created by the Fronting
Lender in accordance with Section 3.01 hereof and outstanding at any time and
from time to time, which aggregate
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outstanding principal amount shall not exceed $55,000,000 at any one time (with
a sublimit of $30,000,000 for Acceptance Obligations).
"Special Facility Obligation" means the sum of (a) L/C Obligations and
(b) Acceptance Obligations; less the aggregate amount on deposit with the
Administrative Agent as cash collateral for Borrower's obligations under Article
III in respect of the Obligations described in clauses (a) and (b) above.
"Stock Acquisitions" has the meaning specified in the second recital
to this Agreement.
"Stock Purchase Agreements" has the meaning specified in the second
recital to this Agreement.
"Subject Subsidiary" has the meaning specified in Section 8.02(a).
"Subject Transaction" means each of the following: (a) an Investment
that would constitute an Acquisition or that would result in the creation or
capitalization of a new Restricted Subsidiary (including the designation of any
Unrestricted Subsidiary as a Restricted Subsidiary), (b) any Investment
contemplated by clauses (h) or (i) of Section 8.03, (c) any incurrence of
Indebtedness contemplated by clauses (i) or (j) of Section 8.04, and (d) any
Restricted Payment pursuant to Section 8.05(f).
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which more than 50% of the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein, to a "Subsidiary" refer to a
Subsidiary of Borrower.
"Supermajority Lenders" means, at any time, Non-Defaulting Lenders
having or holding (a) at least 66 2/3 % of the sum of the aggregate Revolving
Commitments at such time (excluding Revolving Commitments of Defaulting Lenders)
or (b) if the Revolving Commitments shall have been terminated or expire, at
least 66 2/3% the aggregate principal amount of the Revolving Loans and Special
Facility Obligations outstanding at such time (excluding Revolving Loans and
Special Facility Obligations held by Defaulting Lenders).
"Swap Contract" means any agreement relating to any transaction that
is a rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap or option, bond, note or bill option,
interest rate option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swap option, currency
option or any other, similar transaction (including any option to
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enter into any of the foregoing) or any combination of the foregoing, and,
unless the context otherwise clearly requires, any master agreement relating to
or governing any or all of the foregoing.
"Swing Line Commitment" means the commitment of the Swing Line Lender
to make Revolving Loans from time to time pursuant to Section 2.0l(b) in an
aggregate amount not to exceed on any date the amount of $5,000,000, as the same
shall be reduced as a result of a reduction in the Swing Line Commitment
pursuant to Section 2.06; provided, however, that the Swing Line Commitment is a
part of the combined Revolving Commitments, rather than a separate, independent
commitment.
"Swing Line Facility" means the facility hereunder to provide Swing
Line Loans.
"Swing Line Lender" means BofA, its successors and assigns.
"Swing Line Loan" has the meaning specified in Section 2.01(b).
"Swing Line Loan Participation Certificate" means a participation
certificate in substantially the form of Exhibit K.
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of each Lender
and the Administrative Agent, respectively, taxes imposed on any Lender or the
Administrative Agent as a result of a present or former connection between such
Lender or the Administrative Agent and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from such
Lender or the Administrative Agent having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document).
"Test Period" means, for any determination under this Agreement at any
time, the four consecutive Fiscal Quarters of Borrower then last ended.
"Total Percentage" means, as to any Lender, the percentage which (a)
the sum of the amount of such Lender's Revolving Commitment (or, after
termination or expiration of the Revolving Commitments, the outstanding
principal amount of such Lender's Revolving Loans and Special Facility
Obligations) is of (b) the sum of the aggregate amount of all Revolving
Commitments (or, after termination or expiration of the Revolving Commitments,
the outstanding principal amount of all Revolving Loans and Special Facility
Obligations).
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"Trademarks" means, collectively, trademarks, service marks, trade
names, logos, trade dress and trademark and service mark applications,
registrations and recordings, including all rights relating thereto arising
under common law.
"Transactions" means, collectively, the Stock Acquisitions, the
Preferred Stock Investment, the Financings, the Debt Repayment and the other
transactions contemplated hereby and entered into and consummated in connection
with the Financings.
"Transferee" has the meaning specified in Section 11.08(f).
"Transition Services Agreement" means the Transition Services
Agreement dated as of August 20, 1998 between Borrower and Spalding.
"Type" has the meaning specified in the definition of "Revolving
Loan".
"UCP" has the meaning specified in Section 3.11.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Plan pursuant to Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of America.
"Unrestricted Subsidiary" means each Subsidiary (a) first created or
acquired by Borrower or a Restricted Subsidiary after the Closing Date to the
extent the acquisition price therefor (by capital contribution, purchase price,
etc.) is funded by Borrower or any Restricted Subsidiary in accordance with
clause (i) of Section 8.03 and such Subsidiary is designated by Borrower as an
Unrestricted Subsidiary in a written notice delivered to the Agents prior to or
reasonably promptly after such creation or acquisition or (b) first created or
acquired after the Closing Date by another Unrestricted Subsidiary created or
acquired in accordance with the provisions of this definition; provided,
however, that the provisions of clause (i) of Section 8.03 are not breached in
connection with such creation or acquisition and that such Subsidiary and
Borrower enter into a tax sharing agreement in form and substance reasonably
satisfactory to the Agents, it being understood and agreed that (i) a Restricted
Subsidiary cannot be owned in whole or in part by an Unrestricted Subsidiary,
(ii) an Unrestricted Subsidiary cannot be designated as a Restricted Subsidiary
except with prior written notice to the Agents and as otherwise provided in
clause (h) of Section 8.03 and (iii) in order to be permitted to be created or
acquired or to continue to exist, no recourse whatsoever may be had to Borrower
or any of the Restricted Subsidiaries or any of their respective properties in
respect of any obligations or liabilities (contingent or otherwise) of such
Unrestricted Subsidiary
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except to the extent the aggregate maximum amount of such recourse constitutes
an investment made and permitted pursuant to clause (i) of Section 8.03.
"Voting Stock" means, with respect to any Person, shares of such
Person's capital stock having the right to vote for the election of directors of
such Person under ordinary circumstances.
SECTION 1.02. Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including without
limitation."
(iii) 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."
(iv) The term "property" includes any kind of property or asset, real,
personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments, supplements and other modifications
thereto, but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The table of contents, captions and headings of this Agreement are
for convenience of reference only and shall not affect the interpretation of
this Agreement.
(f) (i) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agents, Borrower and
the other parties, and are the products of all parties.
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(ii) No Agent and no Lender has any fiduciary relationship with or duty
to Borrower or any of its Subsidiaries arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between the
Agents and Lenders, on one hand, and Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor.
(iii) No joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among Borrower and the Lenders.
SECTION 1.03. Accounting Principles. Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall be
made in accordance with GAAP, consistently applied.
ARTICLE II
THE CREDITS
SECTION 2.01. Amounts and Terms of Commitments.
(a) The Revolving Credit. Each Lender severally agrees, on the terms
and conditions set forth herein, to make loans to Borrower (each such loan, a
"Revolving Loan"; collectively, the "Revolving Loans") from time to time on any
Business Day during the period from the Closing Date to the Revolving Commitment
Termination Date in an aggregate amount not to exceed at any time outstanding
the amount specified for such Lender on Schedule 2.01 (such amount, as the same
may be reduced under Section 2.06, or as a result of one or more assignments
under Section 11.08, such Lender's "Revolving Commitment"); provided, however,
that, after giving effect to any Borrowing of Revolving Loans, the aggregate
principal amount of all outstanding Revolving Loans plus all outstanding Swing
Line Loans plus all outstanding Special Facility Obligations shall not at any
time exceed the combined Revolving Commitments. Within the limits of each
Lender's Revolving Commitment, and subject to the other terms and conditions
hereof, Borrower may borrow under this Section 2.01(a), prepay under Section
2.07 and reborrow from time to time under this Section 2.01(a).
(b) Swing Line Commitment. The Swing Line Lender agrees, on the terms
and conditions set forth herein, to make one or more loans to Borrower (each
such loan, a "Swing Line Loan") from time to time on any Business Day during the
period from the Closing Date to the Revolving Commitment Termination Date, in an
aggregate amount not to exceed the Swing Line Commitment; provided, however,
that, after giving effect to any Borrowing
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of Swing Line Loans, the aggregate principal amount of all outstanding Revolving
Loans and Swing Line Loans plus all outstanding Special Facility Obligations
shall not at any time exceed the combined Revolving Commitments. Within the
limits of the Swing Line Lender's Swing Line Commitment, and subject to the
other terms and conditions hereof, Borrower may borrow Swing Line Loans under
this Section 2.01(b), prepay Swing Line Loans under Section 2.06 and reborrow
Swing Line Loans under this Section 2.01(b).
SECTION 2.02. Revolving Loan Accounts.
(a) The Revolving Loans and Special Facility Advances made by each
Lender and the Letters of Credit Issued and the Acceptances created by the
Fronting Lender shall be evidenced by one or more loan accounts or records
maintained by such Lender or Fronting Lender, as the case may be, in the
ordinary course of business. The loan accounts or records maintained by the
Administrative Agent, the Fronting Lender and each Lender shall be conclusive
absent clearly demonstrable error of the amount of the Revolving Loans made and
Special Facility Obligations extended by the Lenders to or for the account of
Borrower and the interest and payments thereon. Any failure so to record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of Borrower hereunder to pay any amount owing with respect to the Revolving
Loans and Special Facility Obligations.
(b) Upon the request of any Lender made through the Administrative
Agent, solely to facilitate the pledge or assignment of its Revolving Loans to
any Federal Reserve Bank pursuant to Section 11.08(g), the Revolving Loans made
by such Lender may be evidenced by one or more Notes, instead of or in addition
to loan accounts. Each such Lender is irrevocably authorized by Borrower to
endorse on the schedules annexed to its Note(s) the date, amount and maturity of
each Revolving Loan made, continued or converted by it and the amount of each
payment of principal made by Borrower with respect thereto. Each such Lender's
record shall be conclusive absent clearly demonstrable error; provided, however,
that the failure of a Lender to make, or an error in making, a notation thereon
with respect to any Revolving Loan shall not limit or otherwise affect the
obligations of Borrower hereunder or under any such Note to such Lender.
SECTION 2.03. Procedure for Borrowing.
(a) Each Borrowing shall be made upon Borrower's irrevocable written or
telephonic notice delivered to the Administrative Agent (and to the Swing Line
Lender if a Swing Line Loan is requested) (if in writing) in the form of a
Notice of Borrowing (any such notice to be received by the Administrative Agent
(and by the Swing Line Lender if a Swing Line Loan is requested) not later than
(i) 11:00 a.m. (New York City time) three Business Days prior to the requested
Borrowing Date (if telephonic, promptly confirmed thereafter in writing in the
form of a Notice of Borrowing), in the case of Eurodollar Loans and (ii) 11:00
a.m. (New York City time) (or 1:00 p.m. (New York City time) in the case of
Swing Line
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Loans) on the requested Borrowing Date (if telephonic, confirmed thereafter in
writing in the form of a Notice of Borrowing), in the case of Base Rate Loans,
specifying:
(A) the amount of the Borrowing, which shall (1) in the case
of Revolving Loans, be in an aggregate minimum amount of $500,000 for
both Eurodollar Loans and Base Rate Loans or any multiple of $100,000
in excess thereof and (2) in the case of Swing Line Loans (except for
Swing Line Loans made in accordance with Section 3.04), be in an
aggregate minimum amount of $100,000 of Base Rate Loans or any multiple
of $100,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business
Day;
(C) the Type of Revolving Loans comprising the Borrowing
(provided that all Swing Line Loans shall be Base Rate Loans); and
(D) the duration of the Interest Period applicable to
Eurodollar Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any Borrowing
comprised of Eurodollar Loans, such Interest Period shall be one month.
(b) If Revolving Loans (other than Swing Line Loans) are
requested, the Administrative Agent will promptly notify each Lender of its
receipt of any Notice of Borrowing and of the amount of such Lender's
Revolving Loan Percentage of that Borrowing.
(c) (i) In the case of Revolving Loans (other than Swing Line
Loans), each Lender will make the amount of its Revolving Loan Percentage of
each Borrowing available to the Administrative Agent for the account of
Borrower at the Administrative Agent's Payment Office by 1:00 p.m. (New York
City time) on the Borrowing Date requested by Borrower in funds immediately
available to the Administrative Agent. The proceeds of all such Revolving
Loans will then be made available to Borrower by the Administrative Agent at
such office by crediting the account of Borrower on the books of the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the Lenders or by wire transfer in accordance with
written instructions provided to the Administrative Agent by Borrower, in
each case in like funds as received by the Administrative Agent.
(ii) In the case of Swing Line Loans, the Swing Line Lender
will make available to Borrower at its account at the Swing Line Lender, not
later than 2:00 p.m. (New York City time) on the requested Borrowing Date, in
immediately available funds, the proceeds of the Swing Line Loan being made
on such date.
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(d) Without in any way limiting the obligation of Borrower to
confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent (and the Swing Line Lender) may act prior to
receipt of written confirmation without liability upon the basis of
such telephonic notice believed by the Administrative Agent (and the
Swing Line Lender) in good faith to be from a Responsible Officer of
Borrower (or a designee of such Responsible Officer). In each such case
Borrower hereby waives the right to dispute the Administrative Agent's
(and the Swing Line Lender's) record of the terms of any such
telephonic notice.
SECTION 2.04. Conversion and Continuation Elections.
(a) Borrower may, upon irrevocable telephonic notice to the
Administrative Agent (promptly confirmed thereafter in writing) in accordance
with Section 2.04(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the
case of Eurodollar Loans, to convert any such Revolving Loans (or any
part thereof in an amount not less than $500,000 in the case of
conversions of Revolving Loans to Eurodollar Loans or Base Rate Loans,
or in each case that is in an integral multiple of $100,000 in excess
thereof) into Revolving Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Revolving Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$500,000 for Eurodollar Loans or, in each case, any multiple of
$100,000 in excess thereof).
(b) Borrower shall deliver a Notice of Conversion/Continuation to be
received by the Administrative Agent not later than 11:00 a.m. (New York City
time) (i) at least three Business Days in advance of the Conversion/Continuation
Date, if the Revolving Loans are to be converted into or continued as Eurodollar
Loans and (ii) on the Conversion/Continuation Date, if the Revolving Loans are
to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Revolving Loans to be converted or
continued;
(C) the Type of Revolving Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
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(c) If upon the expiration of any Interest Period applicable to
Eurodollar Loans, Borrower has failed to select timely a new Interest Period to
be applicable to such Eurodollar Loans, Borrower shall be deemed to have elected
to convert such Eurodollar Loans into Eurodollar Loans having an Interest Period
of one month effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by Borrower, the Administrative Agent will promptly notify each Lender
of the details of any automatic conversion. All conversions and continuations
shall be made ratably according to the respective outstanding principal amounts
of the Revolving Loans with respect to which the notice was given held by each
Lender.
(e) If any Event of Default or payment Default is in existence at the
time of any proposed continuation of, or conversion into, any Eurodollar Loans
and the Administrative Agent has, or the Required Lenders have, determined in
its or their sole discretion not to permit such continuation or conversion and
have notified Borrower telephonically or in writing thereof, Borrower may not
elect to have a Revolving Loan converted into or continued as a Eurodollar Loan
and any outstanding Eurodollar Loans shall be automatically converted on the
last day of the current Interest Period applicable thereto into Base Rate Loans.
(f) Without in any way limiting the obligation of Borrower to confirm
in writing any notice it may give hereunder by telephone, the Administrative
Agent may act prior to receipt of written confirmation without liability upon
the basis of such telephonic notice believed by the Administrative Agent in good
faith to be from a Responsible Officer of Borrower (or a designee of such
Responsible Officer). In each such case Borrower hereby waives the right to
dispute the Administrative Agent's record of the terms of any such telephonic
notice.
(g) No Swing Line Loans may be converted to Eurodollar Loans.
SECTION 2.05. Special Provisions for Swing Line Loans.
(a) Lenders to Make Revolving Loans.
(i) The Swing Line Lender, at any time in its discretion, upon
written request to the Lenders through the Administrative Agent (with a
copy to Borrower), may require each Lender (including the Swing Line
Lender) to make a Revolving Loan, subject to the provisions of Section
2.0l(a), in an amount equal to such Lender's Revolving Loan Percentage
of the outstanding Swing Line Loans. The Swing Line Lender shall
deliver such request to the Administrative Agent prior to 12:00 noon
(New York City time) on the Business Day immediately preceding the date
(which
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shall be a Business Day) on which such Revolving Loans are to be made.
Promptly upon receipt of any such request, the Administrative Agent
shall give notice thereof to the Lenders. Each Lender shall make
available its Revolving Loan Percentage of such Revolving Loans to the
Administrative Agent by 12:00 noon (New York City time) on the
requested date for such Revolving Loans. The Administrative Agent shall
apply the proceeds of such Revolving Loans to prepay the Swing Line
Loans of the Swing Line Lender; provided, however, that the
Administrative Agent shall be obligated to make the proceeds of such
Revolving Loans available only to the extent received by it from the
Lenders. All Revolving Loans made pursuant to this Section 2.05(a)
shall be Base Rate Loans.
(ii) In the event the Administrative Agent advances proceeds
of any Revolving Loan to the Swing Line Lender and one or more of the
Lenders (other than the Swing Line Lender) fail to fund all or any
portion of such Revolving Loan immediately upon receipt of notice from
the Administrative Agent, then (A) such Lender shall pay directly to
the Administrative Agent the amount thereof by no later than 1:00 p.m.
(New York City time) on such date and interest shall accrue on such
Lender's obligation to make such payment, from such date until three
days thereafter, at a rate per annum equal to the Federal Funds Rate in
effect from time to time during such period, and after the expiration
of such three day period, at the Base Rate, and (B) if not paid by such
Lender, the Swing Line Lender will repay directly to the Administrative
Agent such amount as will equal the amount such other Lender(s) failed
to fund, together with interest at a rate per annum equal to the
Federal Funds Rate in effect from time to time during the period in
which such Lender failed to make such payments, whereupon the Swing
Line Loans will be reinstated pro rata.
(b) Participations in Swing Line Loans.
(i) If, at any time prior to the making of Revolving Loans
pursuant to Section 2.05 hereof, any Event of Default described in
clause (f) or (g) of Section 9.01 shall have occurred, each Lender, on
the date such Revolving Loan was to have been made or, if no request
for Revolving Loans had been made pursuant to Section 2.05(a)(i),
promptly upon request by the Swing Line Lender delivered to the
Administrative Agent, shall purchase an undivided participation
interest in all outstanding Swing Line Loans in an amount equal to its
Revolving Loan Percentage times the outstanding amount of such Swing
Line Loans. Each Lender (other than the Swing Line Lender) will
transfer immediately to the Administrative Agent for credit to the
Swing Line Lender, in immediately available funds, the amount of its
participation. The Swing Line Lender will deliver to such other Lender,
promptly following receipt of such funds, a Swing Line Loan
Participation Certificate, dated the date of receipt of
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such funds and in the amount of such Lender's participation if
requested to do so by such other Lender.
(ii) Upon (and only upon) receipt by the Administrative Agent
for the account of the Swing Line Lender of immediately available funds
from Borrower (i) as payment for a Swing Line Loan with respect to
which any Lender has paid the Administrative Agent for the account of
the Swing Line Lender for such Lender's participation in such Swing
Line Loan pursuant to Section 2.05(b)(i) or (ii) in payment of interest
thereon, the Administrative Agent will pay to each Lender which is not
a Defaulting Lender, in the same funds as those received by the
Administrative Agent for the account of the Swing Line Lender, the
amount of such Lender's Loan Percentage of such funds, and the Swing
Line Lender shall receive the amount of the Loan Percentage of such
funds of any Lender that did not so pay the Administrative Agent for
the account of the Swing Line Lender.
(c) Acknowledged Privity. Borrower expressly agrees that, in respect of
each Lender's funded participation interest in any Swing Line Loan, such Lender
shall be deemed to be in privity of contract with Borrower and have the same
rights and remedies against Borrower under the Loan Documents as if such funded
participation interest in such Swing Line Loan were a Revolving Loan.
(d) Obligation to Participate in Swing Line Loans Absolute. Each
Lender's obligation in accordance with this Agreement to make Revolving Loans or
purchase participation interests in Swing Line Loans, as contemplated by Section
2.05(b)(i), as a result of the making of a Swing Line Loan, shall be absolute
and unconditional and without recourse to the Swing Line Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender, 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 or Material Adverse Change; or (iii) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
SECTION 2.06. Voluntary Termination or Reduction of Revolving, Swing
Line and/or Special Facility Commitments. Borrower may, upon not less than three
Business Days' prior written notice to the Administrative Agent, terminate the
Revolving Commitments and/or the Swing Line Commitment and/or the Special
Facility Commitment, or permanently reduce the Revolving Commitments and/or the
Swing Line Commitment and/or the Special Facility Commitment by an aggregate
minimum amount of $1,000,000 or any multiple of $100,000 in excess thereof;
unless, after giving effect thereto and to any prepayments of Revolving Loans
made on the effective date thereof, the then-outstanding principal amount of the
Revolving Loans, Swing Line Loans and Special Facility Obligations would exceed,
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respectively, the amount of the Revolving Commitments, the Swing Line Commitment
and the Special Facility Commitment then in effect. Once reduced in accordance
with this Section, the Revolving Commitments and/or the Swing Line Commitment
and/or the Special Facility Commitment may not be increased. Any reduction of
the Revolving Commitments and/or the Fronting Lender's Special Facility
Commitment shall be applied to each Lender according to its Revolving Loan
Percentage. All accrued commitment fees to but not including the effective date
of any termination in full of all Revolving Commitments and/or the Swing Line
Commitment and/or the Special Facility Commitment shall be paid on the effective
date of such termination.
SECTION 2.07. Optional Prepayments. Subject to Section 4.04, Borrower
may, at any time or from time to time, upon prior irrevocable written notice to
the Administrative Agent by 11:00 a.m. (New York City time) one Business Day in
advance (or, in the case of Swing Line Loans, the same Business Day), prepay
Revolving Loans, Swing Line Loans or Special Facility Obligations, in whole or
in part, in minimum amounts of $500,000 or any multiple of $100,000 in excess
thereof. Such notice of prepayment shall specify the date and amount of such
prepayment, the Type(s) of Revolving Loans or types of Special Facility
Obligations to be prepaid; provided, however, that, at Borrower's option,
exercised in a writing to the Administrative Agent at least one Business Day
before any such prepayment is to be distributed, such prepayment shall not be
applied to any Revolving Loan of a Defaulting Lender, but shall be re-allocated
ratably to the Revolving Loans of the Non-Defaulting Lenders. The Administrative
Agent will promptly notify each Lender of its receipt of any such notice, and of
such Lender's Revolving Loan Percentage of such prepayment. If such notice is
given by Borrower, 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, in the case of Eurodollar Loans, accrued interest to each such
date on the amount prepaid and any amounts required pursuant to Section 4.04.
SECTION 2.08. Mandatory Prepayments of Revolving Loans and Reductions
of Commitments.
(a) Asset Dispositions. If Borrower or any Restricted Subsidiary shall
at any time make a Disposition (other than a Disposition permitted pursuant to
clause (a), (b) or (c) of Section 8.02), then (i) Borrower or such Restricted
Subsidiary may, within 360 days after the receipt by Borrower or such Restricted
Subsidiary of the Net Disposition Proceeds of such Disposition, (A) reinvest
(subject to Section 8.03) up to 100% of such Net Disposition Proceeds in the
businesses described in Section 7.13 (including, subject to the provisions of
clause (h) of Section 8.03, making an Acquisition in such businesses), unless at
the time of such reinvestment an Event of Default or payment Default has
occurred and is then continuing (except in the case where Borrower or such
Restricted Subsidiary is subject to a definitive agreement that has been duly
and fully executed at a time when no Event of Default or payment
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Default existed and pursuant to which it is obligated to use such Net
Disposition Proceeds for a purpose permitted by this Section 2.08(a)) or (B)
retain the amount of such Net Disposition Proceeds not so applied pending such
application, and (ii) to the extent such Net Disposition Proceeds are not so
applied during such 360-day period, the Revolving Commitments shall be
immediately reduced in accordance with Section 2.08(c) in an aggregate amount
equal to the portion of such Net Disposition Proceeds not so applied.
(b) Indebtedness Issuance. If Borrower shall issue Indebtedness under
clause (h) of Section 8.04 or, subject to the written consent of the Required
Lenders, if Borrower or any Restricted Subsidiary shall issue or incur
indebtedness for borrowed money or incur Capitalized Lease Liabilities not
otherwise permitted to be issued or incurred pursuant to Section 8.04, the
Revolving Commitments shall be immediately reduced in accordance with Section
2.08(c) by an amount equal to the Net Issuance Proceeds of such issuance or
incurrence.
(c) Mandatory Reduction of Commitments and Prepayments of Revolving
Loans. Any reductions in Revolving Commitments made pursuant to clauses (a) and
(b) of this Section 2.08 shall be made in the amounts so required in each case
as and when applicable so that at all times the Revolving Commitments are not
reduced below the amount of Special Facility Obligations then outstanding. All
such reductions shall be applied to the Lenders' Revolving Commitments pro rata.
The Revolving Commitments shall be automatically and permanently terminated in
their entirety on the Revolving Commitment Termination Date. Borrower shall
immediately prepay the outstanding Revolving Loans to the extent that the amount
thereof plus the Special Facility Obligations then outstanding then exceeds the
Revolving Commitments then in effect.
(d) General. Any prepayments pursuant to this Section 2.08 shall be
applied to Types of Loans as Borrower shall direct (and in the absence of any
such direction, shall be applied first to any Base Rate Loans then outstanding
and then to Eurodollar Loans with the shortest Interest Periods remaining).
Borrower shall pay, together with each prepayment under this Section 2.08,
accrued interest on the amount of Eurodollar Loans prepaid and any amounts
required pursuant to Section 4.04. At Borrower's option, exercised in a writing
to the Administrative Agent at least one Business Day before any such prepayment
is to be distributed, prepayments pursuant to this Section 2.08 shall not be
applied to any Revolving Loan of a Defaulting Lender, but shall be reallocated
ratably to the Revolving Loans of the Non-Defaulting Lenders.
(e) Interest Periods. In lieu of making any payment pursuant to this
Section 2.08 in respect of any Eurodollar Loan other than on the last day of the
Interest Period therefor, so long as no Default or Event of Default shall have
occurred and be continuing, Borrower at its option may deposit with the
Administrative Agent an amount equal to the amount of the Eurodollar Loan to be
prepaid and such Eurodollar Loan shall be repaid on the last day
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of the Interest Period therefor in the required amount (it being understood and
agreed that such deposit need not be made with respect to Eurodollar Loans
having Interest Periods that end within three months of the date of such
prepayment). Such deposit shall be held by the Administrative Agent in a
corporate time deposit account established on terms reasonably satisfactory to
the Administrative Agent, earning interest at the then-customary rate for
accounts of such type (any such deposit account, a "Collateral Account"). Such
deposit shall cash collateralize the Obligations; provided, however, that
Borrower may at any time direct that such deposit be applied to make the
applicable payment required pursuant to this Section 2.08, subject to the
provisions of Section 4.04.
(f) Telephonic Notice. Without in any way limiting the obligation of
Borrower to confirm in writing any notice it may give hereunder by telephone,
the Administrative Agent may act prior to receipt of written confirmation
without liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from a Responsible Officer of Borrower
(or a designee of such Responsible Officer). In each such case Borrower hereby
waives the right to dispute the Administrative Agent's record of the terms of
any such telephonic notice.
SECTION 2.09. Repayment.
(a) The Revolving Credit. Borrower shall repay to the Lenders on the
Revolving Commitment Termination Date the aggregate principal amount of
Revolving Loans outstanding on such date.
(b) The Swing Line Credit. Borrower shall repay to the Swing Line
Lender on the Revolving Commitment Termination Date the aggregate principal
amount of Swing Line Loans outstanding on such date.
SECTION 2.10. Interest.
(a) Rate. Each Revolving Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Eurodollar Rate or the Base Rate, as the case may be (and subject
to Borrower's right to convert to other Types of Revolving Loans under Section
2.04) plus the Applicable Margin.
(b) Payment Dates. Interest on each Revolving Loan (except for Swing
Line Loans made as a result of a drawing under a documentary Letter of Credit
and in contemplation of refinancing such Swing Line Loans with the proceeds of
Acceptances) shall be paid in arrears on each Interest Payment Date.
Interest shall also be paid on the date of any prepayment of Eurodollar Loans
under Section 2.07 or 2.08 for the portion of the Revolving Loans so prepaid and
upon payment (including
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prepayment) in full thereof and, at and after maturity (whether by acceleration
or otherwise) of a Revolving Loan, interest shall be paid on demand of the
Administrative Agent at the request or with the consent of the Required Lenders.
(c) Default Rate. Notwithstanding clause (a) of this Section, if any
amount of principal of or interest on any Revolving Loan is not paid in full
when due (whether at stated maturity, by acceleration, demand or otherwise),
Borrower agrees to pay interest on such unpaid principal or interest, from the
date such amount becomes due until the date such amount is paid in full, and
after as well as before any entry of judgment thereon to the extent permitted by
law, payable on demand, at a fluctuating rate per annum equal to the Base Rate
plus the Applicable Margin plus 2%.
(d) Maximum Rate. Anything herein to the contrary notwithstanding, the
obligations of Borrower to any Lender 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 such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Lender, and in such event Borrower shall pay such Lender interest at the highest
rate permitted by applicable law.
SECTION 2.11. Fees.
(a) Arrangement, Agency Fees. Borrower shall pay the fees as required
by the letter agreements (the "Fee Letters") among Borrower and the Agents dated
August 6, 1998 and between Borrower and the Administrative Agent dated as of
August 10, 1998.
(b) Commitment Fees. Borrower shall pay to the Administrative Agent for
the account of each Lender a commitment fee on the daily unused portion of such
Lender's Revolving Commitment, computed and payable on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon the daily
utilization for that quarter, at a rate per annum equal to the Applicable Margin
for commitment fees. Such commitment fee shall accrue from the Closing Date to
the Revolving Commitment Termination Date, with the final payment to be made in
any event on the Revolving Commitment Termination Date. The commitment fees
provided in this clause shall accrue at all times after the above-mentioned
commencement date, including at any time during which one or more conditions in
Article V are not met.
SECTION 2.12. Computation of Fees and Interest.
(a) All computations of interest for Eurodollar Loans and Base Rate
Loans (calculated at the Federal Funds Rate) shall be made on the basis of a
360-day year and actual
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days elapsed. All other computations (including for interest on Base Rate Loans
(calculated at other than the Federal Funds Rate), commitment fees and the fees
set forth in Section 3.08)) shall be made on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed. Interest and fees shall
accrue during each period during which interest or such fees are computed from
(and including) the first day thereof to (but excluding) the last day thereof.
(b) Each determination of an interest rate by the Administrative Agent
shall be conclusive and binding on Borrower and the Lenders in the absence of
clearly demonstrable error. The Administrative Agent will, at the request of
Borrower or any Lender, deliver to Borrower or such Lender, as the case may be,
a statement showing the quotations used by the Administrative Agent in
determining any interest rate and the resulting interest rate.
SECTION 2.13. Payments by Borrower.
(a) All payments to be made by Borrower shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by Borrower shall be made to the Administrative Agent for the account
of the Lenders at the Administrative Agent's Payment Office, and shall be made
in dollars and in immediately available funds, no later than 12:00 noon (New
York City time) on the date specified herein. The Administrative Agent will
promptly distribute to each Lender its Revolving Loan Percentage (or other
applicable share as expressly provided herein) of such payment in like funds as
received. Any payment received by the Administrative Agent later than 3:00 p.m.
(New York City time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following 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.
(c) Unless the Administrative Agent receives written notice from
Borrower prior to the date on which any payment is due to the Lenders that
Borrower will not make such payment in full as and when required, the
Administrative Agent may assume that Borrower has made such payment in full to
the Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrower has not made such
payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
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SECTION 2.14. Payments by the Lenders to the Administrative Agent.
(a) Unless the Administrative Agent receives written notice from a
Lender prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least one Business Day prior to the date of such Borrowing,
that such Lender will not make available as and when required hereunder to the
Administrative Agent for the account of Borrower the amount of that Lender's
Revolving Loan Percentage of the Borrowing, the Administrative Agent may assume
that each Lender has made such amount available to the Administrative Agent in
immediately available funds on the Borrowing Date and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrower on such date a corresponding amount. If and to the extent
any 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 Borrower such amount, that Lender shall on
the Business Day following such Borrowing Date make such amount available to the
Administrative Agent, together with interest at the Federal Funds Rate for each
day during such period. A notice of the Administrative Agent submitted to any
Lender with respect to amounts owing under this clause (a) shall be conclusive,
absent clearly demonstrable error. If such amount is so made available, such
payment to the Administrative Agent shall constitute such Lender's Revolving
Loan on the date of Borrowing for all purposes of this Agreement. If such amount
is not made available to the Administrative Agent on the Business Day following
the Borrowing Date, the Administrative Agent will notify Borrower of such
failure to fund and, upon demand by the Administrative Agent, Borrower shall
immediately pay such amount to the Administrative Agent for the Administrative
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Revolving Loans comprising such Borrowing.
(b) The failure of any lender to make any Revolving Loan on any
Borrowing Date shall not relieve any other Lender of any obligation hereunder to
make a Revolving Loan on such Borrowing Date, but no Lender shall be responsible
for the failure of any other Lender to make the Revolving Loan to be made by
such other Lender on any Borrowing Date.
SECTION 2.15. Sharing of Payments, etc. If, other than as expressly
provided elsewhere herein, any Lender shall obtain on account of the Revolving
Loans made by it any payment (whether voluntary, involuntary, through the
exercise of any right of set-off or otherwise) in excess of its ratable share
(or other share contemplated hereunder) of such Revolving Loans, such Lender
shall immediately (a) notify the Administrative Agent of such fact and (b)
purchase from the other Lenders such participations in the Revolving Loans made
by them as shall be necessary to cause such purchasing Lender to share the
excess payment pro rata 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
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be rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying
Lender's ratable share (according to the proportion of (i) the amount of such
paying Lender's required repayment to (ii) 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. Borrower agrees
that any lender so purchasing a participation from another Lender may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 11.10) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation. The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of clearly demonstrable
error) of participations purchased under this Section and will in each case
notify the Lenders following any such purchases or repayments.
ARTICLE III
LETTERS OF CREDIT AND ACCEPTANCES
SECTION 3.01. Letter of Credit and Acceptance Subfacilities.
(a) On the terms and conditions set forth herein (i) the Fronting
Lender agrees (A) from time to time on any Business Day during the period from
the Closing Date to the Revolving Commitment Termination Date to issue Letters
of Credit, or create Acceptances, or both, at the request of and for the account
of Borrower and the Restricted Subsidiaries, as Account Parties, and to amend or
renew Letters of Credit previously issued by it, in accordance with Sections
3.02(c) and 3.02(d), and (B) to honor drafts duly drawn under the Letters of
Credit and (ii) the Lenders severally agree irrevocably to participate in
Letters of Credit Issued and Acceptances created for the account of Account
Parties; provided, however, that the Fronting Lender shall not be obligated to
Issue or create, and no Lender shall be obligated to participate in, any Letter
of Credit or Acceptance, as the case may be, if as of the date of Issuance of
such Letter of Credit (an "Issuance Date") or the creation of such Acceptance (a
"Creation Date"), and after giving effect to such Issuance or creation, (1) the
aggregate amount of all Special Facility Obligations plus the aggregate
outstanding principal amount of all Revolving Loans plus the aggregate
outstanding principal amount of all outstanding Swing Line Loans exceeds the
combined Revolving Commitments, (2) the participation of any Lender in the
aggregate amount of all Special Facility Obligations plus the aggregate
outstanding principal amount of such Lender's Revolving Loans plus the aggregate
principal amount of such Lender's participations in all outstanding Swing Line
Loans exceeds such Lender's Revolving Commitment or (3) the aggregate amount of
all Special Facility Obligations exceeds the Special Facility Commitment. Within
the foregoing limits, and subject to the other terms and conditions hereof,
Borrower's ability to obtain Letters of Credit or Acceptances shall be fully
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revolving, and, accordingly, Borrower may, during the foregoing period, obtain
Letters of Credit to replace Letters of Credit which have expired or which have
been drawn upon and reimbursed or Acceptances which have matured and have been
reimbursed.
(b) The Fronting Lender is under no obligation to Issue any Letter of
Credit or create any Acceptance if:
(i) the Fronting Lender has received written notice from the
Administrative Agent or Borrower, on or prior to the Business Day prior
to the requested date of Issuance of such Letter of Credit or the
creation of such Letter of Acceptance, stating that a Default or Event
of Default has occurred and is continuing, unless and until such time
as the Fronting Lender shall have received a written notice of (x)
rescission of such notice from the party or parties originally
delivering such notice or (y) the waiver of such Default or Event of
Default in accordance with the provisions of Section 11.01;
(ii) the expiry date of any requested Letter of Credit is (A)
more than one year after the date of Issuance or (B) after the
Revolving Commitment Termination Date;
(iii) the maturity date of any requested Acceptance is (A)
less than 30 days or more than 180 days after the date of creation or
(B) after the Revolving Commitment Termination Date;
(iv) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance reasonably acceptable
to the Fronting Lender;
(v) any requested Acceptance is not in form and substance
reasonably acceptable to the Fronting Lender or does not meet the
requirements of the FRB;
(vi) a Lender Default known to the Fronting Lender exists,
unless the Fronting Lender has entered into arrangements reasonably
satisfactory to it and Borrower to eliminate the Fronting Lender's risk
with respect to the participation in Letters of Credit or Acceptances
by Defaulting Lenders, including cash collateralizing such Defaulting
Lender's Revolving Loan Percentage of Special Facility Obligations;
(vii) the Fronting Lender reasonably determines that for any
reason adequate and reasonable means do not exist for determining the
Acceptance Reference Rate; or
(viii) the applicable Account Party is not solvent (as such
term is defined in the Solvency Certificate).
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(c) Each letter of credit and acceptance set forth on Schedule C hereto
outstanding or unmatured, as the case may be, on the Closing Date shall be
deemed to have been issued or created, as the case may be, by the Fronting
Lender hereunder on the Closing Date.
SECTION 3.02. Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the irrevocable
submission by Borrower of a Notice of L/C Issuance/Amendment to the Fronting
Lender (with a copy sent by Borrower to the Administrative Agent) at least three
Business Days (or such shorter time as the Fronting Lender may agree in a
particular instance in its sole discretion) prior to the proposed date of
Issuance. Each such Notice of L/C Issuance/Amendment shall be by facsimile,
confirmed immediately in an original writing, and shall specify in form and
detail reasonably satisfactory to the Fronting 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; (vii) the name and address of the
respective Account Party; and (viii) such other matters as the Fronting Lender
may reasonably require.
(b) At least one Business Day prior to the Issuance of any Letter of
Credit, the Fronting Lender will confirm with the Administrative Agent (by
telephone or in writing) the availability of the Revolving Commitments with
respect to such Issuance. Unless the Fronting Lender has received notice from
the Administrative Agent on or before the Business Day immediately preceding the
date the Fronting Lender is to issue a requested Letter of Credit (A) directing
the Fronting Lender not to issue such Letter of Credit because such issuance is
not then permitted under Section 3.0l(a) as a result of the limitations set
forth in clauses (1) and (2) thereof or clause (i) of Section 3.0l(b) or (B)
that one or more conditions specified in Article V are not then satisfied, then,
subject to the terms and conditions hereof, the Fronting Lender shall, on the
requested date, issue a Letter of Credit for the account of Borrower in
accordance with the Fronting Lender's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and prior
to the Revolving Commitment Termination Date, the Fronting Lender will, upon the
written request of Borrower received by the Fronting Lender (with a copy sent by
Borrower to the Administrative Agent) at least three Business Days (or such
shorter time as the Fronting 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 facsimile, confirmed immediately in an original writing, made in the
form of a Notice of L/C Issuance/Amendment and shall specify in form and detail
reasonably satisfactory to the Fronting Lender: (i) the Letter of Credit to be
amended; (ii) the proposed date of
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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 the Fronting
Lender may reasonably require. The Fronting Lender shall be under no obligation
to amend any Letter of Credit if (A) the Fronting 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. The
Administrative Agent will promptly notify the Lenders of the receipt by it of
any Notice of L/C Issuance/Amendment.
(d) The Fronting Lender and the Lenders agree that, while a standby
Letter of Credit is outstanding and prior to the Revolving Commitment
Termination Date, at the option of the respective Account Party and upon the
written request of Borrower and the Account Party received by the Fronting
Lender (with a copy sent by the prospective Account Party to the Administrative
Agent) at least three Business Days (or such shorter time as the Fronting Lender
may agree in a particular instance in its sole discretion) prior to the proposed
date of notification of renewal, the Fronting Lender shall be entitled to
authorize the automatic renewal of any standby Letter of Credit issued by it.
Each such request for renewal of a standby Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the form of a Notice
of L/C Issuance/Amendment, and shall specify in form and detail reasonably
satisfactory to the Fronting Lender: (i) the standby Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of the standby Letter
of Credit (which shall be a Business Day); (iii) the revised expiry date of the
standby Letter of Credit; and (iv) such other matters as the Fronting Lender may
reasonably require. The Fronting Lender shall be under no obligation so to
renew, and shall not so renew any standby Letter of Credit if (A) the Fronting
Lender would have no obligation at such time to issue or amend such standby
Letter of Credit in its renewed form under the terms of this Agreement or (B)
the beneficiary of any such standby Letter of Credit does not accept the
proposed renewal of the standby Letter of Credit. If any outstanding standby
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Fronting Lender that such standby
Letter of Credit shall not be renewed, and if at the time of renewal the
Fronting Lender would be entitled to authorize the automatic renewal of such
standby Letter of Credit in accordance with this Section 3.02(d) upon the
request of respective Account Party but the Fronting Lender shall not have
received any Notice of L/C Issuance/Amendment from respective Account Party with
respect to such renewal or other written direction by Borrower with respect
thereto, the Fronting Lender shall nonetheless be permitted to allow such
standby Letter of Credit to renew, and Borrower and the Lenders hereby authorize
such renewal, and, accordingly, the Fronting Lender shall be deemed to have
received a Notice of L/C Issuance/Amendment from the respective Account Party
requesting such renewal.
(e) The Fronting Lender shall deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as
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necessary or appropriate, at any time and from time to time, in order to cause
the expiry date of such Letter of Credit to be a date not later than the
Revolving Commitment Termination Date.
(f) This Agreement shall control in the event of any conflict with any
Letter of Credit related document (other than any Letter of Credit).
(g) The Fronting Lender will also deliver to the Administrative Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising lender or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
(h) Notwithstanding anything to the contrary in this Article III,
Borrower and each other Account Party may make a request by using software
provided to them by the Fronting Lender when requesting that the Fronting Lender
Issue a Letter of Credit (a "Computerized Request") in lieu of making such
request in the form of a Notice of L/C Issuance/Amendment.
(i) Without in any way limiting the obligation of Borrower to confirm
in writing any notice it may give hereunder by telephone, the Administrative
Agent (and the Fronting Lender) may act prior to receipt of written confirmation
without liability upon the basis of such telephonic notice believed by the
Administrative Agent (and the Fronting Lender) in good faith to be from a
Responsible Officer of Borrower (or a designee of such Responsible Officer). In
each such case Borrower hereby waives the right to dispute the Administrative
Agent's (and the Fronting Lender's) record of the terms of any such telephonic
notice.
SECTION 3.03. Creation of Acceptances.
(a) All drafts presented by Borrower to the Fronting Lender for
acceptance by the Fronting Lender as Acceptances pursuant to this Agreement
shall be properly executed and drawn by Borrower. To facilitate the acceptance
of Acceptances hereunder, Borrower shall from time to time as required by the
Fronting Lender provide to the Fronting Lender an appropriate number of executed
drafts drawn in blank by Borrower in the form prescribed by the Fronting Lender.
Borrower may, at its option, execute any draft so presented by the facsimile
signature or signatures of any one or more designated signing officers of
Borrower, and the Fronting Lender is hereby authorized to accept or pay, as the
case may be, any draft of Borrower which purports to bear such facsimile
signature or signatures notwithstanding that any such individual has ceased to
be a designated signing officer of Borrower and any such draft or Acceptance
shall be as valid as if such individual were a designated signing officer of
Borrower at the date of issue of such Acceptance. Any such draft or Acceptance
may be dealt with by the Fronting Lender for all intents and purposes and shall
bind Borrower as if duly signed in the signing officer's own handwriting and
issued by Borrower. Without limiting the
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effect of the indemnity provided under Section 11.05 but in addition to such
provision, Borrower will and hereby does undertake to hold the Fronting Lender
harmless against, and to indemnify, and Borrower hereby does agree to indemnify,
the Fronting Lender from, all losses, costs, damages and expenses arising out of
the payment or negotiation of any such draft or Acceptance on which a facsimile
signature has been wrongly affixed, except to the extent caused by the gross
negligence or willful misconduct of the Fronting Lender. The Fronting Lender
shall not be liable for its failure to accept an Acceptance as required
hereunder if the cause of such failure is, in whole or in part, due to the
failure of Borrower to provide executed drafts to the Fronting Lender on a
timely basis. Without creating any obligation to effect such a purchase,
Acceptances may be purchased by the Fronting Lender and may be held by it for
its own account until maturity or sold by it at any time prior thereto in any
relevant market therefor in the United States or elsewhere, in the Fronting
Lender's sole discretion.
(b) On the terms and conditions set forth herein (including Section
5.02), Acceptances shall be created by the Fronting Lender on a pre-arranged
monthly date mutually agreed upon by Borrower, the Fronting Lender and the
Administrative Agent if a Swing Line Loan was made as a result of a drawing
under a documentary Letter of Credit and in contemplation of refinancing such
Swing Line Loan with the proceeds of such Acceptances. The aggregate face amount
of such Acceptances shall be an amount that when discounted at the then
prevailing Acceptance Reference Rate to a present value will exactly repay the
principal amount of such Swing Line Loan and all accrued but unpaid interest
thereon.
(c) This Agreement shall control in the event of any conflict with any
Acceptance related document (other than any Acceptance).
(d) The Fronting Lender will also deliver to the Administrative Agent,
concurrently or promptly following its creation of an Acceptance, a true and
complete copy of each such Acceptance.
(e) Any executed drafts to be used as Acceptances which are delivered
by Borrower to the Fronting Lender shall be held in safekeeping with the same
degree of care as if they were the negotiable instruments of the Fronting
Lender.
SECTION 3.04. Letter of Credit/Acceptance Participations, Drawings and
Reimbursements.
(a) Immediately upon (i) the Issuance of any Letter of Credit by the
Fronting Lender for an Account Party in accordance with Sections 3.01 and 3.02
or (ii) the creation of any Acceptance by the Fronting Lender for an Account
Party in accordance with Sections 3.01 and 3.03, each Lender shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the Fronting
Lender a participation in the Special Facility Obligations in
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respect of such Letter of Credit or Acceptance, including all interest and other
Obligations of the Account Party with respect thereto (other than fronting fees
and charges payable to the Fronting Lender in its capacity as such with respect
to Letters of Credit and Acceptances) and any security therefor and guaranty
pertaining thereto in an amount equal to the product of (x) the Revolving Loan
Percentage of such Lender times (y) the maximum amount of the Special Facility
Obligations in respect thereof. For purposes of Sections 2.01(e) and 3.01, each
Issuance of a Letter of Credit and each creation of an Acceptance shall be
deemed to utilize the Revolving Commitment of each Lender by an amount equal to
the amount of such participation.
(b) Upon receipt of a drawing on any Letter of Credit by the
beneficiary or transferee thereof, the Fronting Lender will promptly notify
the respective Account Party and, if not the Account Party, Borrower. The
respective Account Party agrees to reimburse the Fronting Lender, prior to
1:00 p.m. (New York City time), on each date that any amount is paid by the
Fronting Lender under any Letter of Credit (each such date, a "Reimbursement
Date"), in an amount equal to the amount so paid. The respective Account
Party agrees to pay the Fronting Lender, prior to 1:00 p.m. (New York City
time) on the maturity date of any Acceptance (also a "Reimbursement Date")
the full face amount of such Acceptance. In the event any such reimbursement
or payment is not made by 1:00 p.m. (New York City time) on a Reimbursement
Date for
(i) the full amount of any drawing under any Letter of Credit
(together with the fee, costs and charges described in Section 3.08(c)
relating thereto), the Fronting Lender will promptly notify the
Administrative Agent and the Administrative Agent will promptly notify
the Swing Line Lender thereof, and Borrower shall be deemed to have
requested that a Swing Line Loan be made by the Swing Line Lender on
such Reimbursement Date in the amount of such drawing (and such fees,
costs and charges) subject to the amount of the unutilized portion of
the Swing Line Commitment and the conditions set forth in Section 5.02;
or
(ii) the face amount of any matured Acceptance, the Fronting
Lender will promptly notify the Administrative Agent and the
Administrative Agent will promptly notify the Swing Line Lender
thereof, and Borrower shall be deemed to have requested that a Swing
Line Loan in the face amount of the matured Acceptances be made by the
Swing Line Lender on such Reimbursement Date under such matured
Acceptances subject to the amount of the unutilized portion of the
Swing Line Commitment and the conditions set forth in Section 5.02.
Any notice given by the Fronting Lender or the Administrative Agent pursuant to
this Section 3.04(b) may be oral if immediately confirmed in writing (including
by facsimile); provided,
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however, that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(c) The Swing Line Lender shall upon any notice pursuant to clause (i)
or (ii) of Section 3.04(b) make available to the Administrative Agent for the
account of the Fronting Lender an amount in immediately available funds equal to
the amount of the Swing Line Loan requested.
(d) With respect to any unreimbursed drawing under a Letter of Credit
or matured Acceptance because of Borrower's failure to satisfy the conditions
set forth in Section 5.02 or because the Swing Line Commitment does not have
sufficient availability, Borrower shall be deemed to have incurred from the
Fronting Lender a Special Facility Borrowing in the amount of such drawing or
matured Acceptance, which Special Facility Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin plus 2% per annum, and each
Lender shall make available to the Administrative Agent for the account of the
Fronting Lender an amount in immediately available funds equal to its Revolving
Loan Percentage of the amount of such drawing or the face amount of such matured
Acceptance, in the case of each Lender, whereupon the participating Lenders
shall each be deemed to have made payment in respect of its participation in
such Special Facility Borrowing and such payment shall constitute a Special
Facility Advance from such Lender in satisfaction of its participation
obligation under this Section 3.04. If any Lender so notified fails to make
available to the Administrative Agent for the account of the Fronting Lender the
amount of such Lender's Revolving Loan Percentage of the amount of such drawing
or the face amount of such Acceptance, as the case may be, by no later than 1:00
p.m. (New York City time) on the applicable Reimbursement Date, then interest
shall accrue on such Lender's obligation to make such payment, from such
Reimbursement Date until three days after such date, at a rate per annum equal
to the Federal Funds Rate in effect from time to time during such period, and
after the expiration of such three day period, at the Base Rate.
(e) The Swing Line Lender's obligation in accordance with this
Agreement to make Swing Line Loans, as contemplated by this Section 3.04, as a
result of a drawing under a Letter of Credit, and each Lender's obligation in
accordance with this Agreement to make Special Facility Advances, as
contemplated by this Section 3.04, as a result of a drawing under a Letter of
Credit or the maturity of an Acceptance, shall in each case be absolute and
unconditional and without recourse to the Fronting Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender or the Swing Line Lender
may have against the Fronting Lender, 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; or (iii) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing; provided,
however, that the
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Swing Line Lender's obligation to make Swing Line Loans under this Section 3.04
is subject to the conditions set forth in Section 5.02.
(f) In the event that any Acceptance created pursuant to this Agreement
shall not comply at the time of its creation with applicable regulations of the
FRB governing bankers' acceptances and shall not be eligible under such
regulations for purchase and for discount by the Federal Reserve Banks of the
United States, Borrower agrees that, upon receipt of notice from the
Administrative Agent on behalf of the Fronting Lender, it will forthwith pay the
Administrative Agent, for the account of the Fronting Lender, any costs incurred
by the Fronting Lender (including any costs resulting from a higher discount
rate, reserve requirement or additional premium liability to the Federal Deposit
Insurance Corporation or any successor agency of the United States exercising
substantially the same function) in connection with such Acceptance on account
of such noncompliance or ineligibility.
SECTION 3.05. Repayment of Participations.
(a) Upon (and only upon) receipt by the Administrative Agent for the
account of the Fronting Lender of immediately available funds from Borrower (i)
in reimbursement of any payment made by the Fronting Lender under a Letter of
Credit with respect to which any Lender has paid the Administrative Agent for
the account of the Fronting Lender for such Lender's participation in a drawing
of a Letter of Credit as a result of the making of a Special Facility Advance or
the maturity of an Acceptance pursuant to Section 3.04 or (ii) in payment of
interest thereon, the Administrative Agent will pay to each Lender that is not a
Defaulting Lender, in the same funds as those received by the Administrative
Agent for the account of the Fronting Lender, the amount of such Lender's
Revolving Loan Percentage of such funds, and the Fronting Lender shall receive
the amount of the Revolving Loan Percentage of such funds of any Lender that did
not so pay the Administrative Agent for the account of the Fronting Lender.
(b) If the Administrative Agent or the Fronting Lender is required at
any time to return to Borrower or to a trustee, receiver, liquidator, custodian
or any official in any Insolvency Proceeding, any portion of the payments made
by Borrower to the Administrative Agent for the account of the Fronting Lender
pursuant to Section 3.05(a) in reimbursement of a payment made under a drawing
of a Letter of Credit or the maturity of an Acceptance, as the case may be, or
interest or fee thereon, each Lender shall, on demand of the Administrative
Agent, forthwith forward to the Administrative Agent or the Fronting Lender the
amount of its Revolving Loan Percentage of any amounts so returned by the
Administrative Agent or the Fronting Lender plus interest thereon from the date
such demand is made to the date such amounts are resumed by such Lender to the
Administrative Agent or the Fronting Lender, at a rate per annum equal to the
Federal Funds Rate in effect from time to time for the first three days, and at
the Base Rate thereafter.
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SECTION 3.06. Role of the Fronting Lender.
(a) The Swing Line Lender, each Lender and Borrower agree that, in
paying any drawing under a Letter of Credit, the Fronting Lender shall not have
any responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) 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 Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Fronting 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 or
document relating to any Letter of Credit.
(c) 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;
provided, however, that this assumption is not intended to, and shall not,
preclude Borrower's pursuing such rights and remedies as it may have against the
beneficiary or transferee at law or under any other agreement. No Agent-Related
Person, nor any of the respective correspondents, participants or assignees of
the Fronting Lender, shall be liable or responsible for any of the matters
described in clauses (a) through (g) of Section 3.07; provided, however, that
anything in such clauses to the contrary notwithstanding, Borrower may have a
claim against the Fronting Lender, and the Fronting Lender may be liable to
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by Borrower which Borrower proves
were caused by the Fronting Lender's gross negligence or willful misconduct or
the Fronting Lender's willful failure to pay under any Letter of Credit 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) the Fronting Lender may
accept documents that appear on their face to be in order, without
responsibility for further investigation, and (ii) the Fronting 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.
SECTION 3.07. Obligations Absolute. The obligations of Borrower under
this Agreement to reimburse (or if Borrower is not the Account Party with
respect thereto, either to reimburse or to cause such Account Party to
reimburse) the Fronting Lender for a drawing under a Letter of Credit or the
maturity of an Acceptance, and to repay (or if Borrower is not the Account Party
with respect thereto, either to pay or to cause such Account Party to pay) any
Special Facility Borrowing and any Swing Line Loan or Revolving Loan
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made in connection with a drawing under a Letter of Credit or the maturity of an
Acceptance, and the obligation of the Swing Line Lender or each Lender, as the
case may be, to reimburse the Fronting Lender for any drawing on a Letter of
Credit or maturity of an Acceptance, shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including the following:
(a) any lack of validity or enforceability of this Agreement,
any Loan Document, any Letter of Credit, any Acceptance or of any
reimbursement agreement or other agreement between the Fronting Lender
and an Account Party;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of Borrower in
respect of any Letter of Credit, any Acceptance or any other amendment
or waiver of or any consent to departure from the provisions of this
Agreement or any other Loan Document;
(c) the existence of any claim, set-off, defense or other
right that 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), the Administrative
Agent, the Fronting Lender, the Swing Line Lender, any Lender or any
other Person, whether in connection with this Agreement, any Letter of
Credit, any Acceptance, the transactions contemplated hereby or by the
other Loan Documents or any unrelated transaction (including an
underlying transaction between Borrower and the beneficiary named in
any such Letter of Credit);
(d) any draft, demand, certificate or other document presented
under or in connection with any Letter of Credit or Acceptance, as the
case may be, 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;
(e) any payment by the Fronting Lender acting in good faith
under any Letter of Credit 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 Fronting Lender under any Letter
of Credit or Acceptance to any Person reasonably believed by it 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
or Acceptance, as the case may be, including any arising in connection
with any Insolvency Proceeding;
(f) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from
any guarantee or other obligation,
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for all or any of the obligations of Borrower in respect of any Letter
of Credit or Acceptance; or
(g) 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, Borrower or a guarantor;
provided, however, that, notwithstanding any provision of this Section 3.07 to
the contrary, neither Borrower, the Swing Line Lender nor any Lender shall be
obligated to reimburse the Fronting Lender for any wrongful payment made by the
Fronting Lender under any Letter of Credit as a result of acts or omissions
constituting gross negligence or willful misconduct on the part of the Fronting
Lender.
SECTION 3.08. Letter of Credit and Acceptance Fees.
(a) Borrower shall pay to the Administrative Agent for the account of
each of the Lenders a fee with respect to the Letters of Credit and Acceptances
at a rate per annum equal to the Applicable Margin for Revolving Loans comprised
of Eurodollar Loans minus 0.125%, calculated on the average daily maximum amount
available to be drawn under outstanding Letters of Credit and Acceptances
payable on a quarterly basis in arrears on each Interest Payment Date for Base
Rate Loans based upon Letters of Credit and Acceptances outstanding for that
quarter as calculated by the Administrative Agent. Such letter of credit fees
shall be due and payable quarterly in arrears on each Interest Payment Date for
Base Rate Loans during which Letters of Credit or Acceptances are outstanding,
commencing on the first such quarterly date to occur after the Closing Date,
through the Revolving Commitment Termination Date (or such later date upon which
the outstanding Letters of Credit or Acceptances, as the case may be, shall
expire), with the final payment to be made on the Revolving Commitment
Termination Date (or such later expiration date).
(b) Borrower shall pay to the Fronting Lender a fronting fee for each
Letter of Credit Issued by the Fronting Lender equal to 0.125% of the face
amount of such Letter of Credit. Such fronting fee shall be due and payable on
each date of Issuance of a Letter of Credit.
(c) Borrower shall pay to the Fronting Lender from time to time
promptly after demand the normal issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the Fronting Lender
relating to Letters of Credit and Acceptances as from time to time in effect.
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SECTION 3.09. Borrower's Guaranty of Special Facility Obligations of
the Restricted Subsidiaries. Borrower agrees as follows in respect of Special
Facility Obligations:
(a) Borrower hereby unconditionally and irrevocably guarantees
to the Lenders, the Fronting Lender and their respective successors,
endorsees, transferees and assigns, the prompt payment and complete
performance when due (whether at the stated maturity, by acceleration
or otherwise) of all indebtedness, obligations and liabilities of the
Restricted Subsidiaries to the Lenders or the Fronting Lender, whether
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred under, or arising out of, or in
connection with, the Special Facility Obligations, whether such
indebtedness, obligations and liabilities constitute principal,
interest, fees or expenses, or reimbursement obligations with respect
to any of the foregoing, and Borrower further agrees to pay any and all
expenses which may be paid or incurred by the Administrative Agent or
any Lender or the Fronting Lender in collecting any or all of such
Special Facility Obligations or enforcing any rights under this
Agreement or any documents or agreements executed in connection with or
relating to such Special Facility Obligations (collectively, the
"Guaranteed Obligations").
(b) The guaranty contained in this Section 3.09 shall be
construed as a continuing, absolute and unconditional guaranty of
payment without regard to (i) the validity, regularity or
enforceability of this Agreement, any other Loan Document, any of the
Guaranteed Obligations, or any other collateral security therefor or
guaranty thereof or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender or the
Fronting Lender, (ii) any defense, setoff or counterclaim (other than a
defense of payment or performance) which may at any time be available
to or be assured by Borrower or any of the Restricted Subsidiaries
against any Lender or the Fronting Lender, or (iii) any other
circumstance whatsoever (with or without notice to or knowledge of
Borrower or such Restricted Subsidiary) which constitutes, or might be
construed to constitute, an equitable or legal discharge of Borrower or
such Restricted Subsidiary for the Guaranteed Obligations or in any
other instance, and the obligations and liabilities of Borrower under
this Section 3.09, in an Insolvency Proceeding, shall not be
conditioned or contingent upon the pursuit by the Administrative Agent,
any Lender, the Fronting Lender or any other Person at any time of any
right or remedy against any of the Restricted Subsidiaries or against
any other Person which may be or become liable in respect of all or any
part of such obligations or against any collateral security or guaranty
therefor or right of offset with respect thereto.
(c) The guaranty contained in this Section 3.09 shall continue
to be effective, or be reinstated, as the case may be, if, at any time,
any payment, or any part thereof, of any of the Guaranteed Obligations
is rescinded or must otherwise be restored or
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returned by any Lender or the Fronting Lender in an Insolvency
Proceeding of any of the Restricted Subsidiaries, or upon or as a
result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, such Restricted Subsidiary or any
substantial part of its property, or otherwise, all as though such
payments had not been made.
(d) Borrower hereby expressly waives, until payment in full in
cash of all Guaranteed Obligations and termination of the Special
Facility Commitment, any rights which it may now have or hereafter
acquire against any of the Restricted Subsidiaries by way of
subrogation, reimbursement, contribution or setoff by virtue of any
payment made pursuant to this Section 3.09 or otherwise, and any claim,
right or remedy which Borrower may now have or hereafter acquire
against any of the Restricted Subsidiaries that arises from the
performance by Borrower of its obligations under this Section 3.09,
including, without limitation, any claim, right or remedy of the
Administrative Agent, the Fronting Lender or the Lenders against any
Account Party or any security which the Administrative Agent, the
Fronting Lender or the Lenders now have or hereafter acquire, whether
or not such claim, right or remedy arises in equity, under contract, by
statute, under color of law or otherwise. If any amount shall be paid
to Borrower on account of such subrogation, reimbursement, contribution
or setoff rights, such amount shall be held in trust for the benefit of
the Administrative Agent, the Fronting Lender and the Lenders and shall
forthwith be paid to the Administrative Agent to be credited and
applied upon the obligations, whether matured or unmatured, in
accordance with the terms of this Agreement or any of the other Loan
Documents or to be held by the Administrative Agent as collateral
security for any Guaranteed Obligations.
(e) Borrower shall remain obligated hereunder notwithstanding
that, without any reservation of rights against Borrower and without
notice to or further assent by Borrower, any demand for payment of any
of the Guaranteed Obligations made by any Lender or any such Fronting
Lender may be rescinded by such Person and any of the Guaranteed
Obligations or the liability of any other Person upon or for any part
thereof, or any collateral security or guaranty therefor or right of
offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative
Agent, any Lender or the Fronting Lender, and this Agreement and the
other Loan Documents and any other documents executed and delivered in
connection herewith relating to or evidencing any Guaranteed
Obligation, may be amended, modified, supplemented or terminated, in
whole or in part, in accordance with the terms thereof, as the
Administrative Agent and the Lenders may deem advisable from time to
time, and any collateral security, guaranty or right of offset at any
time held by the Administrative Agent, any Lender or the Fronting
Lender for the payment of the Guaranteed
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Obligations may be sold, exchanged, waived, surrendered or released.
Borrower waives any and all notice of the creation, renewal, extension
or accrual of any of the Guaranteed Obligations and notice of or proof
of reliance by the Administrative Agent, any Lender or the Fronting
Lender upon the guaranty in this Section 3.09, the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon this Section 3.09, and
all dealings between such Restricted Subsidiary, Borrower, the
Administrative Agent and the Lenders or the Fronting Lender shall
likewise be conclusively presumed to have been had or consummated in
reliance upon this Section 3.09. Borrower waives diligence,
presentment, protest, demand for payment and notice of default or
nonpayment to or upon such Restricted Subsidiary or Borrower with
respect to the Guaranteed Obligations.
SECTION 3.10. No Waiver with Respect to Acceptances. Borrower and each
of the Restricted Subsidiaries waives any defense to payment which might
otherwise exist if for any reason an Acceptance shall be held by any Lender in
its own right at the maturity thereof.
SECTION 3.11. Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce ("UCP") most recently at the time of issuance of any Letter of Credit
shall (unless otherwise expressly provided in the Letters of Credit) apply to
the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
SECTION 4.01. Taxes.
(a) Any and all payments by Borrower to each Lender or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for, any Taxes. In
addition, Borrower shall pay all Other Taxes to the relevant taxing authority or
other authority in accordance with applicable law.
(b) If 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:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Lender or the Administrative
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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) Borrower shall make such deductions and withholdings; and
(iii) Borrower shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law.
(c) Borrower agrees to indemnify and hold harmless each Lender and the
Administrative Agent for the full amount of (i) Taxes and (ii) Other Taxes that
are payable by such Lender or the Administrative Agent and any penalties,
interest, additions to tax, expenses or other similar liabilities arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 45 days after the date the Lender or the Administrative Agent makes
written demand therefor.
(d) Each Lender that is not incorporated or organized in or under the
laws of the United States of America or a state thereof (a "Non-U.S. Lender")
shall:
(i) deliver to Borrower and the Administrative Agent, prior to
the first day on which Borrower is required to make any payments
hereunder to such Lender, two copies of either United States Internal
Revenue Service Form 1001 or Form 4224 or, in the case of a Non-U.S.
Lender claiming exemption from U.S. Federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", a Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of Borrower
and is not a controlled foreign corporation related to Borrower (within
the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from,
or a reduced rate of, U.S. Federal withholding tax on payments by
Borrower under this Agreement;
(ii) deliver to Borrower and the Administrative Agent two
further copies of any such form of certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by Borrower
or the Administrative Agent;
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unless in any such case any change in treaty, law or regulation has occurred
prior to the date on which any such delivery would otherwise be required that
renders any such form inapplicable or would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender so
advises Borrower and the Administrative Agent. Each Non-U.S. Lender that shall
become a Participant pursuant to Section 11.08 or a Lender pursuant to Section
11.08 shall, upon the effectiveness of the related transfer, be required to
provide all the forms and statements required pursuant to this Section 4.01(d);
provided that in the case of a Participant such Participant shall furnish all
such required forms and statements to the Lender from which the related
participation shall have been purchased.
(e) Borrower shall not be required to indemnify any Non-U.S. Lender or
the Administrative Agent, or to pay any additional amounts to any Non-U.S.
Lender or the Administrative Agent, in respect of U.S. Federal withholding tax
pursuant to paragraph (a) above to the extent that (i) the obligation to
withhold amounts with respect to U.S. Federal withholding tax existed on the
date such Non-U.S. Lender became a party to this Agreement (or, in the case of a
Non-U.S. Participant, on the date such Participant became a Participant
hereunder) or as of the date such Non-U.S. Lender changes its applicable Lending
Office; provided, however, that this clause (i) shall not apply to the extent
that (x) the indemnity payments or additional amounts any Lender (or
Participant) would be entitled to receive (without regard to this clause (i)) do
not exceed the indemnity payment or additional amounts that the Person making
the assignment, participation, transfer or change in Lending Office would have
been entitled to receive in the absence of such assignment, participation,
transfer or change in Lending Office, or (y) such assignment, participation,
transfer or change in Lending Office had been requested by Borrower; (ii) the
obligation to pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Lender or Non-U.S. Participant to comply with the
provisions of paragraph (d) above; or (iii) any of the representations or
certifications made by a Non-U.S. Lender or Non-U.S. Participant pursuant to
paragraph (d) above are incorrect at the time a payment hereunder is made, other
than by reason of any change in treaty, law or regulation having effect after
the date such representations or certifications were made.
(f) If Borrower determines in good faith that a reasonable basis exists
for contesting any Taxes for which indemnification has been demanded hereunder,
the relevant Lender or the Administrative Agent, as applicable, shall cooperate
with Borrower in challenging such Taxes at Borrower's expense if so requested by
Borrower in writing. If any Lender or the Administrative Agent, as applicable,
receives a refund of a Tax for which a payment has been made by Borrower
pursuant to this Agreement, which refund in the good faith judgment of such
Lender or Administrative Agent, as the case may be, is attributable to such
payment made by Borrower, then the Lender or the Administrative Agent, as the
case may be, shall reimburse Borrower for such amount as the Lender or
Administrative Agent, as the case may be, determines to be the proportion of the
refund as will leave it, after such reimbursement, in no better or worse
position than it would have been in if the payment had not
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been required. Neither the Lenders nor the Administrative Agent shall be obliged
to disclose information regarding its tax affairs or computations to Borrower in
connection with this paragraph (f) or any other provision of this Section 4.01.
(g) Promptly after the date of any payment by Borrower of Taxes or
Other Taxes, Borrower shall furnish to each Lender or the Administrative Agent
the original or a certified copy of a receipt evidencing payment thereof, or
other evidence of payment satisfactory to such Lender or the Administrative
Agent.
SECTION 4.02. Illegality.
(a) If any Lender, including the Fronting Lender, determines that the
introduction after the Closing Date of any Requirement of Law, or any change in
any Requirement of Law after the Closing Date, or in the interpretation or
administration after the Closing Date of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender, including the Fronting Lender, or its
applicable Lending Office to make Eurodollar Loans or create Acceptances, as the
case may be, then, on written notice thereof by such Lender to Borrower through
the Administrative Agent, any obligation of such Lender to make Eurodollar Loans
or create Acceptances, as the case may be, shall be suspended until such Lender,
including the Fronting Lender, notifies the Administrative Agent and Borrower
that the circumstances giving rise to such determination no longer exist, which
notice each Lender, including the Fronting Lender, agrees to give promptly upon
such circumstances ceasing to exist.
(b) If any Lender, including the Fronting Lender, determines that it is
unlawful to maintain any Eurodollar Loan or Acceptance, as the case may be,
Borrower shall, upon its receipt of written notice of such fact and demand from
such Lender (with a copy to the Administrative Agent), prepay in full such
Eurodollar Loans or Acceptances, as the case may be, of such Lender then
outstanding, together with interest accrued thereon and amounts required under
Section 4.04, either on the last day of the Interest Period thereof, if such
Lender may lawfully continue to maintain such Eurodollar Loans or Acceptances,
as the case may be, to such day, or immediately, if such Lender may not lawfully
continue to maintain such Eurodollar Loan or Acceptance, as the case may be. If
Borrower is required to so prepay any Eurodollar Loan or Acceptance, as the case
may be, then concurrently with such prepayment, Borrower shall borrow from the
affected Lender, in the amount of such repayment, a Base Rate Loan.
(c) Each Lender, including the Fronting Lender, hereby agrees that if
such Lender's obligation to make Eurodollar Loans or Acceptances, as the case
may be, is suspended pursuant to clause (a) or if Borrower is required to prepay
such Lender's Eurodollar Loans or Acceptances, as the case may be, pursuant to
clause (b) then, in each case, upon the written request of Borrower, all
Revolving Loans or Acceptances, as the case may be, of such
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Lender that would, in the absence of clause (a), be made as Eurodollar Loans or
created as Acceptances, as the case may be, shall instead be made as or created
as, and any Eurodollar Loans or Acceptances, as the case may be, of such Lender
that shall have been converted into Base Rate Loans pursuant to clause (b) shall
be converted into, Revolving Loans accruing interest at a rate per annum equal
to the Federal Funds Rate most recently determined by the Administrative Agent
plus 0.125% plus the Applicable Margin then in effect for Eurodollar Loans.
SECTION 4.03. Increased Costs and Reduction of Return.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation (including FRB Regulation D) after
the Closing Date (other than changes with respect to Taxes) or (ii) the
compliance by any Lender with any guideline or order from any central bank or
other Governmental Authority after the Closing Date (whether or not having the
force of law), 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 Swing Line Loans or Special Facility Obligations, or, in the
case of the Fronting Lender, any increase in the cost to the Fronting Lender of
Issuing or agreeing to Issue any Letter of Credit or creating or agreeing to
create any Acceptance, or agreeing to make or making, funding or maintaining any
unpaid drawing under any Letter of Credit or any unpaid maturing of any
Acceptance, then Borrower shall be liable for, and shall from time to time,
promptly after receipt of written demand therefor (with a copy of such demand to
be sent to the Administrative Agent), accompanied by a written notice showing in
reasonable detail the basis for the calculation of any such increased costs
(which notice shall, absent clearly demonstrable error, be final and conclusive
and binding upon all parties hereto), pay to the Administrative Agent for the
account of such Lender, additional amounts as are sufficient to compensate such
Lender for such increased costs. References in this Section 4.03(a) to the
"Closing Date" shall, for purposes of each Letter of Credit or Acceptance listed
on Schedule C hereto, be deemed to refer to the date such Letter of Credit was
initially issued.
(b) If, after the Closing Date, (i) the introduction of any Capital
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii)
any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority, or by NAIC or
any other comparable agency charged with the interpretation or administration
thereof or (iv) compliance by any Lender (or its Lending Office) or any
corporation controlling any Lender with any Capital Adequacy Regulation, affects
or would affect the amount of capital required to be maintained by such Lender
or any corporation controlling such Lender and (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy and
such Lender's desired return on capital) the amount of such capital is increased
as a consequence of its Commitment, loans, credits, participation interests or
obligations under this Agreement, then, upon demand of such Lender to
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Borrower through the Administrative Agent, accompanied by a written notice
showing in reasonable detail the basis for calculation of any such amounts,
Borrower shall pay to such Lender, from time to time promptly after receipt of
such demand and notice as specified by such Lender, additional amounts
sufficient to compensate such Lender for such increase.
SECTION 4.04. Funding Losses. If (a) any payment of principal of any
Eurodollar Loan is made by Borrower to or for the account of a Lender or is
otherwise received by a Lender pursuant to Section 4.09 other than on the last
day of the Interest Period for such Eurodollar Loan, as a result of a payment or
conversion pursuant to Section 2.04, 2.06, 2.07, 2.08, 2.09, 4.02 or 4.03, as a
result of acceleration of the maturity of the Revolving Loans pursuant to
Article IX or for any other reason, or if any prepayment of Eurodollar Loans is
not made on any date specified in a notice of prepayment given by Borrower or if
any payment of Eurodollar Loans is not made when due, (b) if any Borrowing of
Eurodollar Loans is not made as a result of a withdrawn Notice of Borrowing or
for any other reason (other than a default by any Lender or the Administrative
Agent), (c) if any Eurodollar Loan or Base Rate Loan is not converted as a
result of a withdrawn Notice of Conversion/Continuation or for any other reason
(other than a default by any Lender or the Administrative Agent), or (d) if any
Eurodollar Loan is not continued as a result of a withdrawn Notice of
Conversion/Continuation or for any other reason (other than a default by any
Lender or the Administrative Agent), Borrower shall, after receipt of a written
request by such Lender (which request shall set forth in reasonable detail the
basis for requesting such amount), pay to the Administrative Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that such Lender may reasonably incur as a
result of such payment, failure to convert or failure to continue, including any
loss, cost or expense (excluding loss of anticipated profits) actually incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by any Lender to fund or maintain such Eurodollar Loan.
SECTION 4.05. Inability to Determine Rates. If the Required Lenders
reasonably determine that for any reason adequate and reasonable means do not
exist for determining the Eurodollar Rate for any requested Interest Period with
respect to a proposed Eurodollar Loan, or that the Eurodollar Rate applicable
pursuant to Section 2.10(a) for any requested Interest Period with respect to a
proposed Eurodollar Loan does not adequately and fairly reflect the cost to the
Lenders of funding such Revolving Loan, the Administrative Agent will promptly
so notify Borrower and each Lender. Thereafter, the obligation of the Lenders to
make or maintain Eurodollar Loans hereunder shall be suspended until the
Administrative Agent upon the instruction of the Required Lenders revokes such
notice in writing, which Lenders constituting the Required Lenders shall do
promptly upon such circumstances ceasing to exist. Upon receipt of such notice,
Borrower may revoke any Notice of Borrowing or Notice of Conversion/Continuation
then submitted by it. If Borrower does not revoke such Notice, the Lenders shall
make, convert or continue the Revolving Loans, as
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proposed by Borrower, in the amount specified in the applicable notice submitted
by Borrower, but such Revolving Loans shall be made, converted or continued as
Base Rate Loans instead of Eurodollar Loans.
SECTION 4.06. Notice from Lenders. Any Lender claiming reimbursement or
compensation under this Article IV shall deliver to Borrower (with a copy to the
Administrative Agent) a notice setting forth in reasonable detail the amount
payable to the Lender hereunder and the basis therefor and such notice shall be
conclusive and binding on Borrower in the absence of clearly demonstrable error.
SECTION 4.07. Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 4.01(b),
4.01(c), 4.02 or 4.03 with respect to such Lender, it will, if requested by
Borrower, use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another Lending Office for any Revolving Loans
affected by such event or take other action; provided, however, that such Lender
and its Lending Office suffer no economic, legal or regulatory disadvantage,
with the object of avoiding the consequence of the event giving rise to the
operation of any such Section. Nothing in this Section 4.07 shall affect or
postpone any of the Obligations of Borrower or the right of any Lender provided
in Section 4.01(b), 4.01(c), 4.02 or 4.03.
SECTION 4.08. Notice of Certain Costs. Notwithstanding anything in this
Agreement to the contrary, to the extent any notice or demand required by
Section 4.01, 4.02, 4.03 or 4.04 is given by any Lender more than 180 days after
such Lender has knowledge of the occurrence of the event giving rise to the
additional cost, reduction in amounts, loss, tax or other additional amounts
described in such Section, such Lender shall not be entitled to compensation
under such Section 4.01, 4.02, 4.03 or 4.04, as the case may be, for any such
amount incurred or accruing prior to the giving of such notice or demand to
Borrower.
SECTION 4.09. Replacement of Lenders. If (a) Borrower receives notice
from any Lender requesting increased costs or additional amounts under Section
4.01 or 4.03, (b) any Lender is affected in the manner described in Section 4.02
or (c) a Lender becomes a Defaulting Lender, then, in each case, Borrower shall
have the right, so long as no Event of Default shall have occurred and be
continuing and unless, in the case of clause (a), such Lender has removed or
cured the conditions which resulted in the obligation to pay such increased
costs or additional amounts or agreed to waive and otherwise forego any right it
may have to any payments provided for under Sections 4.01 or 4.03 in respect of
such conditions, to replace in its entirety such Lender (the "Replaced Lender"),
upon prior written notice to the Administrative Agent and such Replaced Lender,
with one or more other Eligible Assignee(s) (collectively, the "Replacement
Lender") acceptable to the Administrative Agent and the Fronting Lender (which
acceptance, in each case, shall not be unreasonably withheld); provided,
however, that, at the time of any replacement pursuant to this Section 4.09, the
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Replaced Lender and the Replacement Lender shall enter into (each Replaced
Lender hereby unconditionally agreeing to enter into) one or more Assignment and
Acceptances (appropriately completed), pursuant to which (i) the Replacement
Lender shall acquire all of the Commitments and outstanding Revolving Loans of,
and participations in Swing Line Loans and Special Facility Obligations of, the
Replaced Lender and, in connection therewith, shall pay (x) to the Replaced
Lender in respect thereof an amount equal to the sum of (A) an amount equal to
the principal of, and all accrued but unpaid interest on, all outstanding
Revolving Loans of the Replaced Lender and (B) an amount equal to all accrued
but theretofore unpaid fees owing to the Replaced Lender pursuant to Section 2.1
l and (y) to the Fronting Lender, an amount equal to any portion of the Replaced
Lender's funding of an unpaid drawing under a Letter of Credit or an unpaid
maturing of an Acceptance as to which the Replaced Lender is then in default;
and (ii) Borrower shall pay to the Replaced Lender any other amounts payable to
the Replaced Lender under this Agreement (including amounts payable under
Sections 3.08, 4.01, 4.02, 4.03 and 4.04 which have accrued to the date of such
replacement). Upon the execution of the Assignment and Acceptance(s), the
payment of the amounts referred to in the preceding sentence and, if so
requested by the Replacement Lender, delivery to the Replacement Lender of the
applicable Notes executed by Borrower, the Replacement Lender shall
automatically become a Lender hereunder and the Replaced Lender shall cease to
constitute a Lender hereunder, except with respect to indemnification provisions
under this Agreement, which shall survive as to such Replaced Lender. It is
understood and agreed that if any Replaced Lender shall fail to enter into an
Assignment and Acceptance in accordance with the foregoing, it shall be deemed
to have entered into such an Assignment and Acceptance.
SECTION 4.10. Survival. The agreements and obligations of Borrower in
this Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions of Initial Credit Extensions. The obligation
of each Lender to make its initial Revolving Loan and the obligation of the
Fronting Lender to Issue the initial Letter of Credit or create the initial
Acceptance hereunder is subject to the fulfillment of the following conditions
precedent to the satisfaction of the Agents (all documents to be provided in
sufficient quantity so that each Lender may receive a copy):
(a) Credit Agreement. The Agents shall have received full counterparts
of this Agreement, duly executed by each party hereto.
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(b) Resolutions; Incumbency. The Agents shall have received (i) copies
of the resolutions of the board of directors of Borrower authorizing the
execution, delivery and performance of this Agreement, each other Loan Document
to be delivered by Borrower and the transactions contemplated hereby and
thereby, certified as of the Closing Date or a recent date prior thereto by the
Secretary or an Assistant Secretary of Borrower, together with a certificate of
the Secretary or Assistant Secretary of Borrower dated the Closing Date,
certifying the names and true signatures of the officers of Borrower authorized
to execute, deliver and perform, as applicable, this Agreement, and all other
Loan Documents to be delivered by it hereunder; and (ii) copies of the
resolutions of the board of directors of each of the Guarantors authorizing the
delivery, execution and performance by such Guarantor of the Guaranty, certified
as of the Closing Date by the Secretary or an Assistant Secretary of such
Guarantor, together with a certificate of the Secretary or Assistant Secretary
of such Guarantor dated the Closing Date or a recent date prior thereto,
certifying the names and true signatures of the officers of such Guarantor
authorized to execute, deliver and perform the Guaranty.
(c) Organization Documents; Good Standing. The Agents shall have
received each of the following documents:
(i) the articles or certificate of incorporation and the
bylaws of each of Borrower, each Material Subsidiary and each
Guarantor, in each case, as in effect on the Closing Date, certified by
the Secretary or Assistant Secretary of such Person as of the Closing
Date; and
(ii) good standing certificates for each of Borrower, each
Material Subsidiary and each Guarantor from the Secretary of State (or
similar, applicable Governmental Authority) of its state of
incorporation and each state where such entity is qualified to do
business as a foreign corporation as of a recent date.
(d) Legal Opinions. The Agents shall have received a favorable legal
opinion of Simpson Thacher & Bartlett, special counsel to the Obligors,
addressed to the Agents and the Lenders and dated the Closing Date, in
substantially the form of Exhibit G.
(e) Payment of Fees and Expenses. The Agents shall have received
evidence of payment by Borrower of all accrued and unpaid fees, costs and
expenses to the extent then due and payable under this Agreement, the Commitment
Letter or the Fee Letter on the Closing Date, together with all reasonable and
documented legal costs and expenses of the Agents to the extent invoiced prior
to or on the Closing Date, including any such costs, fees and expenses arising
under or referenced in Sections 2.11 and 11.04.
(f) Guaranty. The Agents shall have received the Guaranty, duly
executed by each Guarantor.
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(g) Pledge Agreement; Security Agreement. The Agents shall have
received the Pledge Agreement, duly executed by Borrower, together with all
certificates and instruments representing the collateral pledged thereunder and
undated stock transfer powers executed in blank with respect thereto. The Agents
shall have received the Security Agreement, duly executed by Borrower and each
Domestic Subsidiary, together with Uniform Commercial Code financing statements
(form UCC-1) executed and delivered by Borrower and such Subsidiaries, as the
case may be, as the debtor and the Administrative Agent as the secured party, or
other similar instruments or documents, in proper form for filing under the
Uniform Commercial Code of all jurisdictions as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable to perfect the
security interest of the Administrative Agent pursuant to the Security
Agreement.
(h) Consummation of Stock Acquisitions and the Preferred Stock
Investment. There shall have been consummated (or contemporaneously herewith
will be consummated) the Stock Acquisitions and the Preferred Stock Investment
and the other transactions contemplated by the Stock Purchase Agreements in
accordance with applicable law and pursuant to the Stock Purchase Agreements,
which Stock Purchase Agreements shall not have been amended nor shall any
provision thereof have been waived by any party thereto, in each case unless
such amendment or waiver is not adverse in any material respect to the interests
of the Lenders, and the Stock Purchase Agreements shall have been approved by
the Board of Directors of Borrower (which approval shall not have been rescinded
or withdrawn) such that KKR and its affiliates, along with management and
Abarco, own 100% of the capital stock of Borrower.
(i) Equity Structure. The KKR Stock Acquisition shall have closed for
$25.5 million, and the Abarco Stock Acquisition shall have closed for $3.3
million.
(j) Preferred Stock Investment. Borrower shall have received at least
$40.0 million from the issuance of new Preferred Stock.
(k) Note Issuance. Borrower shall have received at least $110.0 million
of gross proceeds from the issuance of the Senior Notes.
(l) Other Indebtedness. All Indebtedness identified in Schedule
5.01(l), together with all interest, all prepayment premiums and all other
amounts due and payable with respect thereto shall have been paid in full, all
letters of credit constituting such Indebtedness shall have been (or
contemporaneously therewith shall be) terminated, replaced or backstopped and
all commitments in respect of such Indebtedness shall have been terminated. All
guarantees and Liens securing payment of any such Indebtedness shall have been
(or contemporaneously therewith shall be) released and the Administrative Agent
shall have received all Uniform Commercial Code Form UCC-3 termination
statements and other instruments as may be suitable or appropriate in connection
therewith. After giving effect to the Transactions and
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the other transactions contemplated hereby to occur on or prior to the Closing
Date, Borrower and its Subsidiaries shall have outstanding no Indebtedness other
than (a) Indebtedness under this Agreement, (b) the Senior Notes and (c) other
Indebtedness existing on the Closing Date and permitted to be outstanding under
Section 8.04 (other than clauses (h), (i), (j) and (l) thereof). After giving
effect to the consummation of the Transactions, no more than $15.0 million in
Revolving Loans shall have been made under this Agreement.
(m) No Material Adverse Change. No material adverse change shall have
occurred in the condition, operations, assets, business, properties, or, as of
the Closing Date, prospects of Borrower and its Subsidiaries, taken as a whole,
since June 30, 1998, except as disclosed in writing to the Agents and the
Lenders prior to the date of this Agreement.
(n) No Litigation. There shall have been no material litigation or
administrative proceedings that would reasonably be expected to have a material
adverse effect on (i) the business, assets, operations, properties, financial
condition or prospects of Borrower and its Subsidiaries in each case, taken as a
whole, or (ii) the ability of the parties to consummate the Transactions.
(o) Financial Statements; Projections. The Agents and the Lenders shall
have received (i) unaudited consolidated financial statements for Borrower and
its Subsidiaries as of June 30, 1998, (ii) a pro forma consolidated balance
sheet showing appropriate adjustments (the "Pro Forma Balance Sheet") of
Borrower and its Subsidiaries after giving effect to the Transactions and (iii)
projections for Borrower and its Subsidiaries for four fiscal quarters after the
Closing Date, and for five years thereafter (together, the "Projections").
(p) Solvency. The Agents shall have received (i) a written opinion of
Valuation Research Corporation, addressed to the Agents and the Lenders and
dated the Closing Date, as to the solvency of Borrower and its Subsidiaries
taken as a whole, after giving effect to the incurrence of the Indebtedness
contemplated by this Agreement and the effecting of the Transactions and the
other transactions contemplated by the Stock Purchase Agreements and (ii) a
Solvency Certificate, executed and delivered by the chief financial officer of
Borrower and dated the Closing Date.
(q) Insurance Certificate. The Agents shall have received a certificate
of Borrower setting forth all of Borrower's and the Restricted Subsidiaries'
material insurance policies, which policies shall be certified to satisfy the
requirements of Section 7.06 and the requirements of the Security Agreement.
(r) Transition Services Agreement. The Agents shall have received an
executed copy of the Transition Services Agreement, which shall be in full force
and effect.
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(s) Approvals. All necessary material governmental, shareholders' and
third-party approvals in connection with the Transactions and the other
transactions contemplated by the Stock Purchase Agreements, the execution,
delivery and performance of this Agreement and the other Loan Documents, the
execution, delivery and performance of the Senior Indenture and the Senior Notes
and the execution, delivery and performance of all equity financing documents
relating to the Transactions and the other transactions contemplated by the
Stock Purchase Agreements shall have been duly obtained and all applicable
waiting periods shall have expired without, in all such cases, any action being
taken by any competent authority that restrains, prevents or imposes materially
adverse conditions or material increased costs upon the consummation of the
Transactions and the other transactions contemplated by the Stock Purchase
Agreements.
(t) Officers' Certificate. Each of the following statements shall be
true and correct on and as of the Closing Date (and the Agents shall have
received a certificate signed by a Responsible Officer of Borrower, dated as of
the Closing Date, to such effect):
(i) after giving effect to the Transactions, the
representations and warranties contained in Article VI and in each of
the other Loan Documents 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 refer to an
earlier date, in which case they shall be true and correct in all
material respects as of such earlier date);
(ii) no Default or Event of Default exists or would result
from the initial Credit Extension, the consummation of the Transactions
and the other transactions contemplated by the Stock Purchase
Agreements or from the grant or perfection of the Lien of the
Administrative Agent and the Lenders on the collateral security
provided under the Loan Documents;
(iii) no Material Adverse Change has occurred since June 30,
1998 and no material adverse change has occurred since June 30, 1998
with respect to the business, assets, operations, results of
operations, condition (financial or otherwise) or prospects of Borrower
or Borrower and its Subsidiaries, taken as a whole except as disclosed
in writing prior to the date of this Agreement;
(iv) neither Borrower nor any of its Subsidiaries is subject
to any material litigation or governmental proceeding with respect to
the Transactions and other transactions contemplated by the Stock
Purchase Agreements and no injunction or restraining order exists with
respect to the Transactions and such transactions; and
(v) the conditions set forth in clauses (h), (i), (j), (k),
(l), (m), (n) and (s) have been satisfied.
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Attached to such certificate shall be true and complete (as certified in such
certificate) copies of the Stock Purchase Agreements, the Senior Indenture and
the certificate of designation for the Preferred Stock, which certificate shall
specify that none of the foregoing documents have been amended or otherwise
modified except as set forth in such certificate.
SECTION 5.02. Conditions to All Credit Extensions. The obligation of
each Lender to make any Revolving Loan to be made by it (including its initial
Revolving Loan), including the obligation of the Swing Line Lender to make any
Swing Line Loan, and the obligation of the Fronting Lender to Issue any Letter
of Credit (including the initial Letter of Credit) or create any Acceptance
(including the initial Acceptance), is subject to the satisfaction of the
following conditions precedent on the relevant Credit Extension Date:
(a) Notice of Credit Extension. The Administrative Agent shall have
received (with, in the case of the initial Revolving Loan only, a copy for each
Lender) a Notice of Borrowing or, in the case of any Issuance of any Letter of
Credit, the Fronting Lender and the Administrative Agent shall have received a
Notice of L/C Issuance/Amendment, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The representations
and warranties in Article VI hereof and in the Loan Documents shall be true and
correct in all material respects on and as of such Credit Extension Date with
the same effect as if made on and as of such Credit Extension Date (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); and
(c) No Existing Default. No Default or Event of Default shall exist or
shall result from such Credit Extension.
Each Notice of Borrowing and Notice of L/C Issuance/Amendment (or
Computerized Request) submitted by Borrower hereunder shall constitute a
representation and warranty by Borrower hereunder, as of the date of each such
notice and as of each Credit Extension Date, that the conditions in this Section
5.02 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to each Agent and each Lender that:
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SECTION 6.01. Corporate Existence and Power. Borrower, each Obligor and
each Material Subsidiary:
(a) is a corporation or other business entity duly organized or formed,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or formation;
(b) has the power and authority to own its assets, carry on its
business and to execute, deliver and perform its obligations under this
Agreement and the other Loan Documents to which it is a party; and
(c) is duly qualified as a foreign corporation or other business entity
and is licensed and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification or license,
except, in the case of clauses (a) and (b) above, with respect to Material
Subsidiaries, and, in the case of clause (c) above, with respect to Borrower and
its Material Subsidiaries, to the extent that the failure of which could not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.02. Corporate Authorization; No Contravention; Binding
Effect. The execution, delivery and performance by Borrower of this Agreement
and each other Loan Document to which Borrower is a party, the execution,
delivery and performance by each other Obligor of each Loan Document to which it
is a party, the granting of the Liens contemplated by the Pledge Agreement and
as of the Closing Date the consummation of the Transactions, have in each case
been duly authorized by all necessary corporate or other action, and do not and
will not:
(a) contravene the terms of any of Borrower's or such other Obligor's
Organization Documents;
(b) conflict with or result in any default, breach or contravention of,
or the creation of any Lien under, any document evidencing any material
Contractual Obligation to which Borrower, any Material Subsidiary or any
Obligor is a party or any material order, injunction, writ or decree of any
Governmental Authority to which Borrower, any Material Subsidiary, any Obligor
or any of their respective material properties is subject; or
(c) violate any material Requirement of Law applicable to Borrower, any
Material Subsidiary or any Obligor or any of their respective material
properties.
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This Agreement has been duly executed and delivered by Borrower and this
Agreement and each other Loan Document to which Borrower or any other Obligor is
a party constitute the legal, valid and binding obligations of Borrower or such
Obligor, as the case may be, enforceable against Borrower or such Obligor, as
the case may be, in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally or by general
equitable principles relating to enforceability.
SECTION 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, Borrower or any
other Obligor of this Agreement, any other Loan Document to which Borrower or
any such Obligor is a party, the granting of the Liens contemplated by the
Pledge Agreement or as of the Closing Date, the consummation of the
Transactions, except (a) for any thereof which have been obtained and are in
full force and effect, (b) as such performance or enforcement may be subject to
the exceptions set forth in Schedule 6.03 hereto and (c) as of the Closing Date
with respect to the consummation of the Transactions, any of the foregoing the
failure to obtain or make could not reasonably be expected to have a Material
Adverse Effect.
SECTION 6.04. Litigation. Except as set forth on Schedule 6.04 hereto,
there are no actions, suits or proceedings pending or, to the knowledge of
Borrower, threatened, with respect to Borrower or any Restricted Subsidiary (i)
that have, or could reasonably be expected to have, a Material Adverse Effect or
(ii) that have, or could reasonably be expected to have, a material adverse
effect on the rights and remedies of the Lenders taken as a whole or on the
ability of Borrower and the other Obligors to perform their material obligations
under the Loan Documents taken as a whole.
SECTION 6.05. ERISA Compliance. Except as specifically disclosed in
Schedule 6.05:
(a) Each Plan is in compliance in all material respects with
the terms thereof and the applicable provisions of ERISA, the Code and
other federal or state law except to the extent that failure to comply
would not result, individually or in the aggregate, in an amount of
liability that could reasonably be expected to have a Material Adverse
Effect. Borrower and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, except to
the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.
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(b) There are no pending or, to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Pension Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability in an
amount which could reasonably be expected to have a Material Adverse
Effect if such Pension Plan were then terminated; and (iii) neither
Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA that could
reasonably be expected to have a Material Adverse Effect.
SECTION 6.06. Regulatory Matters. Neither the making of any Credit
Extension hereunder, nor the use of any proceeds thereof, will violate the
provisions of Regulation T, U or X of the FRB. Borrower is not an "Investment
Company" within the meaning of the Investment Company Act of 1940.
SECTION 6.07. Title to Properties. Borrower and each Restricted
Subsidiary has good title to, or leasehold interests in, all property necessary
for the conduct of their respective businesses free and clear of all Liens
(other than any Liens permitted by this Agreement), except where the failure to
have such good title or leasehold interests could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 6.08. Taxes. Borrower, the Restricted Subsidiaries and all
other corporations with whom Borrower or any Restricted Subsidiary joins in the
filing of a consolidated return have filed all Federal income tax returns and
other material tax returns and reports, domestic and foreign, required to be
filed, and have paid all material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those not yet delinquent or which are
being contested in good faith. Borrower, each of the Restricted Subsidiaries and
each such other corporation with whom Borrower or any Restricted Subsidiary
joins in the filing of a consolidated return have paid, or have provided
adequate reserves (in the good faith judgment of the management of Borrower) in
accordance with GAAP for the payment of, all such material taxes, assessments,
fees and charges relating to all prior taxable years and the current taxable
year of Borrower, each of the Restricted Subsidiaries and each such other
corporation with whom Borrower or any Restricted Subsidiary joins in the filing
of a consolidated return. To the best knowledge of Borrower, there is no
proposed tax assessment against Borrower, any Restricted Subsidiary or any such
other corporation with whom Borrower or any Restricted Subsidiary joins in the
filing of a consolidated return that could reasonably be expected to have a
Material Adverse Effect.
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SECTION 6.09. Financial Condition.
(a) The audited consolidated balance sheet of Borrower and its
Subsidiaries as of September 30, 1997, and the related consolidated statements
of earnings and cash flows for the Fiscal Year ended on such date and the
unaudited consolidated balance sheet of Borrower and its Subsidiaries as of June
30, 1998, and the related consolidated statements of earnings and cash flows for
the nine months ended on such date: (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; and (ii) fairly present in all material respects the
financial condition of Borrower and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby.
(b) Since June 30, 1998, except as may have been disclosed in writing
to the Lenders prior to the Closing Date, there has been no Material Adverse
Change.
SECTION 6.10. Trademarks, Copyrights, Patents and Licenses, etc. Each
of Borrower and the Restricted Subsidiaries owns or is licensed or otherwise has
the right to use all of the Trademarks, copyrights, patents, licenses and other
rights that are reasonably necessary for the operation of each of their
respective businesses, without conflict with the rights of any other Person and
free of burdensome restrictions, except where the failure to have any such
rights could not reasonably be expected to have a Material Adverse Effect.
SECTION 6.11. Subsidiaries. As of the Closing Date, Borrower has no
Subsidiaries other than those specifically disclosed in Schedule 6.11 hereto.
SECTION 6.12. Full Disclosure.
(a) All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of Borrower or any of its
Subsidiaries in writing to any Agent and/or any Lender on or before the Closing
Date (i) all information contained in the Loan Documents) for purposes of or in
connection with this Agreement or any transactions contemplated herein is true
and complete 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 a whole) not misleading at such
time in light of the circumstances under which such information was provided, it
being understood and agreed that for purposes of this Section 6.12(a), such
factual information shall not include projections and pro forma financial
information.
(b) The Pro Forma Balance Sheet of Borrower and the Projections were or
are based on good faith estimates and assumptions believed to be reasonable at
the time made, it being recognized by the Lenders that such projections as to
future events are not to be viewed
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as facts and that actual results during the period or periods covered by any
such projections may differ significantly from the projected results.
SECTION 6.13. Compliance with Environmental Laws. Borrower and
each of the Restricted Subsidiaries is in compliance with all applicable
Environmental Laws in respect of the conduct of its business and the
ownership of its property, except such noncompliance as could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect. Without
limiting the effect of the preceding sentence:
(a) neither Borrower nor any of its Subsidiaries has received
a complaint, order, citation, notice or other written communication
with respect to the existence or alleged existence of a violation of,
or liability arising under, any Environmental Law, the outcome of
which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect; and
(b) to the best of Borrower's knowledge, after due inquiry,
there are no environmental, health or safety conditions existing or
reasonably expected to exist at any real property owned, operated,
leased or used by Borrower or any of its existing or former
Subsidiaries or any of their respective predecessors, including
off-site treatment or disposal facilities used by Borrower or its
existing or former Subsidiaries for wastes treatment or disposal, which
could reasonably be expected to require any construction or other
capital costs or clean-up obligations to be incurred prior to the
August 20, 2005 in order to assure compliance with any Environmental
Law, including provisions regarding clean-up, to the extent that any of
such conditions, construction or other capital costs or clean-up
obligations, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
SECTION 6.14. Year 2000. The Borrower has reviewed its operations and
the operations of its Subsidiaries with a view to assessing whether their
business or operations will, in the receipt, transmissions, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
be vulnerable to any significant risk that computer hardware, software or any
equipment containing embedded microchips used in their business or operations
will not in the case of dates or time periods occurring after December 31, 1999
function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000. The Borrower has no reason to believe that
the risks associated with the Year 2000 issue could have a Material Adverse
Effect.
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ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any
Revolving Loan or other Obligation shall remain unpaid or unsatisfied, unless
the Required Lenders waive compliance in writing:
SECTION 7.01. Financial Statements. Borrower shall deliver to the
Administrative Agent, with sufficient copies for each Lender:
(a) promptly after available, but not later than 120 days after the end
of each Fiscal Year, a copy of the audited consolidated balance sheet of
Borrower and its Subsidiaries as at the end of such year and the related
consolidated statements of earnings, cash flows and, to the extent prepared,
shareholders' equity for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, and accompanied by the opinion
of a nationally recognized independent public accounting firm ("Independent
Auditor"), which report shall state that such consolidated financial
statements present fairly in all material respects the financial position of
Borrower and its Subsidiaries for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years (except as noted therein)
(such opinion shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material portion of
Borrower's or any Subsidiary's records); and
(b) promptly after available, but not later than 60 days after the end
of each of the first three Fiscal Quarters of each Fiscal Year, a copy of the
unaudited consolidated balance sheet of Borrower and the Restricted
Subsidiaries as of the end of such quarter and the related consolidated
statements of earnings, cash flows and, to the extent prepared, shareholders'
equity for the period commencing on the first day and ending on the last day
of such quarter, and certified by a Responsible Officer of Borrower as fairly
presenting in all material respects, in accordance with GAAP (subject to
year-end audit adjustments), the financial position and the results of
operations of Borrower and the Restricted Subsidiaries as of the date thereof.
SECTION 7.02. Certificates; Other Information. Borrower shall furnish
to the Administrative Agent, with sufficient copies for each Lender:
(a) promptly when available but not later than 120 days after the end
of each Fiscal Year, a certificate of the Independent Auditor, in conformity
with professional auditing standards applicable to such matters, stating that
in making the examination
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necessary therefor no knowledge was obtained of any Default or Event of
Default under Section 8.06, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in clauses (a) and (b) of Section 7.01, financial
statements prepared on a Pro Forma Basis for each Acquisition
consummated during the Test Period relating to such financial
statements referred to in clauses (a) and (b) of Section 7.01, together
with a Compliance Certificate executed by a Responsible Officer of
Borrower (or, in the case of the Test Periods ended on or about
September 30, 1998, and December 31, 1998, an Interest Rate Certificate
executed by a Responsible Officer of Borrower);
(c) within 60 days after the commencement of each Fiscal Year
of Borrower, operating and related budgets of Borrower and the
Restricted Subsidiaries in reasonable detail for such Fiscal Year by
Fiscal Quarter as customarily prepared by management of Borrower for
its internal use, setting forth the principal assumptions upon which
such budgets are based;
(d) promptly after transmission thereof, copies of any reports
filed on Forms 10-K, 10-Q, and 8-K, effective registration statements
filed on Forms S-1, S-2, S-3 and S-4, and any proxy statements, as well
as any substitute or similar documents to substantially the same effect
as the foregoing, including, to the extent requested by the
Administrative Agent, the schedules and exhibits thereto, in each case
as transmitted to the SEC by Borrower or any Restricted Subsidiary
(other than immaterial amendments to any such registration statement);
and
(e) promptly, such additional information regarding the
business or financial condition of Borrower or any Restricted
Subsidiary as the Administrative Agent, on its own behalf or on behalf
of the Required Lenders, may from time to time reasonably request in
writing.
SECTION 7.03. Notices. Borrower shall notify the Administrative Agent
and each Lender of:
(a) promptly after a Responsible Officer of Borrower or any
Restricted Subsidiary obtains actual knowledge thereof, (i) the
occurrence of any event that constitutes a Default or Event of Default
(including any event of default, as defined in the Senior Indenture),
(ii) any litigation or governmental proceeding pending against Borrower
or any Restricted Subsidiary that could reasonably be expected to have
a Material Adverse Effect and (iii) any acceleration, redemption or
purchase demands or notices provided by the trustee for the Senior
Notes; and
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(b) promptly after a Responsible Officer of Borrower or any
Restricted Subsidiary obtains actual knowledge thereof, the occurrence
of any ERISA Event (but in no event more than 10 days after a
Responsible Officer of Borrower obtains knowledge of such ERISA Event),
and deliver to the Administrative Agent and each Lender a copy of any
notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to
Borrower or any ERISA Affiliate with respect to such event.
Each notice from Borrower under this Section 7.03 shall specify the
nature of the occurrence referred to therein, the period of existence thereof
and what action Borrower proposes to take with respect thereto.
SECTION 7.04. Preservation of Corporate Existence, etc. Borrower shall,
and shall cause each Restricted Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence under the laws of its state or jurisdiction of
incorporation (provided that Borrower and the Restricted Subsidiaries
may consummate any transaction permitted under Section 8.02), except,
in the case of any such Restricted Subsidiary, to the extent that the
failure to do so could not reasonably be expected to have a Material
Adverse Effect; and
(b) preserve and maintain in full force and effect its good
standing under the laws of its state or jurisdiction of incorporation
and all material governmental rights, privileges, qualifications,
permits, licenses and franchises necessary in the normal conduct of its
business, except in each case to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
SECTION 7.05. Maintenance of Property. Borrower will, and will cause
each Restricted Subsidiary to, ensure that its properties and equipment used or
useful in its business, in whomsoever's possession they may be to the extent
that it is within Borrower's or such Restricted Subsidiary's control to cause
same, are kept in good repair, working order and condition, normal wear and tear
excepted, and that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
customary for companies in similar businesses and consistent with third-party
leases, except in each case to the extent the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 7.06. Insurance. Borrower shall maintain, and shall cause each
Material Subsidiary to maintain, insurance in full force and effect, in such
amounts and against such risks and in such amounts, and with such deductibles,
retentions, self-insured
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amounts and co-insurance provisions, as are customarily maintained in accordance
with normal industry practices.
SECTION 7.07. Payment of Taxes. Borrower shall, and shall cause each
Subsidiary to, pay and discharge all material taxes, assessments and
governmental charges or levies upon it or upon its income or profits, or upon
any properties belonging to it, prior to the date on which material penalties
attach thereto, and all lawful material claims that, if unpaid, could reasonably
be expected to become a material Lien upon any properties of Borrower or any
Material Subsidiary; provided, however, that neither Borrower nor any of its
Subsidiaries shall be required hereunder to pay any such tax, assessment,
charge, levy or claim that is being contested in good faith if it has maintained
adequate reserves (in the good faith judgment of the management of Borrower or
such Subsidiary) with respect thereto in accordance with GAAP.
SECTION 7.08. Compliance with Statutes, etc. Borrower shall comply, and
shall cause each Subsidiary to comply, in all material respects, with all
applicable statutes, regulations and other Requirements of Law (including
Environmental Laws) having jurisdiction over it or its business, except such as
may be contested in good faith or as to which a bona fide dispute may exist or
except to the extent that the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
SECTION 7.09. Inspection of Property and Books and Records. Borrower
shall permit, and shall cause each Material Subsidiary to permit, officers and
designated representatives of the Administrative Agent or the Required Lenders
to visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to Borrower.
SECTION 7.10. Use of Proceeds. Borrower shall use the proceeds of the
Revolving Loans for the purposes described in the recitals to this Agreement.
SECTION 7.11. Future Subsidiaries. Without limiting the effect of any
provision contained herein (including Section 8.03), upon any Person becoming,
after the date hereof, a Subsidiary of Borrower (other than any Unrestricted
Subsidiary or (other than for purposes of Section 7.11(a)) a Restricted
Subsidiary that is not a Material Subsidiary), including any Person that was a
Restricted Subsidiary, but not a Material Subsidiary, but which becomes, a
Material Subsidiary through internal growth or otherwise, or upon Borrower or
any Subsidiary acquiring additional capital stock of any existing Subsidiary
which is then pledged under the Pledge Agreement, at Borrower's expense:
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(a) in the event such Person is a Domestic Subsidiary,
Borrower shall cause such Person (i) if not theretofore a party to the
Guaranty, to execute a supplement to the Guaranty for the purpose of
becoming a guarantor thereunder and (ii) if not theretofore a party to
the Security Agreement, to execute a supplement to the Security
Agreement for the purpose of becoming a grantor thereunder, together
with acknowledgment copies of Uniform Commercial Code financing
statements (form UCC-1) executed and delivered by such Subsidiary
naming such Subsidiary as the debtor and the Administrative Agent as
the secured party, or other similar instruments or documents, filed
under the Uniform Commercial Code of all jurisdictions as may be
necessary or, in the reasonable opinion of the Administrative Agent,
desirable to perfect the security interest of the Administrative Agent
pursuant to the Security Agreement; provided, however, that no
Restricted Subsidiary acquired pursuant to Section 8.03(h) (or any of
its Subsidiaries) need become a party to the Security Agreement or
otherwise comply with this Section 7.11(a)(ii);
(b) in the event such Person is (1) a Material Subsidiary that
is a direct Domestic Subsidiary of Borrower or (2) a Material
Subsidiary that is a direct Foreign Subsidiary of Borrower, Borrower
shall, pursuant to the Pledge Agreement, pledge to the Administrative
Agent for the benefit of the Lenders (free and clear of any other
pledges relating to such Person or any of its Subsidiaries) all of the
outstanding shares of such capital stock of such Subsidiary owned
directly by it (provided, that, in the event such Subsidiary is a
Foreign Subsidiary, Borrower shall not be required to pledge more than
65 % of the outstanding shares of the capital stock of such Foreign
Subsidiary), along with undated stock powers for such certificates,
executed in blank (or, if any such shares of capital stock are
uncertificated, confirmation and evidence satisfactory to the
Administrative Agent that the security interest in such uncertificated
securities has been perfected by the Administrative Agent in accordance
with Section 9-115 of the Uniform Commercial Code as in effect in the
State of New York or any similar law which may be applicable); and
(c) in the event such Person is a Material Subsidiary and a
direct Foreign Subsidiary of Borrower, Borrower shall, within 60 days
of such Person having become a Material Subsidiary execute and deliver
a supplement to the Pledge Agreement, which supplement shall, under the
law of incorporation of such Foreign Subsidiary, be effective to create
and perfect a valid security interest in 65% of the outstanding shares
of the capital stock of such Foreign Subsidiary, accompanied, if
reasonably requested by the Agents, by legal opinions of outside
counsel to Borrower in respect of such collateral, reasonably
satisfactory to the Agents.
SECTION 7.12. Transactions with Affiliates. Borrower shall, and shall
cause each Restricted Subsidiary to, conduct all transactions with any of its
Affiliates (other than
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Borrower and the Restricted Subsidiaries) upon terms that are substantially as
favorable to Borrower or such Restricted Subsidiary as it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of Borrower
or such Restricted Subsidiary; provided, however, that the foregoing
restrictions shall not apply to (a) the payment of customary annual fees to KKR
and its Affiliates for management, consulting and financial services rendered to
Borrower and the Restricted Subsidiaries, and customary investment banking fees
paid to KKR and its Affiliates for services rendered to Borrower or the
Restricted Subsidiaries in connection with divestitures, acquisitions,
financings and other transactions, (b) customary fees paid to members of the
Board of Directors of Borrower and the Restricted Subsidiaries, (c) transactions
expressly permitted with an Affiliate hereunder and sales and other dispositions
of assets in the ordinary course of business and (d) the performance of any of
the agreements listed on Schedule 7.12 amended from time to time to the extent
not materially adverse to the Lenders.
SECTION 7.13. Change in Business. Borrower shall, and shall cause its
Material Subsidiaries to, taken as a whole, engage primarily in (a) the lines of
business carried on by Borrower and the Restricted Subsidiaries on the Closing
Date and any other business the majority of whose revenues are derived from
sales of consumer products and/or (b) businesses or activities reasonably
similar thereto or a reasonable extension, development or expansion thereof or
ancillary thereto.
SECTION 7.14. End of the Fiscal Year. Borrower will, for financial
reporting purposes, cause each of the, and each of the Domestic Subsidiaries',
fiscal years to end on September 30 of each year (the "Fiscal Year End") (each
such period a "Fiscal Year" and references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "1998 Fiscal Year") shall
hereinafter refer to the Fiscal Year ending in the Fiscal Year End occurring
during such calendar year); provided, however, that Borrower may, upon prior
written notice to the Agents, change the definition of Fiscal Year End set forth
above to any other date reasonably acceptable to the Agents, in which case
Borrower and the Agents will, and are hereby authorized by the Lenders to, make
any adjustments to this Agreement that are necessary in order to reflect such
change in financial reporting.
SECTION 7..15. Pledged Stock of Foreign Subsidiaries; Post-Closing
Collateral Matters.
(a) Supplemental Security. Within 60 days after the Closing Date,
Borrower shall promptly deliver, or cause to be delivered, appropriate
supplemental security documentation (consistent with the corresponding terms of
the Pledge Agreement) under the law of the jurisdiction of incorporation of each
Foreign Subsidiary that is a direct Material Subsidiary of Borrower to the
Administrative Agent, duly executed and delivered by an Authorized Officer
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of the pledgor thereof, all in form and substance reasonably satisfactory to the
Administrative Agent.
(b) Intellectual Property. Without limiting the obligations of Borrower
and the Restricted Subsidiaries otherwise set forth herein or in the Security
Agreement, Borrower shall and shall cause its Subsidiaries to take all action
reasonably determined by the Agents within 60 days of the Closing Date to be
necessary or desirable to perfect the Lien of the Security Agreement with
respect to any material portion of the Intellectual Property Collateral (as
defined in the Security Agreement) located outside the United States and for
which the cost of such action is reasonable in relation to the benefit to the
Lenders of taking such action in respect of the Intellectual Property Collateral
to be so registered, including, without limitation, hiring local counsel or
other agents to cause such security interest to be registered with any
applicable Governmental Authority. All such actions shall be at the sole expense
of Borrower and the Restricted Subsidiaries.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any
Revolving Loan or other Obligation shall remain unpaid or unsatisfied, unless
the Required Lenders waive compliance in writing:
SECTION 8.01. Limitation on Liens. Borrower shall not, and shall not
suffer or permit any Restricted Subsidiary to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) any Lien created under any Loan Document;
(b) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or
to the extent that non-payment thereof is permitted by Section 7.07;
(c) Liens in respect of property or assets imposed by law,
such as carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business, in each case so long as such Liens do not
individually or in the aggregate have a Material Adverse Effect;
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(d) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money);
(e) Liens incurred in the ordinary course of business by a
Restricted Subsidiary on securities to secure repurchase and reverse
repurchase obligations in respect of such securities;
(f) Liens consisting of judgment or judicial attachment liens
in circumstances not constituting an Event of Default under clause (i)
of Section 9.01;
(g) easements, rights-of-way, restrictions, minor defects or
irregularities of title and other similar encumbrances not interfering
in any material respect with the business of Borrower and the
Restricted Subsidiaries taken as a whole;
(h) Liens securing obligations in respect of Capital Leases on
assets subject to such leases; provided, however, that such Capital
Leases are otherwise permitted hereunder;
(i) Liens arising solely by virtue of any statutory or common
law provision relating to banks' liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; provided, however, that such
deposit account is not a cash collateral account;
(j) Liens existing on the date hereof securing obligations not
in excess of $2,000,000 in the aggregate;
(k) any interest or title of a lessor or secured by a lessor's
interest under any lease permitted by this Agreement, or any leases or
subleases granted to others not interfering in any material respect
with the business of Borrower or any Restricted Subsidiary to which the
property subject to such lease or sublease relates;
(l) Liens (i) placed upon property, plant or equipment (other
than the capital stock of any Restricted Subsidiary) used in the
ordinary course of business of Borrower or any Restricted Subsidiary in
connection with the acquisition thereof by Borrower or any such
Restricted Subsidiary to secure Indebtedness of Borrower or a
Restricted Subsidiary to pay all or a portion of the purchase price
thereof (provided that (A) the Lien encumbering the property, plant or
equipment so acquired does not
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encumber any other asset of Borrower or any such Restricted Subsidiary
and (B) the Indebtedness secured thereby is permitted by clause (f) of
Section 8.04 and such acquisition was otherwise permitted by this
Agreement), and (ii) existing on specific assets at the time acquired
by Borrower or any Restricted Subsidiary (provided that (A) any such
Liens were not created at the time of or in contemplation of the
acquisition of such assets by Borrower or such Restricted Subsidiary,
(B) such Lien does not encumber any other asset of Borrower or any
Restricted Subsidiary and (C) the Indebtedness secured thereby is
permitted by clause (i) of Section 8.04 and such acquisition was
otherwise permitted by this Agreement);
(m) any Lien placed upon the capital stock or other equity
interests of any Restricted Subsidiary (other than a direct Restricted
Subsidiary of Borrower) acquired under clause (h) of Section 8.03 to
secure Indebtedness incurred pursuant to clause (j) of Section 8.04 to
finance the acquisition of such Restricted Subsidiary by Borrower or
any other Restricted Subsidiary; provided, however, that such
Restricted Subsidiary has executed a supplement to the Guaranty in
accordance with the provisions of Section 7.11 and clause (h) of
Section 8.03;
(n) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(o) Liens on goods the purchase price of which is financed by
a documentary letter of credit issued for the account of Borrower or
any Restricted Subsidiary; provided, however, that such Lien secures
only the obligations of Borrower or such Restricted Subsidiary in
respect of such letter of credit to the extent permitted under Section
8.04;
(p) leases or subleases granted to others not interfering in
any material respect with the business of Borrower and the Restricted
Subsidiaries taken as a whole;
(q) additional Liens (other than Liens on any collateral
securing the Obligations or any capital stock of any Restricted
Subsidiary) securing obligations of Borrower and the Restricted
Subsidiaries so long as the aggregate amount of the obligations so
secured does not exceed $25,000,000 at any time outstanding;
(r) any Lien arising pursuant to Section 107(1) of CERCLA, 42
U.S.C. Section 9607(1), or other Environmental Law, unless such Lien
(i) by action of the lienholder, or by operation of law, takes priority
over any subsequent Lien on the property upon which it is a Lien and
(ii) relates to a liability of Borrower and the Restricted Subsidiaries
that is reasonably likely to exceed, individually or in the aggregate,
$10,000,000;
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(s) the replacement, extension or renewal of any Lien
permitted by clauses (a) through (m) above upon or in the same assets
theretofore subject to such Lien or the replacement, extension or
renewal (without increase in the amount or change in any direct or
contingent obligor except to the extent otherwise permitted under this
Agreement) of the Indebtedness secured thereby; and
(t) Liens placed on assets of any Foreign Subsidiary to secure
Indebtedness of a Foreign Subsidiary permitted pursuant to Section
8.04(g), up to an aggregate principal amount at any time of $20,000,000
and only to the extent that such Indebtedness is not guaranteed by
Borrower or any Domestic Subsidiary (without duplication).
SECTION 8.02. Consolidations and Mergers; Sales of Assets. Borrower
shall not, and shall not suffer or permit any Restricted Subsidiary to, merge,
consolidate or otherwise combine or liquidate with or into, or enter into or
consummate any Disposition (other than any Disposition resulting from a casualty
or condemnation), whether in one transaction or in a series of transactions to
or in favor of, any Person, except:
(a) (i) any Restricted Subsidiary may merge or otherwise
consolidate with Borrower (provided that Borrower shall be the
continuing or surviving corporation); (ii) any Restricted Subsidiary
may merge or otherwise consolidate with any other Restricted Subsidiary
which is a Guarantor (provided that such Guarantor shall be the
continuing or surviving corporation); (iii) any Restricted Subsidiary
(the "Subject Subsidiary") (other than a Material Subsidiary) may merge
or otherwise consolidate with any Restricted Subsidiary which is not a
Guarantor so long as the Subject Subsidiary, when combined with all
other Restricted Subsidiaries merged or consolidated in accordance with
this subclause (iii), would not constitute a Material Subsidiary; (iv)
any Restricted Subsidiary which is not a Guarantor may merge or
otherwise consolidate with any other Restricted Subsidiary which is not
a Guarantor; and (v) any Restricted Subsidiary may merge or consolidate
with a Restricted Subsidiary which is not a Guarantor to the extent
that the fair market value, measured at the time of such merger or
consolidation, of the assets transferred in such merger or
consolidation would be a permitted Investment under Section 8.03(c) or
(i);
(b) any Restricted Subsidiary may sell or otherwise transfer
its assets (upon voluntary liquidation or otherwise) to Borrower, and
Borrower or any Restricted Subsidiary may sell or otherwise transfer
its assets (upon voluntary liquidation or otherwise) to any other
Restricted Subsidiary; provided, however, that Borrower and the
Domestic Subsidiaries may not sell or otherwise transfer (upon
voluntary liquidation or otherwise) its assets to any Subsidiary that
is not a Guarantor other than (i) in the ordinary course of business as
necessary to support the ordinary course operations of such Subsidiary;
(ii) assets transferred in exchange for fair value; (iii) assets the
fair
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value (determined in good faith by Borrower) of which, measured at the
time of such transfer, would constitute permitted Investments under
Section 8.03(c) or (i); and (iv) assets that, when aggregated with all
other assets transferred pursuant to this clause (b) (iv), are not
material;
(c) any Foreign Subsidiary may sell its accounts receivable
for cash pursuant to discounting arrangements entered into in the
ordinary course of its business; provided, however, that (i) such sale
is without recourse to Borrower and the other Restricted Subsidiaries
and (ii) the aggregate amount of all such financings outstanding at any
one time, when added to the aggregate amount of Indebtedness
outstanding at such time under clause (g) of Section 8.04, does not
exceed $20,000,000; and
(d) Borrower or any Restricted Subsidiary may consummate one
or more Dispositions (in addition to any thereof described in any other
provision of this Section 8.02); provided, however, that (i) Borrower
complies with the requirements of Section 2.08(a); (ii) such
Disposition is made for fair value (as determined in good faith by
Borrower); and (iii) the aggregate consideration received for all
assets disposed of in Dispositions from and after the Closing Date
pursuant to this clause (d) shall not exceed $50,000,000.
SECTION 8.03. Loans, Acquisitions and Investments. Borrower shall not
make, purchase, repurchase, redeem or acquire, or suffer or permit any
Restricted Subsidiary to make, purchase, repurchase, redeem or acquire, any
capital stock, equity interest or any obligations or other securities of, or any
interest in, any Person, or make any acquisitions of any assets (including
Acquisitions), or make any advance, loan, extension of credit or capital
contribution to or any other investment in any Person, including any Affiliate
of Borrower (collectively, "Investments"), except for:
(a) Investments in the form of Cash Equivalents;
(b) Investments in Borrower;
(c) Investments in (x) any Restricted Subsidiary which is a
Guarantor and (y) any Restricted Subsidiary which is not a Guarantor so
long as the aggregate amount of Investments made pursuant to this
Section 8.03(c)(ii) since the Closing Date, when aggregated with the
aggregate fair value of all mergers, consolidations and transfers of
assets made pursuant to Sections 8.02(a)(v) and 8.02(b)(iii) since the
Closing Date (in each case valued at the time of such transaction),
shall not exceed $20,000,000 (exclusive of any write-down or write-off
thereof);
(d) loans and advances to officers, directors and employees of
Borrower or any Restricted Subsidiary (i) to finance the purchase of
capital stock of Borrower and (ii)
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for additional purposes not contemplated by clause (i) above, in an
aggregate principal amount at any time outstanding with respect to this
clause (ii) not exceeding $2,000,000;
(e) Investments existing on the date hereof and listed on
Schedule 8.03 and any extensions, renewals or reinvestments thereof, so
long as the aggregate amount of all Investments pursuant to this clause
(e) is not increased at any time above the amount of such Investments
existing on the date hereof;
(f) Investments constituting non-cash proceeds of the sale or
other disposition of assets, so long as such Investments arise from
Dispositions permitted under Section 8.02(d);
(g) Investments in Swap Contracts;
(h) Investments by Borrower or any Restricted Subsidiary
constituting one or more Acquisitions (each, a "Permitted
Acquisition"), so long as (i) the aggregate consideration (including
cash, assumption of indebtedness, the aggregate amount to be paid under
covenants not to compete (or similar agreements) and working capital
deficits) paid in respect of all Permitted Acquisitions after the
Closing Date does not exceed $20,000,000, (ii) such Acquisition and all
transactions related thereto are consummated in accordance with
applicable law, (iii) in the case of an Acquisition of capital stock or
other equity interest by Borrower or a Restricted Subsidiary, such
Acquisition results in the issuer of such capital stock or other equity
interest becoming a Restricted Subsidiary and the Obligors and such
Restricted Subsidiary comply with Section 7.11, (iv) no capital stock
or other equity interest or assets acquired in connection with such
Acquisition shall be subject to any Lien (other than Liens permitted by
Section 8.01), (v) neither Borrower nor any Restricted Subsidiary shall
assume or incur, directly or indirectly, any Indebtedness in connection
with such Acquisition (other than Indebtedness otherwise permitted by
Section 8.04, provided that if any of such Indebtedness shall be
secured, the guaranty required by subclause (ii) of clause (h) of this
Section 8.03 shall be equally and ratably secured), (vi) after giving
effect to such Acquisition, no Event of Default or payment Default
shall have occurred and be continuing and (vii) Borrower shall have
delivered to the Administrative Agent and the Lenders prior to the
consummation of such Acquisition (A) financial statements prepared on a
Pro Forma Basis for the period of four consecutive Fiscal Quarters
ending with the Fiscal Quarter then last ended immediately prior to the
consummation of such Acquisition for which financial statements and the
Compliance Certificate relating thereto have been delivered to the
Administrative Agent pursuant to Sections 7.01 and 7.02 and (B) a
certificate of Borrower executed by its chief financial officer
demonstrating that the financial results reflected in such financial
statements would comply
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with the requirements of Section 8.06 for the Fiscal Quarter in which
such Investment is to be made (with the requirements of March 31, 1999
being deemed applicable for any such Permitted Acquisition consummated
prior to March 31, 1999); provided, however, that the limitation set
forth in clause (i) of this Section 8.03(h) shall not apply with
respect to any Acquisition if (A) financial statements prepared on a
Pro Forma Basis for the period of four consecutive Fiscal Quarters
ended with the Fiscal Quarter ended immediately prior to the
consummation of such Acquisition for which financial statements and the
Compliance Certificate relating thereto have been delivered to the
Administrative Agent pursuant to Sections 7.01 and 7.02 demonstrate
that the pro forma ratio of Consolidated Total Debt to Consolidated
EBITDA after giving effect to such Acquisition would be less than
5.0:1.0; and (B) Borrower shall have delivered a certificate executed
by its chief financial officer attesting to the compliance by Borrower
with the ratio set forth in subclause (A) and attaching appropriate
supporting data and documentation, financial statements and
calculations;
(i) so long as no Event of Default or payment Default exists
and is continuing at the time of the making of such Investment (or
would occur immediately after giving effect thereto), additional
Investments by Borrower or the Restricted Subsidiaries (including in
Unrestricted Subsidiaries) so long as the aggregate amount of
Investments made pursuant to this Section 8.03(i) since the Closing
Date, when aggregated with the aggregate fair value of all mergers,
consolidations and transfers of assets made pursuant to Sections
8.02(a)(v) and 8.02(b)(iii) since the Closing Date (in each case valued
at the time of such transaction), shall not exceed (exclusive of any
write-down or write-off thereof) in the sum of (i) $15,000,000 plus
(ii) the aggregate amount of net cash proceeds in respect of equity
contributions made to Borrower after the Closing Date and prior to such
time or issuances of equity of Borrower after the Closing Date and
prior to such time (other than, in any event, any proceeds of the
Preferred Stock and equity contributions made in accordance with clause
(d)(i) of this Section 8.03 or used in accordance with clause (b) or
(c) of Section 8.05 plus the Cumulative Consolidated Net Income Basket
at the time of the making of such Investment (it being agreed that each
Investment made pursuant to this clause (i) shall not be outstanding to
the extent of any return or prepayment of such Investment and that any
Investment that was made in compliance with this Section 8.03(i) shall
not subsequently be deemed not permitted merely because Cumulative
Consolidated Net Income shall have subsequently declined from that in
effect at the time such Investment was made);
(j) Investments permitted by Section 8.05;
(k) Investments in or constituting Capital Expenditures
permitted by Section 8.07; provided, however, that any such Capital
Expenditure which constitutes an
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Acquisition shall comply with the provisions of subclauses (ii)-(vii)
of Section 8.03(h); and
(l) Investments acquired by Borrower or any Restricted
Subsidiary in the ordinary course of business in connection with the
collection or settlement of accounts receivable.
SECTION 8.04. Limitation on Indebtedness. Borrower shall not, and shall
not suffer or permit any Restricted Subsidiary to, create, incur, assume, suffer
to exist, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except (subject in any event to the provisions of
Section 8.06):
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness incurred by the Company evidenced by the
Senior Notes in an aggregate principal amount not to exceed
$110,000,000 and any refinancing, refunding, renewal or extension
thereof; provided, however, that (i) the principal amount thereof is
not increased above the principal amount thereof outstanding
immediately prior to such refinancing, refunding renewal or extension
(except to the extent otherwise permitted under this Section 8.04),
(ii) the stated maturity and the weighted average life to maturity is
not shortened, (iii) the direct and contingent obligors with respect to
such Indebtedness are not changed (except to the extent otherwise
permitted by this Section 8.04), and (iv) the covenants, events of
default, redemption provisions, required repurchase provisions and
voting provisions are not more onerous to Borrower and the Restricted
Subsidiaries or more adverse to the Lenders in any material respect
than the Senior Notes and the Senior Notes Indenture;
(c) unsecured Indebtedness between Borrower and the Restricted
Subsidiaries and Indebtedness between Restricted Subsidiaries;
provided, however, that any Indebtedness of Borrower or any Guarantor
to any non-Guarantor Subsidiary incurred pursuant to this Section
8.04(c) shall be subordinated to the Obligations on terms acceptable to
the Agents;
(d) Contingent Obligations in respect of obligations that are
permitted to be incurred under this Agreement (other than obligations
that are permitted to be incurred under clause (c) of Section 8.02);
provided, however, that (i) in the event any primary obligation to
which any such Contingent Obligation relates is subordinated to
Indebtedness under a Loan Document, such Contingent Obligation is
subordinated to the same extent, (ii) Contingent Obligations (without
duplication) of Borrower and the Domestic Subsidiaries in respect of
obligations incurred by Foreign Subsidiaries shall not exceed
$20,000,000 at any one time outstanding less the principal amount of
any such Indebtedness which is secured by a Lien permitted pursuant to
Section 8.01(t)
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and (iii) no Guarantor may guarantee any Indebtedness incurred under
clause (b) of this Section 8.04;
(e) Indebtedness outstanding on the date hereof of Borrower
and the Domestic Subsidiaries and listed on Schedule 8.04 (which shall
not include the Senior Notes) and any refinancing, refunding, renewal
or extension thereof; provided, however, that (i) the principal amount
thereof is not increased above the principal amount thereof outstanding
immediately prior to such refinancing, refunding, renewal or extension
(except to the extent otherwise permitted under this Section 8.04) and
(ii) the direct and contingent obligors with respect to such
Indebtedness are not changed (except to the extent otherwise permitted
under this Section 8.04);
(f) Indebtedness of Domestic Subsidiaries described in clause
(1)(i) of Section 8.01 or constituting Capitalized Lease Liabilities;
provided, however, that the aggregate amount of such Indebtedness
(including the aggregate amount of Capitalized Lease Liabilities under
all Capitalized Leases) shall not exceed $20,000,000 at any one time
outstanding;
(g) Indebtedness of Foreign Subsidiaries in an aggregate
amount at any one time outstanding, which, when added to the aggregate
amount of financings outstanding at such time under clause (c) of
Section 8.02, does not exceed $20,000,000;
(h) unsecured Indebtedness of Borrower (i) which does not have
any scheduled principal payment (including any sinking fund
requirement) prior to August 20, 2005, (ii) which has pricing terms,
covenants, representations and defaults, which, taken as a whole, are
not more burdensome or restrictive on Borrower than the pricing terms,
covenants, representations and defaults provided in this Agreement and
(iii) such Indebtedness may only be incurred to the extent that the
Revolving Commitments shall be concurrently reduced in an amount equal
to all the net proceeds of such Indebtedness pursuant to Section
2.08(b);
(i) (i) Indebtedness of a Person that becomes a Restricted
Subsidiary after the Closing Date as the result of an Investment
permitted under clause (h) of Section 8.03; provided, however, that (A)
such Indebtedness existed at the time such Person became a Restricted
Subsidiary and was not created in anticipation thereof, (B) such
Indebtedness is not guaranteed in any respect by Borrower or any other
Restricted Subsidiary and (C) the aggregate amount of such Indebtedness
and all Indebtedness outstanding under clause (j) immediately below
shall not exceed $20,000,000 in the aggregate at any one time
outstanding; provided, however, that the limitation set forth in this
subclause (i)(C) shall not apply with respect to the incurrence of any
Indebtedness if (I) financial statements prepared on a Pro Forma Basis
for the period of four consecutive Fiscal Quarters ended with the
Fiscal Quarter ended immediately prior to the
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incurrence of such Indebtedness for which financial statements and the
Compliance Certificate relating thereto have been delivered to the
Administrative Agent pursuant to Sections 7.01 and 7.02 demonstrate
that the pro forma ratio of Consolidated Total Debt to Consolidated
EBITDA after giving effect to the incurrence of such Indebtedness would
be less than 5.0:1.0; and (II) Borrower shall have delivered a
certificate executed by its chief financial officer attesting to the
compliance by Borrower with the ratio set forth in subclause (I) and
attaching appropriate supporting data and documentation, financial
statements and calculations, and (ii) any refinancing, refunding,
renewal or extension of any Indebtedness specified in the immediately
preceding clause (i); provided, however, that (1) the principal amount
of any such Indebtedness is not increased above the principal amount
thereof outstanding immediately prior to such refinancing, refunding,
renewal or extension (except to the extent otherwise permitted by this
Section 8.04) and (2) the direct and contingent obligors with respect
to such Indebtedness are not changed (except to the extent otherwise
permitted by this Section 8.04);
(j) (i) Indebtedness of Borrower incurred to finance a
Permitted Acquisition under clause (h) of Section 8.03; provided,
however, that the aggregate principal amount of Indebtedness incurred
pursuant to this clause (j) and pursuant to clause (i) of Section 8.04
immediately above shall not exceed $20,000,000 in the aggregate at any
one time outstanding; provided, further, however, that the limitation
set forth in this subclause (i) shall not apply with respect to the
incurrence of any Indebtedness if (A) financial statements prepared on
a Pro Forma Basis for the period of four consecutive Fiscal Quarters
ended with the Fiscal Quarter ended immediately prior to the incurrence
of such Indebtedness for which financial statements and the Compliance
Certificate relating thereto have been delivered to the Administrative
Agent pursuant to Sections 7.01 and 7.02 demonstrate that the pro forma
ratio of Consolidated Total Debt to Consolidated EBITDA after giving
effect to the incurrence of such Indebtedness would be less than
5.0:1.0; and (B) Borrower shall have delivered a certificate executed
by its chief financial officer attesting to the compliance by Borrower
with the ratio set forth in subclause (A) and attaching appropriate
supporting data and documentation, financial statements and
calculations and (ii) to the extent such Permitted Acquisition results
in a Person becoming a Restricted Subsidiary and such Restricted
Subsidiary executes a supplement to the Guaranty in accordance with the
provisions of clause (h) of Section 8.03, Contingent Obligations of
Guarantors in respect of guarantees of the Indebtedness described in
the immediately preceding subclause (i);
(k) Contingent Obligations incurred in the ordinary course of
business in respect of obligations of customers, suppliers, franchisees
and licensees; and
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(l) additional unsecured Indebtedness in an aggregate
principal amount not to exceed $20,000,000 at any time outstanding.
SECTION 8.05. Restricted Payments. Borrower shall not declare or make
any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, purchase, redeem or otherwise acquire for value any shares of its capital
stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding, or pay, prepay, purchase, redeem or defease the principal
of the Senior Notes (or any refinancing thereof), and Borrower shall not permit
any Restricted Subsidiary to purchase, redeem or otherwise acquire for value any
shares of any class of capital stock of Borrower, any other Restricted
Subsidiary (except shares thereof owned by Borrower or any Restricted
Subsidiary) or such Restricted Subsidiary (other than (i) of its shares held by
Borrower or any other Restricted Subsidiary and (ii) in pro rata redemption or
repurchases of its common stock), as the case may be, now or hereafter
outstanding (or any warrants, rights or options to acquire such shares), and
Borrower shall not permit any of the Restricted Subsidiaries to pay, prepay,
purchase, redeem or defease principal of the Senior Notes (or any refinancing
thereof) (any such transaction described in the foregoing (other than any
exception to any of the foregoing described transactions) being herein referred
to as a "Restricted Payment"), except that, so long as before and after giving
effect to any such Restricted Payment no Event of Default or payment Default
shall have occurred, Borrower may:
(a) declare and make dividends or other distributions payable
solely in shares of its capital stock and any Subsidiary may make pro
rata dividends or distributions;
(b) purchase, redeem or otherwise acquire (i) shares of Common
Stock or warrants or options to acquire any such shares with the
proceeds received from the substantially concurrent issuance of new
shares of Common Stock and (ii) shares of Preferred Stock with a
portion of the proceeds received from the substantially concurrent
issuance of new shares of Common Stock or preferred stock in an
aggregate amount not to exceed the proceeds received by Borrower from
such issuance;
(c) redeem, defease or otherwise prepay or retire the Senior
Notes (any such transaction, a "Senior Note Redemption") in an
aggregate amount not to exceed at any time the aggregate amount of net
cash proceeds in respect of equity contributions made to Borrower after
the Closing Date and prior to such time or issuances of equity of
Borrower after the Closing Date and prior to such time (other than, in
any event, any proceeds of the Preferred Stock and equity contributions
made in accordance with clause (d)(i) of Section 8.03 or used in
accordance with clause (b) of this Section 8.05 or clause (i) of
Section 8.03);
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(d) redeem or exchange in whole or in part any capital stock
of Borrower for another class of capital stock or rights to acquire
such other class of capital stock of Borrower; provided, however, that
such other class of capital stock contains terms and provisions (taken
as a whole) at least as advantageous to the Lenders as those contained
in the capital stock redeemed or exchanged thereby;
(e) repurchase or redeem shares of its capital stock (together
with options or warrants in respect of any thereof) held by the
officers, directors and employees of Borrower (or former officers,
directors or employees of Borrower subsequent to such Person's death,
disability or termination) (in each case other than any Affiliate of
Abarco and its successors and assigns), so long as such repurchase is
pursuant to, and in accordance with the terms of, management and/or
employee stock plans, stock subscription agreements or shareholder
agreements all as in effect on the Closing Date;
(f) make any Restricted Payment, to the extent that (i)
Borrower shall have delivered to the Administrative Agent (A) financial
statements prepared on a Pro Forma Basis for the period of four
consecutive Fiscal Quarters ending with the Fiscal Quarter then last
ended for which financial statements and the Compliance Certificate
relating thereto have been delivered to the Administrative Agent
pursuant to Sections 7.01 and 7.02 and (B) a certificate of Borrower
executed by its chief financial officer demonstrating that the
financial results reflected in such financial statements would (1)
comply with the requirements of clauses (a) and (b) of Section 8.06 for
the Fiscal Quarter in which such Restricted Payment is to be made (with
the requirements of March 31, 1999 being deemed applicable for any such
Restricted Payment made prior to March 31, 1999) and (2) satisfy a
requirement that the ratio of Consolidated Total Debt as at the end of
such period to Consolidated EBITDA for such period be less than 4.0 to
1.0 and (ii) the aggregate amount expended by Borrower pursuant to this
clause (h) shall not at the time of the making of any Restricted
Payment pursuant to this clause (h) exceed the Cumulative Consolidated
Net Income Basket in effect at such time;
(g) effect any Senior Note Redemption made at any such time
during which no Revolving Loans are outstanding immediately prior to
and immediately after giving effect to such Senior Note Redemption, but
only to the extent that concurrently therewith Borrower makes a
permanent reduction in the Revolving Commitments pursuant to Section
2.06 in the amount of such Senior Note Redemption; and
(h) exchange Senior Notes for Borrower's capital stock upon
the surrender thereof by the holder thereof.
SECTION 8.06. Financial Covenants. Borrower shall not permit:
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(a) the ratio of Consolidated EBITDA for any Test Period
ending on or about any date set forth below to Consolidated Interest
Expense for such Test Period to be less than the ratio set forth
opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
March 31,1999 1.10 : 1.00
June 30, 1999 1.25 : 1.00
September 30, 1999 1.25 : 1.00
December 31, 1999 1.50 : 1.00
March 31, 2000 1.50 : 1.00
June 30, 2000 1.50 : 1.00
September 30, 2000 1.75 : 1.00
December 31, 2000 1.75 : 1.00
March 31, 2001 1.75 : 1.00
June 30, 2001 1.75 : 1.00
September 30, 2001 2.00 : 1.00
December 31, 2001 2.00 : 1.00
March 31, 2002 2.00 : 1.00
June 30, 2002 2.00 : 1.00
September 30, 2002
and the last day of each
December, March, June and
September thereafter 2.50 : 1.00
</TABLE>
(b) the ratio (the "Leverage Ratio") of Consolidated Total
Debt as at the last day of any Test Period ending on or about any date
set forth below to Consolidated EBITDA for such Test Period, determined
on a Pro Forma Basis for each Acquisition and Disposition consummated
during such Test Period, to be greater than or equal to the ratio set
forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
March 31, 1999 6.95 : 1.00
June 30, 1999 6.50 : 1.00
September 30, 1999 5.50 : 1.00
December 31, 1999 5.50 : 1.00
March 31, 2000 5.50 : 1.00
June 30, 2000 5.50 : 1.00
September 30, 2000 5.50 : 1.00
December 31, 2000 5.00 : 1.00
</TABLE>
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<TABLE>
<S> <C>
March 31, 2001 5.00 : 1.00
June 30, 2001 5.00 : 1.00
September 30, 2001 5.00 : 1.00
December 31, 2001 4.50 : 1.00
March 31, 2002 4.50 : 1.00
June 30, 2002 4.50 : 1.00
September 30, 2002
and the last day of each
December, March, June and
September thereafter 4.00 : 1.00
</TABLE>
SECTION 8.07. Capital Expenditures. (a) Borrower sh not permit any
Restricted Subsidiary to, make any Capital Ex would cause the aggregate amount
of all Capital Expenditures and the Restricted Subsidiaries in the 1999 Fiscal
Year of Borrower and each Fiscal Year thereafter to exceed an amount equal to 4%
of the consolidated net sales of Borrower and the Restricted Subsidiaries for
the immediately preceding Fiscal Year; provided, however, that, in determining
such consolidated net sales, (A) the net sales of any business or Person
acquired by Borrower or any Restricted Subsidiary during such immediately
preceding Fiscal Year pursuant to a Permitted Acquisition shall be determined as
if such business or Person had been so acquired on the first day of such
immediately preceding Fiscal Year and (B) the net sales of any business or
Person sold or otherwise disposed of by Borrower and the Restricted Subsidiaries
during such immediately preceding Fiscal Year shall be eliminated from such
consolidated net sales, in each case based on assumptions believed by Borrower
in good faith to be reasonable.
(b) Notwithstanding anything to the contrary contained in clause (a)
above, Borrower and the Restricted Subsidiaries may in any Fiscal Year make
Capital Expenditures (in addition to the Capital Expenditures permitted to be
made pursuant to clause (a) above) equal to an aggregate amount equal to 4% of
the excess, if any, of (i) the increase (if any) in consolidated net sales of
Borrower and the Restricted Subsidiaries for such Fiscal Year attributable to
businesses and Persons acquired during such Fiscal Year pursuant to Permitted
Acquisitions over (ii) the decrease (if any) in such consolidated net sales
attributable to businesses and Persons sold or otherwise disposed of by Borrower
and the Restricted Subsidiaries during such Fiscal Year.
(c) Notwithstanding anything to the contrary contained in clauses (a)
and (b) above, to the extent that Capital Expenditures made by Borrower and the
Restricted Subsidiaries during any Fiscal Year are less than the maximum amount
permitted to be made for such Fiscal Year pursuant to clauses (a) and (b) above,
100% of such unused amount (each such amount, a "carry-forward amount") may be
carried forward to the immediately succeeding Fiscal Year and utilized to make
Capital Expenditures in such succeeding Fiscal Year in the
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event the amount permitted pursuant to clauses (a) and (b) in such succeeding
Fiscal Year have been used (it being understood and agreed that no carry-forward
amount may be carried forward beyond the Fiscal Year immediately succeeding the
Fiscal Year in which it arose and that no portion of the carry-forward amount
available for any Fiscal Year may be used until the entire amount of Capital
Expenditures permitted to be made in such Fiscal Year (without giving effect to
such carry-forward amount) shall be made).
SECTION 8.08. Amendments. Borrower shall not amend or modify, and shall
not permit or suffer to exist the amendment or other modification of, the Senior
Notes and the Senior Indenture (or any refinancing thereof) or the certificate
of designation for the Preferred Stock (or any capital stock issued in exchange
or redemption therefor) in a manner materially adverse to the Lenders.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. Event of Default. Any of the following shall constitute
an "Event of Default":
(a) Non-Payment. Borrower fails to make (i) when and as
required to be made herein, payments of any amount of principal of any
Revolving Loan or Acceptance or (ii) within five days after the same
becomes due, payment of any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty
by Borrower or any Restricted Subsidiary made or deemed made herein or
in any other Loan Document or which is contained in any certificate,
document or financial or other statement by Borrower, any Restricted
Subsidiary or any Responsible Officer, furnished at any time under this
Agreement or in or under any other Loan Document, is incorrect in any
material respect on or as of the date made or deemed made; or
(c) Specific Defaults. Borrower fails to perform or observe
any term, covenant or agreement contained in any of clause (a)(i) of
Section 7.03 or Sections 8.01 through 8.08 or Section 8 of the Pledge
Agreement or Section 4 of the Security Agreement; or
(d) Other Defaults. Borrower or any other Obligor fails to
perform or observe any other term or covenant contained in this
Agreement or any other Loan Document to which it is a party, and such
default shall continue unremedied for a period of 30
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days after the date upon which written notice thereof is received by
Borrower or such Obligor, as applicable, from the Administrative Agent
or the Required Lenders; or
(e) Cross-Default. Borrower or any Restricted Subsidiary (i)
(A) fails to make any payment in respect of any Indebtedness (other
than the Obligations or Indebtedness described in clause (c) of Section
8.04) 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
relevant document on the date of such failure or (B) fails to perform
or observe any other condition or covenant, or (except in the case of
Indebtedness consisting of any Swap Contract) 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 relevant document 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, in the case of Indebtedness
consisting of Contingent Obligations, to become due and payable and
(ii) the aggregate amount of such Indebtedness, together with the
aggregate amount of all other Indebtedness in default for failure to
make payment or the maturity of which has been declared, or could be so
declared, to be so due and payable, equals or exceeds $9,000,000; or
(f) Insolvency; Voluntary Proceedings. Borrower or any
Material Subsidiary (or group of Restricted Subsidiaries that as of the
latest audited financial statements of Borrower and the Restricted
Subsidiaries would constitute a Material Subsidiary) (i) makes a
general assignment for the benefit of creditors or generally fails to
pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at
stated maturity or otherwise; (ii) is adjudicated insolvent or
bankrupt, or any order of relief or other order approving any such case
or proceeding is entered; (iii) commences any Insolvency Proceeding
with respect to itself; or (iv) 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 Borrower or any Material
Subsidiary (or group of Restricted Subsidiaries that as of the latest
audited financial statements of Borrower and the Restricted
Subsidiaries would constitute a Material Subsidiary), or any writ,
judgment, warrant of attachment, execution or similar process is issued
or levied against a substantial part of Borrower's or any Material
Subsidiary's (or group of Restricted Subsidiaries that as of the latest
audited financial statements of Borrower and the Restricted
Subsidiaries would constitute a Material Subsidiary) properties, and
any such
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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) Borrower or any Material Subsidiary (or group of
Restricted Subsidiaries that as of the latest audited financial
statements of Borrower and the Restricted Subsidiaries would constitute
a Material Subsidiary) 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) Borrower or any Material Subsidiary (or group of
Restricted Subsidiaries that as of the latest audited financial
statements of Borrower and the Restricted Subsidiaries would constitute
a Material Subsidiary) acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar
Person for itself or a substantial portion of its property or business;
or
(h) ERISA. An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan; or
(i) Judgments. One or more judgments, orders, decrees or
arbitration awards is entered against Borrower or any Restricted
Subsidiary involving in the aggregate a liability (to the extent not
paid or covered by insurance provided by a reputable and creditworthy
carrier that has acknowledged liability in writing) of $9,000,000 or
more, and the same shall remain unsatisfied, unvacated and unstayed
pending appeal for a period of 60 days after the entry thereof; or
(j) Change of Control. There occurs any Change of Control; or
(k) Collateral. Any material provision of the Pledge Agreement
or the Security Agreement shall for any reason (other than as a result
of acts or omissions of the Administrative Agent or any Lender) cease
to create a valid security interest in the collateral purported to be
covered thereby or any material provision of the Pledge Agreement or
the Security Agreement or the Guaranty shall cease to be valid and
binding on or enforceable against Borrower or any other Obligor party
thereto, or Borrower or any other Obligor shall deny or disaffirm in
writing its obligations under the Pledge Agreement or the Security
Agreement or the Guaranty.
SECTION 9.02. Remedies. If any Event of Default occurs, the
Administrative Agent shall, at the request of, or may, with the consent of, the
Required Lenders:
(a) declare the commitment of each Lender to make Loans, any
obligation of the Swing Line Lender to make Swing Line Loans and any
obligation of the Fronting Lender to Issue Letters of Credit or create
Acceptances to be terminated, whereupon such commitments shall be
terminated;
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(b) (i) declare an amount equal to the sum of (x) the
aggregate face amount of all unmatured Acceptances and (y) the maximum
aggregate amount that is or at any time thereafter may become available
for drawing under any outstanding Letters of Credit (whether or not any
beneficiary shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under such
Letters of Credit) to be immediately due and payable, Borrower being
obligated to cash collateralize all such obligations immediately,
and/or (ii) declare the unpaid principal amount of all outstanding
Revolving 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, all without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived by Borrower; and/or
(c) exercise on behalf of itself and the Lenders all rights
and remedies available to it and the Lenders under the Loan Documents
or applicable law; provided, however, that upon the occurrence of any
event specified in clause (f) or (g) of Section 9.01 with respect to
Borrower (in the case of clause (g)(i), upon the expiration of the
60-day period mentioned therein), the obligation of each Lender to make
Revolving Loans and any obligation of the Fronting Lender to Issue
Letters of Credit or create Acceptances shall automatically terminate
and the unpaid principal amount of all outstanding Revolving Loans and
all interest and other amounts as aforesaid and an amount equal to the
sum of (x) the aggregate face amount of all unmatured Acceptances and
(y) the maximum aggregate amount that is or at any time thereafter may
become available for drawing under any outstanding Letters of Credit
(whether or not any beneficiary shall have presented, or shall be
entitled to present, the drafts or other documents required to draw
under such Letter of Credit) shall automatically become immediately due
and payable (Borrower being automatically immediately obligated to cash
collateralize all such Obligations) without further act of the
Administrative Agent, the Fronting Lender or any Lender.
SECTION 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 AGENTS
SECTION 10.01. Appointment and Authorization; Administrative Agent. (a)
Each Lender hereby irrevocably (subject to Section 10.09) appoints, designates
and authorizes
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the Administrative 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
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent or any other
Agent have or be deemed to have any fiduciary relationship with any 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 Administrative Agent or any other Agent. Without
limiting the generality of the foregoing sentence, the use of the term "agent"
in this Agreement with reference to the Administrative Agent or any other Agent
is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting
parties.
(b) Each Lender hereby irrevocably (subject to Section 10.09) appoints
the Fronting Lender to act on behalf of the Lenders with respect to any Letters
of Credit Issued by it, any Acceptances created by it and the documents
associated therewith until such time and except for so long as the
Administrative Agent may agree at the request of the Required Lenders to act for
such Fronting Lender with respect thereto; provided, however, that the Fronting
Lender shall have all of the benefits and immunities (i) provided to the
Administrative Agent in this Article X with respect to any acts taken or
omissions suffered by the Fronting Lender in connection with Letters of Credit
Issued by it or proposed to be Issued by it, Acceptances created by it or
proposed to be created by it and the application and agreements for letters of
credit pertaining to the Letters of Credit as fully as if the term
"Administrative Agent", as used in this Article X, included the Fronting Lender
with respect to such acts or omissions and (ii) as additionally provided in this
Agreement with respect to the Fronting Lender.
SECTION 10.02. Delegation of Duties. The Administrative 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 Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
SECTION 10.03. Limitation on Liability of Agents and Agent-Related
Persons. None of the Agents or 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 or the transactions contemplated
hereby (except for its own gross negligence or bad faith) or (b) be responsible
in any manner to any of the Lenders for any recital, statement, representation
or warranty made by Borrower or any Subsidiary or Affiliate of
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Borrower, 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 Administrative Agent or any
other Agent under or in connection with, this Agreement or any other Loan
Document, or for the value of or title to any collateral security, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent or 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 Borrower or any
of Borrower's Subsidiaries or Affiliates.
SECTION 10.04. Reliance by Administrative Agent. (a) The Administrative
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 Borrower), independent accountants and other
experts selected by the Administrative Agent. The Administrative 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 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 Administrative 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 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, 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 Administrative 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 a Lender.
SECTION 10.05. Notice of Default. The Administrative 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 Administrative Agent for the account of the
Lenders, unless the Administrative Agent shall have received written notice from
a Lender or Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a
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"notice of default". The Administrative Agent will notify the Lenders of its
receipt of any such notice. The Administrative Agent shall, subject to the
provisions of this Article X, take such action with respect to such Default or
Event of Default as may be requested by the Required Lenders in accordance with
Article IX (other than any such action which may conflict with applicable law);
provided, however, that unless and until the Administrative Agent has received
any such request, the Administrative 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 (except to the extent that this Agreement expressly requires that
such action be taken, or not be taken, only with the consent or upon the
authorization of Required Lenders).
SECTION 10.06. Credit Decision. Each Lender acknowledges that none of
the Agents or Agent-Related Persons has made any representation or warranty to
it, and that no act by the Agents hereafter taken, including any review of the
affairs of Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent or Agent-Related Person to any Lender.
Each Lender represents to each Agent that it has, independently and without
reliance upon any Agent or Agent-Related Person 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 Borrower and its Subsidiaries, the value
of and title to any collateral security, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to Borrower hereunder. Each
Lender also represents that it will, independently and without reliance upon any
Agent or Agent-Related Person 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 Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agents, the Agents 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 Borrower which may come into the possession of any of the
Agents or Agent-Related Persons.
SECTION 10.07. Indemnification of Agents and Agent-Related Persons.
Whether or not the transactions contemplated hereby are consummated, the Lenders
shall identify upon demand the Agents and Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrower and without limiting the obligation
of Borrower to do so), in accordance with its Total Percentage or, if
indemnification is sought after Commitments are terminated or expire, the Total
Percentages in effect immediately prior to such termination or
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expiration, or, if indemnification or reimbursement is sought after Revolving
Loans are paid in full, the Total Percentages in effect immediately prior
thereto from and against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to the Agents or Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse the Agents upon demand for its ratable
share, in accordance with its Total Percentage or, if reimbursement is sought
after the commitments have terminated or expired, the Total Percentages in
effect immediately prior to such termination or expiration or, if
indemnification or reimbursement is sought after Revolving Loans are paid in
full, the Total Percentages in effect immediately prior thereto of any costs or
out-of-pocket expenses (including legal costs and expenses) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
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
Administrative Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Administrative
Agent.
SECTION 10.08. Agents in Individual Capacity. Each Agent-Related Person
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrower and its
Subsidiaries and Affiliates as though the applicable Agent-Related Person were
not the Lead Arranger, Administrative Agent, Documentation Agent or Fronting
Lender hereunder or in connection herewith and without notice to or consent of
the Lenders. The Lenders acknowledge that, pursuant to such activities,
Agent-Related Persons may receive information regarding Borrower or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of Borrower or such Subsidiary) and acknowledge that each
such Agent-Related Person shall be under no obligation to provide such
information to them. With respect to its Revolving Loans, the applicable
Agent-Related Person shall have the same rights and powers under this Agreement
as any other Lender and may exercise the same as though it were not the Lead
Arranger, Administrative Agent, Documentation Agent or Fronting Lender, as the
case may be, and the terms "Lender" and "Lenders" include the applicable
Agent-Related Person in its individual capacity.
SECTION 10.09. Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders which successor
agent shall be approved by Borrower, which approval shall not be unreasonably
withheld. If no successor agent is
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appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Agents,
the Lenders and Borrower, a successor agent from among the Lenders. 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
Administrative Agent and the term "Administrative Agent" shall mean such
successor agent and the retiring Administrative Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article X and Sections 11.04 and 11.05 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above.
SECTION 10.10. Withholding Tax. (a) If any Lender claims exemption
from, or reduction of, withholding tax under a United States tax treaty by
providing IRS Form 1001 pursuant to clause (i) of Section 4.1(d) and such Lender
sells, assigns, grants a participation in or otherwise transfers all or part of
the Obligations of Borrower to such Lender, such Lender agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the extent of
such percentage amount, the Administrative Agent will treat such Lender's IRS
Form 1001 as no longer valid.
(b) If any Lender claiming exemption from United States withholding tax
by providing IRS Form 4224 to the Administrative Agent sells, assigns, grants a
participation in or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. However, if the forms or other documentation
required by clause (i) of Section 4.01(d) are not delivered to the
Administrative Agent, then the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax imposed by Sections 1441
and 1442 of the Code, without reduction.
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(d) If the IRS or any other Governmental Authority of the United States
or other jurisdiction asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or was not properly executed, or
because such Lender failed to notify the Administrative 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
Administrative Agent fully for all amounts paid, directly or indirectly, by the
Administrative Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all costs and expenses
(including legal costs and expenses). The obligation of the Lenders under this
clause shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
SECTION 10.11. Collateral Matters. (a) The Administrative Agent is
authorized on behalf of all the Lenders, without the necessity of any notice to
or further consent from the Lenders, from time to time to take any action with
respect to any collateral security or the Pledge Agreement or the Security
Agreement that may be necessary to perfect and maintain perfected the security
interest in and Liens upon the collateral security granted pursuant to the Loan
Documents.
(b) The Lenders irrevocably authorize the Administrative Agent, at its
option and in its discretion, to release (i) any security interest or Lien
granted to or held by the Administrative Agent upon any collateral security (A)
upon termination of the Commitments and Letters of Credit, the maturity of the
Acceptances and payment in full in cash of all principal of and interest on the
Revolving Loans, all fees payable pursuant to Sections 2.11 and 11.04, all
Special Facility Obligations (including interest thereon) and all other fees,
costs and expenses that are payable under this Agreement or under any other Loan
Document and have been invoiced (in which case the Lenders hereby authorize the
Administrative Agent to execute, and the Administrative Agent agrees to execute,
reasonable releases in connection with this Agreement (other than, in any event,
as to items stated to survive the termination of this Agreement)); (B)
constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; (C) constituting property
in which Borrower or any Subsidiary of Borrower owned no interest at the time
the security interest and/or Lien was granted or at any time thereafter; (D)
consisting of an instrument evidencing Indebtedness or other debt instrument, if
the Indebtedness evidenced thereby has been paid in full; or (E) if approved,
authorized or ratified in writing by the Required Lenders or, if required by
Section 11.01, the Supermajority Lenders or each Lender, as applicable, and (ii)
any Guarantor from its obligations under the Guaranty in the event such
Guarantor is not required to be a Guarantor pursuant to the terms of this
Agreement. Upon request by the Administrative Agent at any time, the Lenders
will confirm in writing the Administrative Agent's authority to release
particular types or items of collateral security pursuant to this Section 10.11.
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SECTION 10.12. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice of request required to be given to the
Administrative Agent by Borrower pursuant to the terms of this Agreement (unless
concurrently delivered to the Lenders by Borrower). The Administrative Agent
will distribute to each Lenders each document or instrument received and copies
of all other communications received by the Administrative Agent in each case
from Borrower for distribution to the Lenders by the Administrative Agent in
accordance with the terms of this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Borrower and Required Lenders and
acknowledged by the Administrative Agent (or signed by Borrower and the
Administrative Agent at the written request of Required Lenders) and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that, in addition:
(a) no such waiver, amendment or consent shall (i) forgive any
principal of any Revolving Loan or extend the final scheduled maturity
date of any Revolving Loan (it being understood that any waiver or
amendment of any installment or prepayment or the method of application
of any prepayment to the amortization of the Obligations shall not
constitute such an extension), or forgive any interest or reduce the
stated rate or change the scheduled time of payment of any interest or
fee payable hereunder (other than as a result of waiving the
applicability of any post-default increase in interest rates) or change
the final expiration date of any Lender's Commitments or increase the
aggregate amount of the Commitments of any Lender, in each case without
the consent of the Lender holding such Revolving Loan, to whom such
interest or fee is payable or having such Commitments, or (ii) amend,
modify or waive any provision of this Section 11.01 or reduce the
percentages specified in the definitions of the terms "Required
Lenders" or "Supermajority Lenders", or consent to the assignment or
transfer by Borrower of its rights and obligations under any Loan
Document to which it is a party, in each case without the consent of
each Lender directly and adversely affected thereby, or (iii) release
all or substantially all the collateral security provided under the
Pledge Agreement and the Security Agreement, in each case without the
consent of the Supermajority Lenders;
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(b) no amendment, waiver or consent shall, unless in writing
and signed by the Fronting Lender (in addition to the Lenders required
under this Section to sign such amendment, waiver or consent),
adversely affect the rights or duties of the Fronting Lender under this
Agreement, any Letter of Credit, any Acceptance or any other document
relating to any Letter of Credit Issued or to be Issued by it or any
Acceptance created or to be created by it;
(c) no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent (in addition to the Lenders
required under this Section to sign such amendment, waiver or consent),
adversely affect the rights or duties of the Administrative Agent under
this Agreement or any other Loan Document; and
(d) the Fee Letter may not be amended, nor may the rights or
privileges thereunder be waived, except in a writing executed by the
parties thereto.
SECTION 11.02. Notices. (a) Except to the extent otherwise expressly
provided herein, all notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission; provided, however, that any
matter transmitted to or by Borrower by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 11.02 and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered to the address or facsimile
number specified for notices on Schedule 11.02; or, as directed to Borrower or
the Administrative Agent, to such other address as shall be designated by such
party in a written notice to the other parties, and as directed to any other
party, at such other address as shall be designated by such party in a written
notice to Borrower and the Administrative Agent.
(b) All such notices, requests and communications shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, except that notices pursuant to Articles II, III or Article X to the
Administrative Agent shall not be effective until actually received by the
Administrative Agent, and notices pursuant to Article III to the Fronting Lender
shall not be effective until actually received by the Fronting Lender at the
address specified for the "Fronting Lender" on Schedule 11.02.
(c) Any agreement of the Administrative Agent and the Lenders herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of Borrower. The Administrative Agent and the Lenders shall
be entitled to rely on the authority of any Person purporting to be a Person
authorized by Borrower to give such notice and the Administrative Agent and the
Lenders shall not have any liability to Borrower or any other Person on account
of any action taken or not taken by the Administrative Agent or the Lenders in
reliance upon such telephonic or facsimile notice. The obligation of Borrower to
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repay the Revolving Loans and Special Facility Obligations shall not be affected
in any way or to any extent by any failure by the Administrative Agent and the
Lenders to receive written confirmation of any telephonic or facsimile notice or
the receipt by the Administrative Agent and the Lenders of a confirmation which
is at variance with the terms understood by the Administrative Agent and the
Lenders to be contained in the telephonic or facsimile notice.
SECTION 11.03. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent 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. All remedies
provided in this Agreement are cumulative, and not exclusive of other remedies,
at law or otherwise.
SECTION 11.04. Costs and Expenses. Borrower shall:
(a) pay or reimburse each Agent, the Swing Line Lender and the Fronting
Lender, as the case may be (subject to clause (e) of Section 5.01) promptly for
all reasonable and documented costs and expenses incurred by such Person in
connection with the development, preparation, delivery, execution and closing
of, and all reasonable and documented costs and expenses incurred by such Person
in connection with the administration and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including the reasonable and documented fees, costs and expenses of
outside counsel incurred by such Person with respect thereto; and
(b) pay or reimburse each Agent and each Lender promptly for all
reasonable and documented costs and expenses, including reasonable and
documented legal fees, costs and expenses, incurred by them in connection with
the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Revolving Loans (including in
connection with any "workout" or restructuring regarding the Revolving Loans,
and including in any Insolvency Proceeding or appellate proceeding).
SECTION 11.05. Borrower Indemnification. (a) Whether or not the
transactions contemplated hereby are consummated, Borrower shall indemnify,
defend and hold each Agent, each Agent-Related Person, each Lender and each of
their respective officers, directors, trustees, employees and agents (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including reasonable and documented legal
fees, costs and expenses) of any kind or nature whatsoever which may at
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any time (including at any time following repayment of the Revolving Loans, the
termination of the Letters of Credit, the maturity of the Acceptances and the
termination, resignation or replacement of the Administrative Agent or
replacement of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Revolving Loans,
Letters of Credit, the Acceptances or the use of the proceeds thereof, whether
or not Borrower or any Affiliate of Borrower or any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, however, that Borrower shall have no obligation hereunder to any
Indemnified Person with respect to (i) Indemnified Liabilities to the extent
determined by a court of competent jurisdiction in a final judgment to have
resulted from such Person's gross negligence or willful misconduct or (ii)
claims among the Agents and the Lenders other than to the extent arising out of
or as a result of any direct or indirect act or omission of Borrower or any
Guarantor or any officer, director, affiliate or employee thereof.
No Indemnified Person shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to any of Borrower or its security
holders or creditors related to or arising out of or in connection with the
Commitment Letter, the Fee Letter, this Credit Agreement, the Credit Extensions
hereunder, the use of proceeds of any such Credit Extension, any of the
Transactions or any related transaction or the engagement of the Agents pursuant
to, or the performance by any Indemnified Person of the services contemplated
hereby, except to the extent found by a court of competent jurisdiction to have
resulted from such Indemnified Person's willful misconduct or gross negligence
and except for any claim for breach of contract (other than claims of
consequential, exemplary or indirect damages).
Without the Agents' prior written consent, neither Borrower nor any of
its Affiliates or Subsidiaries will settle, compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding in
respect of which indemnification has been or would reasonably be expected to be
sought under the indemnification provisions hereof, unless such settlement,
compromise or consent includes an unconditional written release in form and
substance satisfactory to the Indemnified Persons of each Indemnified Person
from all liability arising out of such claim, action or proceeding and covered
by such settlement. The Agents agree not to effect the settlement of any action,
claim or proceeding for which indemnification has been sought hereunder unless
Borrower shall have given its prior consent thereto (not to be unreasonably
withheld, delayed or conditioned) or unless Borrower shall be in breach of its
obligations under this Section 11.05.
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(b) Survival. The obligations in this Section shall survive payment of
all other Obligations.
SECTION 11.06. Marshalling; Payments Set Aside. Neither the
Administrative Agent nor the Lenders shall be under any obligation to marshall
any assets in favor of Borrower or any other Person or against or in payment of
any or all of the Obligations. To the extent that Borrower makes a payment to
the Administrative Agent or the Lenders, or the Administrative Agent or the
Lenders exercise their right of set-off, and such payment or the proceeds of
such set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b) each Lender
severally agrees to pay to the Administrative Agent upon demand its Revolving
Loan Percentage of any amount so recovered from or repaid by the Administrative
Agent.
SECTION 11.07. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns, except that Borrower may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
SECTION 11.08. Assignments, Participations, etc. (a) Any Lender may,
with the prior written consent of Borrower, the Administrative Agent and the
Fronting Lender (which consents shall not be unreasonably withheld, delayed or
conditioned) at any time assign and delegate to one or more Eligible Assignees
(provided that no consent of Borrower shall be required in connection with any
assignment and delegation by a Lender to an Eligible Assignee that is an
Affiliate of such Lender) all or any part of the Revolving Loans, the Revolving
Commitments and the Special Facility Obligations and the other rights and
obligations of such Lender hereunder, in a minimum amount of the lesser of
$5,000,000 (or such lesser amount as may be agreed to by Borrower and the
Administrative Agent in their sole and absolute discretion) and the full
remaining amount of such Lender's Revolving Loans, Revolving Commitments or
Special Facility Obligations (except that no such minimum shall be applicable on
an assignment to a Lender or an Affiliate of a Lender); provided, however, that
Borrower and the Administrative Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned to an Eligible
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Eligible
Assignee, shall have been given to Borrower and the Administrative Agent by such
Lender and the Eligible Assignee; (ii) such Lender and its Eligible Assignee
shall have delivered to Borrower, the Lead Arranger and the
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<PAGE>
Administrative Agent an Assignment and Acceptance substantially in the form of
Exhibit J ("Assignment and Acceptance") together with any Note or Notes subject
to such assignment and (iii) the assignor Lender or Eligible Assignee (in each
case, other than in connection with any assignment by Merrill Lynch Capital
Corporation or its Affiliates) has paid to the Administrative Agent a
registration and processing fee in the amount of $3,500.
(b) Upon the request of the Eligible Assignee, solely to facilitate the
pledge or assignment of its Revolving Loans to any Federal Reserve Bank,
Borrower shall issue Notes to the Eligible Assignee. Upon the request of the
assignor Lender, if applicable, solely to facilitate the pledge or assignment of
its Revolving Loans to any Federal Reserve Bank, Borrower shall issue a reduced
Note to such assignor in exchange and replacement for its then existing Note.
(c) The Administrative Agent, on behalf of Borrower, shall maintain at
the address of the Administrative Agent specified on Schedule 11.02 (or at such
other address as may be designated by the Administrative Agent from time to time
in accordance with Section 11.02) a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment of and principal amount of the
Revolving Loans owing to each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower,
the Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of a Revolving Loan or other obligation
hereunder as the owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding any notice to the contrary. Any assignment of
any Revolving Loan or other obligation hereunder shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by Borrower, any Lender or any Agent
at any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee (and consented to by the
Administrative Agent and, in the case of Revolving Commitments and Special
Facility Obligations, by the Fronting Lender and, in the case of an Eligible
Assignee that is not an Affiliate of the assigning Lender, by Borrower (in each
case such consent not to be unreasonably withheld)) together with payment to the
Administrative Agent of the registration and processing fee described in clause
(a)(iii), the Administrative Agent shall record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders and Borrower. Immediately upon the recordation of such information
in the Register, 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 Commitments arising therefrom, and (i) the Eligible
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
110
<PAGE>
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. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time sell to one or more commercial Lenders
or other Persons not Affiliates of Borrower (a "Participant") participating
interests in any Revolving Loans, the Commitment of that Lender and the other
interests of that 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) Borrower, the Fronting Lender and the Administrative 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 has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
the consent of the Originating Lender as an affected Lender as described in
clause (a)(i) of Section 11.01. In the case of any such participation, the
Participant shall be entitled to the benefit of Sections 4.01, 4.03 and 11.05 as
though it were also a Lender hereunder, but shall not be entitled to any greater
amount than would be payable to the original Lender if no participation had been
made, 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 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.
(f) Subject to Section 11.09, Borrower authorizes each Lender to
disclose to any Eligible Assignee or Participant (each, a "Transferee") and any
prospective Transferee any and all financial information in such Lender's
possession concerning Borrower and its Affiliates that has been delivered to
such Lender by or on behalf of Borrower in connection with such Lender's credit
evaluation of Borrower and its Affiliates prior to such Transferee or
prospective Transferee becoming a party to this Agreement; provided, however,
that neither the Administrative Agent nor any Lender shall provide to any
Transferee or prospective Transferee any of the Confidential Information unless
such person shall have previously executed a confidentiality agreement
containing substantially similar terms to the terms specified in Section 11.09.
(g) Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest
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<PAGE>
in this Agreement and the Note held by it in favor of any Federal Reserve Bank
in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
Section 203.14, or any successor thereto, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
SECTION 11.09. Confidentiality. Each Lender agrees to maintain, in
accordance with its customary procedures for handling confidential information,
the confidentiality of all information provided to it by or on behalf of
Borrower or any Subsidiary, or by the Administrative Agent on Borrower's or such
Subsidiary's behalf, under this Agreement or any other Loan Document
("Confidential Information"), and neither it nor any of its Affiliates shall use
any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with Borrower or any Subsidiary, except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by the Lender or (ii) was or becomes
available on a non-confidential basis from a source other than Borrower;
provided, however, that such source is not bound by a confidentiality agreement
with Borrower known to the Lender; provided, however, that any Lender may
disclose such information (A) 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; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the
Administrative Agent, any Lender or their respective Affiliates may be party;
(E) to the extent reasonably required in connection with the exercise of any
remedy hereunder or under any other Loan Document; (F) to such Lender's
independent auditors and other professional advisors who have been advised that
such information is confidential pursuant to this Section 11.09; (G) to any
Participant or Assignee, actual or potential; provided, however, that such
Person shall have agreed in writing to keep such information confidential to the
same extent required of the Lenders hereunder; and (H) to its Affiliates who
have been advised that such information is confidential pursuant to this Section
11.09. Unless prohibited by applicable law or court order, each Lender and the
Administrative Agent shall notify Borrower of any request by any Governmental
Authority (other than any request in connection with an examination of the
financial condition of such Lender) for disclosure of Confidential Information
prior to such disclosure; provided, however, that in no event shall the
Administrative Agent or any Lender be obligated to return any materials
furnished by Borrower or any of its Subsidiaries. This Section shall supersede
any confidentiality letter or agreement with respect to Borrower or the
Facilities entered into prior to the date hereof.
SECTION 11.10. Set-off. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Revolving Loans
have been accelerated, each Lender is authorized at any time and from time to
time, without prior notice
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<PAGE>
to Borrower, any such notice being waived by Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness, credits or claims (in each case, in any currency and whether
direct or indirect, absolute or contingent, matured or unmatured) at any time
owing by such Lender (or any branch or agency thereof) to or for the credit or
the account of Borrower against any and all Obligations then due and payable by
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise). Each Lender agrees promptly to notify Borrower and the
Administrative 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.
SECTION 11.11. Notification of Addresses, Lending Offices, etc. Each
Lender shall notify the Administrative Agent in writing of any changes in the
address to which notices to the Lender should be directed, of addresses of any
Lending Office, of payment instructions in respect of all payments to be made to
it hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
SECTION 11.12. Counterparts. This Agreement may be executed 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.
SECTION 11.13. 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.
SECTION 11.14. No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of Borrower, the Lenders,
each Agent and the Agent-Related Persons, 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.
SECTION 11.15. Governing Law and Jurisdiction. (a) THIS AGREEMENT, THE
NOTES AND ALL OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS THEREOF.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
LOCATED IN THE COUNTY OF NEW YORK OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FOR THE
113
<PAGE>
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF BORROWER, THE AGENTS AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF
BORROWER, THE AGENTS AND THE LENDERS 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. BORROWER, THE AGENTS AND THE LENDERS EACH WAIVE PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
SECTION 11.16. Waiver of Jury Trial. BORROWER, THE LENDERS AND THE
AGENTS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. BORROWER ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF THIS AGREEMENT AND EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENTS.
SECTION 11.17. Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and understanding among
Borrower, the Lenders and the Agents, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
EVENFLO COMPANY, INC.
By:
--------------------------------
Name:
Title:
S-1
<PAGE>
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
as Lead Arranger and Syndication Agent
By:
------------------------------
Name:
Title:
S-2
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
------------------------------
Name:
Title:
S-3
<PAGE>
DLJ CAPITAL FUNDING, INC.,
as Documentation Agent
By:
------------------------------
Name:
Title:
S-4
<PAGE>
MERRILL LYNCH CAPITAL
CORPORATION, as a Lender
By:
------------------------------
Name:
Title:
S-5
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By:
------------------------------
Name:
Title:
S-6
<PAGE>
DLJ CAPITAL FUNDING, INC., as a Lender
By:
------------------------------
Name:
Title:
S-7
<PAGE>
EXHIBIT A
[FORM OF NOTICE OF BORROWING]
To: Bank of America National Trust and Savings Association ("BofA"), as
administrative agent (in such capacity, the "Administrative Agent") for
the various financial institutions (collectively, the "Lenders") from
time to time parties to that certain Credit Agreement, dated as of
August 20, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Evenflo Company, Inc., a
Delaware corporation ("Borrower"), the Lenders, the Administrative
Agent, BofA, as Swing Line Lender and Fronting Lender, together with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
as Lead Arranger and Syndication Agent and DLJ Capital Funding, Inc.,
as Documentation Agent.
Ladies and Gentlemen:
The undersigned, pursuant to Sections 2.03 and 5.02 of the Credit
Agreement (terms defined therein being used herein as therein defined), hereby
gives you notice irrevocably of the Credit Extension specified below:
1. The Business Day of the proposed Credit Extension is
________.
2. The Borrowing is to be a [Revolving Loan] [Swing Line Loan]
in an aggregate principal amount of $______, comprised of 1[Eurodollar
Loans having an Interest period of [one] [two] [three] [six] [nine]
[twelve] month(s)] [Base Rate Loans].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Credit
Extension, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) the representations and warranties of Borrower and the
other Obligors contained in Article VI of the Credit Agreement and in
the other Loan Documents are true and correct as though made on and as
of such date (except to the extent such representations and warranties
expressly
- -----------------------
a Insert appropriate interest rate option and, if applicable, the number
of months with respect to Eurodollar Loans. Note that Swing Line Loans
must be made as Base Rate Loans.
<PAGE>
refer to an earlier date, in which case they are true and correct as of
such earlier date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Credit Extension; and
(c) the proposed Credit Extension will not (i) cause the
aggregate principal amount of all outstanding Revolving Loans plus the
aggregate amount of all outstanding Swing Line Loans plus the aggregate
amount of all outstanding Special Facility Obligations to exceed the
combined Revolving Commitment of the Lenders, (ii) cause the aggregate
principal amount of all outstanding Swing Line Loans to exceed the
Swing Line Commitment of the Swing Line Lender or (iii) cause the
aggregate amount of all Special Facility Obligations to exceed the
Special Facility Commitment of the Fronting Lender.
Borrower agrees that if, prior to the time of the funding of the Credit
Extension requested hereby, any matter certified to herein by it will not be
true and correct at such time as if then made, it will immediately so notify the
Administrative Agent. Except to the extent, if any, that prior to the time of
the Credit Extension requested hereby the Administrative Agent shall receive
written notice to the contrary from the Borrower, each matter certified to
herein shall be deemed to be certified at the date of such Credit Extension .
IN WITNESS WHEREOF, Borrower has caused this Notice of Borrowing to be
executed and delivered, and the certification and warranties contained herein to
be made, by its duly authorized Responsible Officer this ___ day of _______,
____.
EVENFLO COMPANY, INC.
By:
----------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT B
[FORM OF NOTICE OF CONVERSION/CONTINUATION]
To: Bank of America National Trust and Savings Association ("BofA"), as
administrative agent (in such capacity, the "Administrative Agent") for
the various financial institutions (collectively, the "Lenders") from
time to time parties to that certain Credit Agreement, dated as of
August 20, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Evenflo Company, Inc., a
Delaware corporation ("Borrower"), the Lenders, the Administrative
Agent, BofA, as Swing Line Lender and Fronting Lender together with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Lead Arranger and Syndication Agent and DLJ Capital
Funding, Inc., as Documentation Agent.
Ladies and Gentlemen:
The undersigned, pursuant to Section 2.04 of the Credit Agreement
(terms defined therein being used herein as therein defined), hereby gives you
notice irrevocably, of the [conversion] [continuation] of the Revolving Loans
specified herein, as follows:
1. The Conversion/Continuation Date is ___________ ___, _____.
2. The aggregate amount of the Revolving Loans to be
[converted] [continued] is $-------.
3. The Revolving Loans are to be [converted into] [continued
as] [Eurodollar] [Base Rate] Loans.
[4. The duration of the Interest Period for the Eurodollar
Loans included in the [conversion] [continuation] shall be [one] [two]
[three] [six] [nine] [twelve] months.]
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Notice of
Conversion/Continuation to be executed and delivered, and the certification
contained herein to be made, by its duly authorized Responsible Officer this ___
day of _______, ____.
EVENFLO COMPANY, INC.
By: ----------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT C
EVENFLO COMPANY, INC.
[FORM OF COMPLIANCE CERTIFICATE]
Financial
Statement Date: ___________ ___, _____
Reference is made to that certain Credit Agreement, dated as of August
20, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Evenflo Company, Inc., a Delaware corporation
("Borrower"), the various financial institutions from time to time parties
thereto (collectively, the "Lenders"), Bank of America National Trust and
Savings Association ("BofA"), as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), BofA as Swing Line Lender and Fronting
Lender, together with Merrill Lynch & Co., Merrill Lynch Pierce, Fenner & Smith
Incorporated, as Lead Arranger and Syndication Agent and DLJ Capital Funding,
Inc., as Documentation Agent. Unless otherwise defined herein, capitalized terms
used herein have the respective meanings assigned to them in the Credit
Agreement. Unless otherwise expressly specified herein, the amounts set forth in
the financial covenant analyses attached as Schedule 3 hereto are for the Test
Period ending on the Financial Statement Date, subject in the case of
Consolidated Interest Expense to the proviso to such definition in the Credit
Agreement.
The undersigned Responsible Officer of the Borrower, hereby
certifies as of the date hereof that he/she is the _________ of the Borrower,
and that, as such, he/she is authorized to execute and deliver this
Certificate to the Lenders and the Administrative Agent on behalf of the
Borrower and its Restricted Subsidiaries, and that:
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by clause (a) of Section 7.01 of the Credit
Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
audited consolidated balance sheet of Borrower and its Subsidiaries as at the
end of the Fiscal Year ended ____________ ___, _____ and (b) the related
consolidated statements of earnings, cash flows and, to the extent prepared,
shareholders' equity for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, and accompanied by
the opinion of a nationally recognized independent public accounting firm (the
"Independent Auditor") (such opinion is not qualified or limited because of a
restricted or limited examination by the Independ-
<PAGE>
ent Auditor or any material portion of the Borrower's or any Subsidiary's
records), and present fairly present in all material respects the financial
position and results of operations of Borrower and its Subsidiaries for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years.
or
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by clause (b) of Section 7.01 of the Credit
Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
unaudited consolidated balance sheet of Borrower and the Restricted Subsidiaries
as of the end of the Fiscal Quarter ended __________ ___, _____, and (b) the
related unaudited consolidated statements of earnings, cash flows and, to the
extent prepared, shareholders' equity for the period commencing on the first day
and ending on the last day of such quarter. Such financial statements were
prepared in accordance with GAAP (subject only to year-end audit adjustments)
and fairly present in all material respects the financial position and the
results of operations of Borrower and the Restricted Subsidiaries as of such
date.
2. Attached as Schedule 2 hereto are the statements referred to in
paragraph 1 above prepared on a Pro Forma Basis for each Acquisition and
Disposition consummated during the Test Period ending on the Financial Statement
Date.
3. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement.
4. The financial covenant analyses and information set forth on
Schedule 3 attached hereto are true and accurate in all material respects on and
as of the date of this Certificate.
5. Each Person which became or ceased to be a Material Subsidiary
during the Fiscal Quarter ending on the Financial Statement Date is listed on
Schedule 4 attached hereto.
6. The amount of the Net Disposition Proceeds received by the Borrower
and its Restricted Subsidiaries, the date on which such Net Disposition Proceeds
were so received and the portion of such proceeds reinvested in accordance
2
<PAGE>
with Section 2.08(a) of the Credit Agreement, in each case since(a)
_______________, are set forth on Schedule 5 hereto.
7. Cumulative Consolidated Net Income Available to Common Stockholders
as of the Financial Statement Date was $_____________. The amount of cash
dividends paid by the Borrower since the Closing Date and prior to (and
including) the Financial Statement Date was $_______________.
8. (b)The amount of Capital Expenditures made during the Fiscal Year
ending on the Financial Statement Date was $_______. [The aggregate amount
permitted for such Fiscal Year is $______.](c)
9. Borrower, during such period, has observed, performed or satisfied
all of the covenants in the Credit Agreement to be observed, performed or
satisfied by Borrower, and the undersigned has no knowledge of (i) any Default
or Event of Default; (ii) any litigation or governmental proceeding pending
against Borrower or any Restricted Subsidiary that could reasonably be expected
to have a Material Adverse Effect; or (iii) any acceleration, redemption or
purchase demands or notices provided by the trustee for the Senior Notes.
10. *Attached as Schedule 6 hereto is a certificate of the Independent
Auditor as to no Default of Event or Default under Section 8.06 of the Credit
Agreement.
- ------------------------------
(a) Insert date which is 360 days prior to the Financial Statement Date,
unless 360 days have not elapsed since the Closing Date; if such two
years have not elapsed, insert the Closing Date.
(b) To be included in those Certificates delivered in connection with the
financial statements required by clause (a) of Section 7.01 of the
Credit Agreement.
(c) Include sentence if applicable Capital Expenditures exceed the amount
determined pursuant to Section 8.07(a) of the Credit Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned, a Responsible Officer of
Borrower, has executed this Compliance Certificate as of ___________ ___, _____.
EVENFLO COMPANY, INC.
By:
-----------------------------
Name:
Title:
4
<PAGE>
SCHEDULES
[AS PROVIDED BY BORROWER]
<PAGE>
EXHIBIT D
[FORM OF NOTICE OF L/C ISSUANCE/AMENDMENT]
Date: ____________ ___, _____
To: Bank of America National Trust and Savings Association ("BofA"), as
administrative agent (in such capacity, the "Administrative Agent") for
the various financial institutions (collectively, the "Lenders") from
time to time parties to that certain Credit Agreement, dated as of
August 20, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Evenflo Company, Inc., a
Delaware corporation ("Borrower"), the Lenders, the Administrative
Agent, BofA, as Swing Line Lender and Fronting Lender, together with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Lead Arranger and Syndication Agent and DLJ Capital
Funding, Inc., as Documentation Agent.
Ladies and Gentlemen:
The undersigned, pursuant to Section 3.02 of the Credit Agreement
(terms defined therein being used herein as therein defined), hereby irrevocably
requests that Bank of America National Trust and Savings Association (the
"Fronting Lender") (a)[issue a [standby] [documentary] Letter of Credit on
____________ ___, _____ (the "Issuance Date") in the initial Stated Amount of
$____________ with an Expiration Date (as defined therein) of ___________ ___,
____] (b)[extend the Expiration Date (as defined under Letter of Credit No.__,
issued on ____________ ___, ____, in the initial stated amount of
$_____________) to a revised Expiration Date (as defined therein) of
_____________ ___, _____ for the account of ____________].
(c)[The beneficiary of the requested Letter of Credit will be , located
at ________, _________, and such Letter of Credit will be in support of
_________. The documents to be presented by the beneficiary of such Letter of
Credit, together with the text of any certificates to be presented by such
beneficiary, are attached hereto.]
- ---------------------
(a) Insert and complete as appropriate.
(b) Applicable only to standby Letters of Credit.
(c) Delete if Issuance Request is for an extension.
<PAGE>
[Insert other matter reasonably required by the Fronting Lender.]
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed [issuance]
[extension], before and after giving effect thereto and to the application of
the proceeds therefrom:
(a) the representations and warranties of Borrower and the
other Obligors contained in Article VI of the Credit Agreement and in
the other Loan Documents are true and correct as though made on and as
of such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they are true and
correct as of such earlier date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [issuance] [extension];
and
(c) The proposed [issuance] [extension] will not (i) cause the
aggregate principal amount of all outstanding Revolving Loans plus the
aggregate amount of all outstanding Swing Line Loans plus the aggregate
amount of all outstanding Special Facility Obligations to exceed the
combined Revolving Commitment of the Lenders, (ii) cause the aggregate
principal amount of all outstanding Swing Line Loans to exceed the
Swing Line Commitment of the Swing Line Lender or (iii) cause the
aggregate amount of all Special Facility Obligations to exceed the
Special Facility Commitment of the Fronting Lender.
Borrower agrees that if, prior to the time of the [issuance]
[extension] of the Letter of Credit requested hereby, any matter certified to
herein by it will not be true and correct at such time as if then made, it will
immediately so notify the Administrative Agent. Except to the extent, if any,
that prior to the time of the [issuance] [extension] of the Letter of Credit
requested hereby the Administrative Agent and the Fronting Lender shall receive
written notice to the contrary from Borrower, each matter certified to herein
shall be deemed to be certified at the date of such issuance or extension.
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<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Notice of L/C
Issuance/Amendment to be executed and delivered, and the certification and
warranties contained herein to be made, by its duly authorized Responsible
Officer this ___ day of _______, ____.
EVENFLO COMPANY, INC.
By
---------------------------------
Name
Title:
3
<PAGE>
EXHIBIT E
[FORM OF GUARANTY]
This GUARANTY, dated as of August 20, 1998, is made by each of the
signatories hereto and each other Person which may from time to time hereafter
become a party hereto pursuant to Section 13 (each, individually, an "Additional
Guarantor", and, collectively, the "Additional Guarantors", and, together with
each of the signatories hereto, each, individually, a "Guarantor", and,
collectively, the "Guarantors"), in favor of Bank of America National Trust and
Savings Association ("BofA"), as administrative agent (in such capacity, the
"Administrative Agent") for the various financial institutions from time to time
parties (collectively, the "Lenders") to that certain Credit Agreement, dated as
of August 20, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Evenflo Company, Inc., a Delaware
corporation ("Borrower"), the Lenders, the Administrative Agent, BofA, as Swing
Line Lender and Fronting Lender, together with Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Lead Arranger and Syndication
Agent and DLJ Capital Funding, Inc., as Documentation Agent, for the ratable
benefit of the Secured Creditors (as defined below).
W I T N E S S E T H:
WHEREAS, (a) pursuant to the Credit Agreement, the Lenders have
severally agreed to make Credit Extensions (such capitalized term, and other
capitalized terms used in these recitals, to have the meanings set forth, or
defined by reference in, Section 1) to Borrower upon the terms and subject to
the conditions set forth therein and (b) one or more Lenders (including those of
its Affiliates that have appointed the Administrative Agent to act on such
Affiliates' behalf hereunder on terms substantially similar to those set forth
in Article X of the Credit Agreement, including the provisions relating to
exculpation and indemnification therein) may from time to time enter into Swap
Contracts with Borrower (such Affiliates, together with such Lenders, being
referred to herein as "Secured Creditors");
WHEREAS, each Guarantor is a Domestic Subsidiary of Borrower;
WHEREAS, the proceeds of the Credit Extensions will be used in part to
enable Borrower to make valuable transfers to the Guarantors in connection with
the operation of their respective businesses;
WHEREAS, pursuant to the Credit Agreement, the Fronting Lender has
agreed to issue Letters of Credit and create Acceptances at the request, and for
the account, of Borrower and other Account Parties (including the Guarantors);
<PAGE>
WHEREAS, Borrower and the Guarantors are engaged in related businesses,
and each Guarantor will derive substantial direct and indirect benefit from the
making of the Credit Extensions; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective Credit Extensions to Borrower under the Credit
Agreement that the Guarantors shall have executed and delivered this Guaranty to
the Agents for the ratable benefit of the Secured Creditors;
NOW, THEREFORE, in consideration of the premises and to induce the
Agents and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective Credit Extensions to Borrower under the Credit
Agreement and to induce one or more Secured Creditors to enter into Swap
Contracts with Borrower, the Guarantors hereby agree with the Administrative
Agent, for the ratable benefit of the Secured Creditors, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings ascribed to them in
the Credit Agreement.
(b) As used herein, "Obligations" means the collective reference to (i)
the unpaid principal of and interest on the Revolving Loans and all other
obligations and liabilities (including the Special Facility Obligations and the
Guaranteed Obligations) of Borrower to any Agent, the Fronting Lender or any
Lender (including interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Revolving Loans and interest accruing
at the then applicable rate provided in the Credit Agreement after the filing
of, or which would have accrued but for the filing or commencement of, any
Insolvency Proceeding relating to Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter incurred, that may arise under, out of, or in connection with, the
Credit Agreement, the other Loan Documents, the Letters of Credit, the
Acceptances or any other document made, delivered or given in connection
therewith, whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including all reasonable fees
and disbursements of counsel to the Agents or to the Lenders that are required
to be paid by Borrower or any Guarantor pursuant to the terms of the Credit
Agreement or any other Loan Document) and (ii) all obligations and liabilities
of Borrower to any Secured Creditor, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, that may
arise under, out of, or in connection with, any Swap Contract or any other
document made, delivered or given in connection therewith.
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<PAGE>
(c) "Guaranty" means this Guaranty, as amended, amended and restated,
supplemented or otherwise modified from time to time.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guaranty shall refer to this Guaranty as a whole and
not to any particular provision of this Guaranty, and Section references are to
Sections of this Guaranty unless otherwise specified. The word "including" is
not limiting and means "including without limitation".
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guaranty. (a)Subject to the provisions of Section 2(b), each of the
Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit of the Secured
Creditors and their respective successors, endorsees, transferees and assigns,
the prompt and complete payment and performance by Borrower when due (whether at
the stated maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount that can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors.
(c) Each Guarantor further agrees to pay any and all reasonable
expenses (including all reasonable fees and disbursements of counsel) that may
be paid or incurred by any Agent or any Secured Creditor in enforcing or
obtaining advice of counsel in respect of any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Guarantor under this Guaranty. This
Guaranty shall remain in full force and effect until the Obligations are paid in
full, the Commitments are terminated, the Letters of Credit are terminated or
expired and the Acceptances are matured, notwithstanding that from time to time
prior thereto Borrower may be free from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guaranty or affecting the rights and remedies of any
Agent or any Secured Creditor hereunder.
(e) No payment or payments made by Borrower, any Guarantor, any other
guarantor or any other Person or received or collected by any Agent or any
Secured Creditor from Borrower, any Guarantor, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations
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<PAGE>
shall be deemed to modify, reduce, release or otherwise affect the liability of
any Guarantor hereunder, which shall, notwithstanding any such payment or
payments other than payments made by such Guarantor in respect of the
Obligations or payments received or collected from such Guarantor in respect of
the Obligations, remain liable for the Obligations up to the maximum liability
of such Guarantor hereunder until the Obligations are paid in full, the
Commitments are terminated, no Letters of Credit remain outstanding and no
Acceptance remain unmatured.
(f) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to any Agent or any Secured Creditor on account
of its liability hereunder, it will notify the Administrative Agent in writing
that such payment is made under this Guaranty for such purpose.
3. Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 5. The provisions of
this Section 3 shall in no respect limit the obligations and liabilities of any
Guarantor to the Agents and the Secured Creditors, and each Guarantor shall
remain liable to the Agents and the Secured Creditors for the full amount
guaranteed by such Guarantor hereunder.
4. Right of Set-off. In addition to any rights and remedies of each
Agent and each Secured Creditor provided by law, if an Event of Default exists
or the Revolving Loans have been accelerated, each Guarantor hereby irrevocably
authorizes each Agent and each Secured Creditor at any time and from time to
time, without prior notice to such Guarantor, any such notice being waived by
such Guarantor to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held by, and other indebtedness, credits or claims (in each case, in
any currency and whether direct or indirect, absolute or contingent, matured or
unmatured) at any time owing by such Agent or such Secured Creditor (or any
branch or agency thereof) to or for the credit or the account of such Guarantor
against any and all Obligations then due and payable by such Guarantor hereunder
(whether at the stated maturity, by acceleration or otherwise). Each Secured
Creditor agrees to promptly notify the Guarantor and the Administrative Agent
after any such set-off and application made by such Secured Creditor; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application.
5. Postponement of Subrogation, etc. Each Guarantor hereby expressly
waives, until the Obligations are paid in full, the Commitments are terminated,
all Letters of Credit are terminated or expired and all Acceptances are matured,
any rights which it may now have or hereafter acquire against Borrower or
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<PAGE>
any Guarantor by way of subrogation, reimbursement, contribution or setoff by
virtue of any payment made pursuant to the terms hereof or otherwise and any
claim, right or remedy which such Guarantor may now have or hereafter acquire
against Borrower or any Guarantor that arises from the existence or performance
by such Guarantor of its obligations hereunder, including any claim, right or
remedy of any Agent or any Secured Creditor against Borrower or any security
that any Agent or any Secured Creditor now has or hereafter acquires, that or
not such claim, right or remedy arises in equity, under contract, by statute,
under color of law or otherwise. If any amount shall be paid to any Guarantor on
account of such subrogation, reimbursement, contribution, setoff or other rights
at any time when all the Obligations shall not have been paid in full, all the
Commitments terminated, all Letters of Credit terminated or expired and all
Acceptances matured, such amount shall be held by such Guarantor in trust for
the benefit of the Agents and the Secured Creditors, segregated from other funds
of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be
turned over to the Administrative Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if
required) to be (after payment of any amounts payable to the Agents pursuant to
Section 11.04 and 11.05 of the Credit Agreement) applied by the Administrative
Agent for the ratable benefit of the Secured Creditors in the following order:
first, against Obligations consisting of unpaid and outstanding interest on the
Loans; second, ratably against Obligations consisting of unpaid and outstanding
principal of the Revolving Loans, Obligations then due and owing under all
outstanding Swap Contracts and Obligations consisting of unreimbursed and owing
Special Facility Obligations and other similar obligations; third, to
collateralize Obligations consisting of Special Facility Obligations and other
similar obligations; and fourth, against any other remaining Obligations. The
Administrative Agent may assume that no Obligations are outstanding with respect
to Swap Contracts unless it has received written notice thereof in accordance
with this Guaranty prior to any such application by it, and if so notified may
rely upon and deal with the Secured Creditor party to such Swap Contract as to
Obligations thereunder. Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all the Obligations
(other than indemnities, costs and expenses that survive termination of a Loan
Document but as to which demand for payment has not then been made), the
termination of all Commitments, the termination or expiration of all Letters of
Credit and the maturity of all Acceptances shall be paid over to Borrower or to
any other Person notified in writing to the Administrative Agent that may be
lawfully entitled to receive such surplus.
6. Amendments, etc. with Respect to the Obligations; Waiver of Rights.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Obligations made
by any Agent or any Secured Creditor may be rescinded by such party and any
5
<PAGE>
of the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Agent or any Secured
Creditor, and the Credit Agreement and the other Loan Documents and any other
documents executed and delivered in connection therewith and the Swap Contracts
and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders, as the case may be, or in the
case of any Swap Contract, the Secured Creditor party thereto) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Secured Creditor for
the payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Secured Creditor shall have
any obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Obligations or for this Guaranty or any property
subject thereto. When making any demand hereunder against any of the Guarantors,
the Administrative Agent or any Secured Creditor may, but shall be under no
obligation to, make a similar demand on Borrower or any other Guarantor or
guarantor, and any failure by the Administrative Agent or any Secured Creditor
to make any such demand or to collect any payments from Borrower or any such
other Guarantor or guarantor or any release of Borrower or such other Guarantor
or guarantor shall not relieve any of the Guarantors in respect of which a
demand or collection is not made or any of the Guarantors not so released of
their several obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
any Agent or any Secured Creditor against any of the Guarantors. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
7. Guaranty Absolute and Unconditional. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by any Agent or any Secured
Creditor upon this Guaranty or acceptance of this Guaranty; the Obligations (and
any of them) shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guaranty; and all dealings between Borrower and any of the Guarantors, on the
one hand, and the Agents and the Secured Creditors, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in reliance upon
this Guaranty. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon Borrower or any of the
Guarantors with respect to the Obligations. Each Guarantor understands and
agrees that this Guaranty shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a)the genuineness,
legality, validity, regularity or enforceability of the
6
<PAGE>
Credit Agreement, any other Loan Document or any Swap Contract, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent or any Secured Creditor, (b) any defense, setoff or
counterclaim (other than a defense of payment or performance) that may at any
time be available to or be asserted by Borrower against the Administrative Agent
or any Secured Creditor or (c) any other circumstance whatsoever (with or
without notice to or knowledge of Borrower or such Guarantor) that constitutes,
or might be construed to constitute, an equitable or legal discharge of Borrower
for the Obligations, or of such Guarantor under this Guaranty, in bankruptcy or
in any other instance. When pursuing its rights and remedies hereunder against
any Guarantor, the Administrative Agent and any Secured Creditor may, but shall
be under no obligation to, pursue such rights and remedies as it may have
against Borrower or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any Secured Creditor to pursue such
other rights or remedies or to collect any payments from Borrower or any such
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of Borrower or any such other
Person or any such collateral security, guarantee or right of offset, shall not
relieve such Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent and the Secured Creditors against
such Guarantor. This Guaranty shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon each Guarantor
and the successors and assigns thereof, and shall inure to the benefit of the
Administrative Agent and the Secured Creditors, and their respective successors,
endorsees, transferees and assigns, until all the Obligations and the
obligations of each Guarantor under this Guaranty shall have been satisfied by
payment in full, the Commitments are terminated, the Letters of Credit are
terminated or expired and the Acceptances are matured, notwithstanding that from
time to time during the term of the Credit Agreement and any Swap Contract
Borrower may be free from any Obligations; provided that, upon the sale or other
disposition of any Guarantor hereunder in accordance with the terms of the
Credit Agreement, such Guarantor shall automatically be released from all
obligations hereunder to the extent that such sale or other disposition causes
such Guarantor to cease being a Domestic Subsidiary of Borrower.
8. Reinstatement. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Administrative Agent or any Secured Creditor in connection with an
Insolvency Proceeding of Borrower or any Guarantor, including upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, Bor-
7
<PAGE>
rower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
9. Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Administrative Agent without setoff or counterclaim in
Dollars at the office of the Administrative Agent set forth in Schedule 11.02 to
the Credit Agreement.
10. Representations and Warranties; Covenants. (a) Each Guarantor
hereby represents and warrants that the representations and warranties set forth
in Article VI of the Credit Agreement as they relate to such Guarantor or the
Loan Documents, if any, to which such Guarantor is a party, each of which is
hereby incorporated herein by reference, are true and correct, and the Agents
and each Secured Creditor shall be entitled to rely on each of them as if they
were fully set forth herein.
(b) Each Guarantor hereby covenants and agrees with each Agent and each
Secured Creditor that, from and after the date of this Guaranty until the
Obligations are paid in full, the Commitments are terminated, the Letters of
Credit are terminated or expired and the Acceptances are matured, such Guarantor
shall take, or shall refrain from taking, as the case may be, all actions that
are necessary to be taken or not taken so that no violation of any provision,
covenant or agreement contained in Article VII or VIII of the Credit Agreement,
and so that no Default or Event of Default, is caused by any act or failure to
act of such Guarantor or any of its Subsidiaries.
11. Authority of Agent. Each Guarantor acknowledges that the rights and
responsibilities of the Administrative Agent under this Guaranty with respect to
any action taken by the Administrative Agent or the exercise or non-exercise by
the Administrative Agent of any option, right, request, judgment or other right
or remedy provided for herein or resulting or arising out of this Guaranty
shall, as between the Administrative Agent and the Secured Creditors, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and such Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Creditors with full
and valid authority so to act or refrain from acting, and no Guarantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
12. Notices. All notices, requests and demands pursuant hereto shall be
made in accordance with Section 11.02 of the Credit Agreement. Any such notice,
request or demand to or upon any Guarantor shall be addressed to such Guarantor
in care of Borrower in accordance with such Section.
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<PAGE>
13. Additional Guarantors. Upon the execution and delivery by any other
Person of an instrument in the form of Annex I hereto, such Person shall become
a "Guarantor" hereunder with the same force and effect as if originally named as
a Guarantor herein. The execution and delivery of any such instrument shall not
require the consent of any other Guarantor hereunder. The rights and obligations
of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Guaranty.
14. Counterparts. This Guaranty may be executed 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 counterparts of this
Guaranty signed by all the Guarantors shall be lodged with the Administrative
Agent.
15. Severability. Any provision of this Guaranty that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16. Integration; Loan Document. This Guaranty represents the agreement
of each Guarantor with respect to the subject matter hereof and there are no
promises or representations by the Administrative Agent or any Secured Creditor
relative to the subject matter hereof not reflected herein or, to the extent
expressly referred to herein, in the other Loan Documents. This Guaranty
constitutes a Loan Document.
17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the affected
Guarantor(s), the Administrative Agent and the Lenders required to sign such
amendment, waiver or consent in accordance with Section 11.01 of the Credit
Agreement.
(b) Neither the Administrative Agent nor any Secured Creditor shall by
any act (except by a written instrument pursuant to Section 17(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Secured
Creditor, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Agent or any Secured
Creditor of any right or remedy hereunder on
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<PAGE>
any one occasion shall not be construed as a bar to any right or remedy that
such Agent or such Secured Creditor would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
18. Section Headings. The Section headings used in this Guaranty are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
19. Successors and Assigns. This Guaranty shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Agents and the Secured Creditors and their successors and assigns, except that
no Guarantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of each Agent.
20. WAIVER OF JURY TRIAL. EACH GUARANTOR AND THE AGENTS (THE
ADMINISTRATIVE AGENT ON ITS BEHALF AND ON BEHALF OF THE SECURED CREDITORS)
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL
BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
21. Submission to Jurisdiction; Waivers. Each Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guaranty or any other Loan Document, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Guarantor in care
of Borrower at Borrower's address referred to in Section 11.02 of the Credit
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<PAGE>
Agreement or at such other address of which the Administrative Agent shall have
been notified pursuant to Section 11.02 of the Credit Agreement;
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section 21 any special, exemplary, punitive or consequential damages.
22. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF LAWS THEREOF.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to
be duly executed and delivered by its duly authorized officer as of the day and
year first above written.
[Guarantor 1], a Delaware corporation
By:
----------------------------------
Name:
Title:
[Guarantor 2], a Delaware corporation
By:
----------------------------------
Name:
Title:
[Guarantor 3], a Delaware corporation
By:
----------------------------------
Name:
Title:
[Guarantor 4], a Delaware corporation
By:
----------------------------------
Name:
Title:
[Guarantor 5], a Delaware corporation
By:
----------------------------------
Name:
Title:
S-1
<PAGE>
[Guarantor 6], a Delaware corporation
By:
----------------------------------
Name:
Title:
[Guarantor 7], a Delaware corporation
By:
----------------------------------
Name:
Title:
[Guarantor 8], a Delaware corporation
By:
----------------------------------
Name:
Title:
ACCEPTED BY:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
-------------------------
Name:
Title:
S-2
<PAGE>
Exhibit G
[ST&B LETTERHEAD]
August 20, 1998
To the Lenders named on Schedule I
hereto
To Bank of America National Trust
and Savings Association, as
Administrative Agent under the
Credit Agreement referred to below
Ladies and Gentlemen:
We have acted as special New York counsel to (a) Evenflo Company, Inc.
(the "Borrower") and (b) Lisco Feeding, Inc. and Lisco Furniture, Inc. (the
"Subsidiary Guarantors," and, collectively, the Borrower and the Subsidiary
Guarantors being referred to herein as the "Credit Parties") in connection with
the preparation, execution and delivery of the following documents:
(a) the Revolving Credit Agreement, dated as of August 20, 1996 (the
"Credit Agreement"), among the Borrower, the financial institutions
(the "Lenders") parties thereto, Merrill Lynch Capital Corporation, as
documentation agent, Nationsbank, N.A. (South), as syndication agent,
and Bank of America National Trust & Savings Association, as
administrative agent (in such capacity, the "Administrative Agent")
for the Lenders;
(b) the Notes executed and delivered by the Borrower on the Closing Date;
(c) the Guaranty, dated as of August 20, 1998 (the "Guaranty"), among the
parties thereto in favor of the Administrative Agent;
(d) the Pledge Agreement, dated as of August 20, 1998 (the "Pledge
Agreement"), among the parties thereto in favor of the Administrative
Agent; and
<PAGE>
(e) the Security Agreement, dated as of August 20, 1998 (the "Security
Agreement"), among the parties thereto in favor of the Administrative
Agent.
The documents described in the foregoing clauses (a) through (e) are
collectively referred to herein as the "Credit Documents"; the documents
described in the foregoing clauses (d) and (e) are together referred to herein
as the "Security Documents". Unless otherwise indicated, capitalized terms used
but not defined herein shall have the respective meanings set forth in the
Credit Agreement. This opinion is furnished to you pursuant to Section 5.01(d)
of the Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Credit Documents.
We also have examined the originals, or duplicates or certified or conformed
copies, of such records, agreements, instruments and other documents and have
made such other investigations as we have deemed relevant and necessary in
connection with the opinions expressed herein. As to questions of fact material
to this opinion, we have relied upon certificates of public officials and of
officers and representatives of the Credit Parties. In addition, we have
examined, and have relied as to matters of fact upon, the representations made
in the Credit Documents.
In rendering the opinions set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as duplicates or certified
or conformed copies, and the authenticity of the originals of such latter
documents.
In addition, we have assumed, for purposes of paragraphs 4, 5 and 6
below, that the Credit Parties have rights in the Collateral existing on the
date hereof and will have rights in property which becomes Collateral after the
date hereof.
Based upon and subject to the foregoing, and subject to the
qualifications and limitations set forth herein, we are of the opinion that:
1. Assuming that each of the Credit Documents is a valid and legally
binding obligation of each of the Lenders parties thereto and assuming that (a)
each of the Credit Parties is validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has duly authorized,
executed and delivered the Credit Documents to which it is a party in accordance
with its organic documents, (b) execution, delivery and performance by each
Credit Party of the Credit Documents to which it is a party do not violate the
laws of the jurisdiction in which it is organized or any other applicable laws
(excepting the laws of the State of New York, the General Corporation Law of the
State of Delaware and the Federal laws of the United States), (c) execution,
delivery and performance by each Credit Party of the Credit Documents to which
it is a party do not
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<PAGE>
constitute a breach or violation of any agreement or instrument which is binding
upon such Credit Party and (d) no Credit Party is an "investment company" within
the meaning of and subject to regulation under the Investment Company Act of
1940 (except that we do not make the assumption in the foregoing clause (d) with
respect to Evenflo Company, Inc.), each Credit Document constitutes the valid
and legally binding obligation of each Credit Party which is a party thereto,
enforceable against such Credit Party in accordance with its terms.
2. The execution and delivery by any Credit Party of the Credit Documents
to which it is a party, the borrowings of the Borrower in accordance with the
terms of the Credit Documents and the agreement by the Credit Parties to perform
their respective payment obligations thereunder will not, assuming that proceeds
of borrowings will be used in accordance with the terms of the Credit Agreement,
result in any violation of any Federal or New York statute or the Delaware
General Corporation Law or any rule or regulation issued pursuant to any New
York or Federal statute or the Delaware General Corporation Law or any order
known to us issued by any court or governmental agency or body.
3. No consent, approval, authorization, order, filing, registration or
qualification of or with any Federal or New York governmental agency or body or
any Delaware governmental agency or body acting pursuant to the Delaware General
Corporation Law is required for the execution and delivery by any Credit Party
of the Credit Documents to which it is a party, the borrowings by any Credit
Party in accordance with the terms of the Credit Documents, the granting of the
security interests granted by the Credit Parties pursuant to the Credit
Documents to which they are parties or the agreement by the Credit Parties to
perform their respective payment obligations under the Credit Documents, except
for filings required for the perfection of security interests granted pursuant
to the Security Documents.
4. The Security Agreement creates in favor of the Administrative Agent
for the benefit of the Lenders a security interest in the collateral described
therein in which a security interest may be created under Article 9 to the New
York UCC.
5. Evenflo Company, Inc. is not an "investment company" within the
meaning of or subject to regulation under the Investment Company Act of 1940, as
amended.
Our opinions in paragraphs 1 and 4 above are subject to (i) the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law) and (iii) an implied covenant of good faith and fair
dealing. Our opinion in paragraph 1 above also is subject to the qualification
that certain provisions of the Security Documents, in whole or in part, may not
be enforceable, although the inclusion of such provisions does not render the
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<PAGE>
Security Documents invalid, and the Security Documents and the laws of the State
of New York contain adequate remedial provisions for the practical realization
of the rights and benefits afforded thereby.
Our opinion in paragraph 4 is limited to Articles 8 and 9 of the
New York UCC, and therefore that opinion paragraph does not address (i)
collateral of a type not subject to Article 8 or 9, as the case may be, of the
New York UCC, and (ii) under New York UCC Section 9-103 what law governs
perfection of the security interests granted in the collateral covered by this
opinion letter.
We express no opinion with respect to:
(A) the perfection of any security interest created by any Security
Document;
(B) the effect of Section 552 of the Bankruptcy Code (11 U.S.C. 552)
(relating to property acquired by a pledgor after the commencement of a case
under the United States Bankruptcy Code with respect to such pledgor) and
Section 506(c) of the Bankruptcy Code (11 U.S.C. 506(c) (relating to certain
costs and expenses of a trustee in preserving or disposing of collateral;
(C) the effect of any provision of the Credit Documents which is intended
to establish any standard other than a standard set forth in the New York UCC as
the measure of the performance by any party thereto of such party's obligations
of good faith, diligence, reasonableness or care or of the fulfillment of the
duties imposed on any secured party with respect to the maintenance, disposition
or redemption of collateral, accounting for surplus proceeds of collateral or
accepting collateral in discharge of liabilities;
(D) the effect of any provision of the Credit Documents which is intended
to permit modification thereof only by means of an agreement signed in writing
by the parties thereto;
(E) the effect of any provision of the Credit Documents insofar as it
provides that any Person purchasing a participation from a Lender or other
Person may exercise set-off or similar rights with respect to such participation
or that any Lender or other Person may exercise set-off or similar rights other
than in accordance with applicable law;
(F) the effect of any provision of the Credit Documents imposing
penalties or forfeitures;
(G) the enforceability of any provision of any of the Credit Documents
to the extent that such provision constitutes a waiver of illegality as a
defense to performance of contract obligations; or
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<PAGE>
(H) the effect of any provision of the Credit Documents relating to
indemnification or exculpation in connection with violations of any securities
laws or relating to indemnification, contribution or exculpation in connection
with willful, reckless or criminal acts or gross negligence of the indemnified
or exculpated Person or the Person receiving contribution.
In connection with the provisions of the Credit Documents whereby
Credit Parties submit to the jurisdiction of the United States District Court
for the Southern District of New York, we note the limitations of 28 U.S.C.
Sections 1331 and 1332 on Federal court jurisdiction, and we also note that such
submissions cannot supersede such court's discretion in determining whether to
transfer an action from one Federal court to another under 28 U.S.C. Section
1404(a).
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York, the Federal law of the United States and the Delaware General
Corporation Law.
This opinion letter is rendered to you in connection with the
above described transactions, provided that our opinions set forth herein that
relate to the Credit Agreement and to the Credit Documents delivered in
connection with the Credit Agreement are addressed solely to the Lenders and the
Administrative Agent. This opinion letter may not be relied upon by you for any
other purpose, or relied upon by, or, except as may be required by applicable
law or regulations, furnished to, any other person, firm or corporation without
our prior written consent, except that this opinion may be furnished to, but may
not be relied upon by, any Person that purchases an interest in or a
participation in the Credit Agreement.
Very truly yours,
SIMPSON THACHER & BARTLETT
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<PAGE>
SCHEDULE I
THE LENDERS
Bank of America National Trust and Savings Association
DLJ Capital Funding, Inc.
Merrill Lynch Capital Corporation
Bankers Trust Company
The Bank of Nova Scotia
Chase Manhattan Bank
CitiCorp USA, Inc.
J.P. Morgan & Co., Inc.
Morgan Stanley Senior Funding, Inc.
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<PAGE>
ANNEX I to
Guaranty
SUPPLEMENT NO. ___ dated as of _____________ ___, _____ (this
"Supplement"), to the Guaranty, dated as of August [ ], 1998 (as
amended, supplemented, or otherwise modified, from time to time, the
"Guaranty"), among the initial signatories thereto and each other
Person which from time to time thereafter became a party thereto
pursuant to Section 13 thereof (each, individually, a "Guarantor", and,
collectively, the "Guarantors"), in favor of Bank of America National
Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") for the ratable benefit of the
Secured Creditors (as defined in the Guaranty).
W I T N E S S E T H:
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Guaranty;
WHEREAS, the Guaranty provides that additional parties may become
Guarantors under the Guaranty by execution and delivery of an instrument in the
form of this Supplement;
WHEREAS, pursuant to the provisions of Section 13 of the Guaranty, the
undersigned is becoming an Additional Guarantor under the Guaranty; and
WHEREAS, the undersigned desires to become a Guarantor under the
Guaranty in order to induce the Lenders to continue to make and maintain Credit
Extensions under the Credit Agreement as consideration therefor;
NOW, THEREFORE, the undersigned agrees, for the benefit of the
Administrative Agent and Secured Creditors, as follows:
1. In accordance with the Guaranty, the undersigned by its signature
below becomes a Guarantor under the Guaranty with the same force and effect as
if it were an original signatory thereto as a Guarantor and the undersigned
hereby (a) agrees to all the terms and provisions of the Guaranty applicable to
it as a Guarantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Guarantor thereunder are true and
correct on and as of the date hereof. In furtherance of the foregoing, each
reference to a "Guarantor" or an "Additional Guarantor" in the Guaranty shall be
deemed to include the undersigned.
2. The undersigned hereby represents and warrants that this Supplement
has been duly authorized, executed and delivered by the undersigned and
<PAGE>
the Guaranty constitutes a legal, valid and binding obligation of the
undersigned, enforceable against it in accordance with its terms.
3. In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guaranty shall not in any way be affected or impaired.
4. Without limiting the provisions of the Credit Agreement (or any
other Loan Document, including the Guaranty), the undersigned agrees to
reimburse the Administrative Agent for its reasonable out-of-pocket expenses in
connection with this Supplement, including reasonable attorneys' fees and
expenses of the Administrative Agent.
5. WITHOUT LIMITING THE EFFECT OF SECTION 20 OF THE GUARANTY, THE
UNDERSIGNED AND THE ADMINISTRATIVE AGENT (ON ITS BEHALF AND ON BEHALF OF THE
SECURED CREDITORS) HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS SUPPLEMENT, THE GUARANTY OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
6. Without limiting the effect of Section 21 of the Guaranty, the
undersigned hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Supplement, the Guaranty or any other Loan Document,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the undersigned in care
of the Borrower at the Borrower's address referred to in Section 11.02 of the
Credit Agreement or at such other address of which the Administrative Agent
shall have been notified pursuant to Section 11.02 of the Credit Agreement;
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<PAGE>
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
7. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
8. This Supplement hereby incorporates by reference the provisions of
the Guaranty, which provisions are deemed to be a part hereof, and this
Supplement shall be deemed to be a part of the Guaranty.
9. This Supplement is a Loan Document executed pursuant to the Credit
Agreement and the Guaranty.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Supplement
to the Guaranty as of the day and year first above written.
[NAME OF ADDITIONAL GUARANTOR]
By:
----------------------------------
Name:
Title:
ACCEPTED BY:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By:
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT F
[FORM OF PLEDGE AGREEMENT]
PLEDGE AGREEMENT, dated as of August 20, 1998, by EVENFLO COMPANY,
INC., a Delaware corporation ("Borrower"), in favor of BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION ("BofA"), as administrative agent (in such
capacity, the "Administrative Agent") for the various financial institutions
(the "Lenders") from time to time parties to the Credit Agreement, dated as of
August 20, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Borrower, the Lenders, BofA, as swing line
lender and as fronting lender and as Administrative Agent, together with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Lead
Arranger and Syndication Agent, and DLJ Capital Funding, Inc., as Documentation
Agent, for the ratable benefit of the Secured Creditors (as defined below).
W I T N E S S E T H:
WHEREAS, (a) pursuant to the Credit Agreement, the Lenders have
severally agreed to make Credit Extensions (such capitalized term, and other
capitalized terms used in these recitals, to have the meanings set forth, or
defined by reference, in Section 1) to Borrower upon the terms and subject to
the conditions set forth therein and (b) one or more Lenders (including those of
its Affiliates that have appointed the Administrative Agent to act on such
Affiliates' behalf hereunder on terms substantially similar to those set forth
in Article X of the Credit Agreement, including the provisions relating to
exculpation and indemnification therein) may from time to time enter into Swap
Contracts with Borrower (such Affiliates, together with such Lenders, the Lead
Arranger, the Administrative Agent and the Documentation Agent being referred to
herein as "Secured Creditors");
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective Credit Extensions to Borrower under the Credit
Agreement that Borrower shall have executed and delivered this Pledge Agreement
to the Administrative Agent for the ratable benefit of the Secured Creditors;
and
WHEREAS, Borrower is the legal and beneficial owner of the shares of
stock (the "Pledged Shares") described on Schedule I hereto (as the same may be
supplemented from time to time in accordance with the requirements of the Credit
Agreement) and issued by the corporations named therein, which Pledged Shares
constitute the percentage of all the issued and outstanding shares of capital
stock of such corporations identified on such Schedule I;
<PAGE>
NOW, THEREFORE, in consideration of the premises and to induce the
Agents and the Lenders to enter into the Credit Agreement and the Secured
Creditors to enter into Swap Contracts with Borrower, Borrower hereby agrees
with the Administrative Agent, for the ratable benefit of the Secured Creditors,
as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
(b) "Obligations" means, collectively, (i) the unpaid principal of and
interest on the Credit Extensions and all other obligations and liabilities of
Borrower to the Administrative Agent or any Lender (including interest accruing
at the then-applicable rate provided in the Credit Agreement after the maturity
of the Credit Extensions and interest accruing at the then-applicable rate
provided in the Credit Agreement after, or which would have accrued but for, the
filing or commencement of, or which would have accrued but for the filing or
commencement of, any Insolvency Proceeding, relating to Borrower, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, that may arise under, out of, or
in connection with, the Credit Agreement, the other Loan Documents, the Letters
of Credit, the Acceptances or any other document made, delivered or given in
connection therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including all
reasonable fees and other charges of counsel to the Administrative Agent or to
the Lenders that are required to be paid by Borrower pursuant to the terms of
the Credit Agreement or any other Loan Document) and (ii) all obligations and
liabilities of Borrower to any Secured Creditor, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, that may arise under, out of, or in connection with, any Swap Contract
or any other document made, delivered or given in connection therewith.
(c) "Pledge Agreement" means this Pledge Agreement, as amended, amended
and restated, supplemented or otherwise modified from time to time.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Pledge Agreement shall refer to this Pledge Agreement
as a whole and not to any particular provision of this Pledge Agreement, and
Section references are to Sections of this Pledge Agreement unless otherwise
specified. The word "including" is not limiting and means "including without
limitation".
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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2. Grant of Security. Borrower hereby transfers, assigns and pledges to
the Administrative Agent for the ratable benefit of the Secured Creditors, and
hereby grants to the Administrative Agent for the ratable benefit of the Secured
Creditors, a security interest in, the following, whether now owned or existing
or hereafter acquired or existing (collectively, the "Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, any other issued and outstanding shares of the "issuers" listed on
Schedule I, and any interest of Borrower in the entries on the books of any
financial intermediary pertaining to the Pledged Shares or any such other
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares
and any such other shares; and
(b) to the extent not covered by clause (a) above all proceeds of any
or all of the foregoing Collateral. For purposes of this Pledge Agreement, the
term "proceeds" includes whatever is receivable or received when Collateral or
proceeds are sold, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes, without limitation,
proceeds of any indemnity or guaranty payable to Borrower or the Administrative
Agent from time to time with respect to any of the Collateral.
3. Security for Obligations. This Pledge Agreement secures the payment
of all Obligations of Borrower. Without limiting the generality of the
foregoing, this Pledge Agreement secures the payment of all amounts that
constitute part of the Obligations and would be owed by Borrower to the
Administrative Agent or the Secured Creditors under the Loan Documents and any
Swap Contracts but for the fact that they are unenforceable or not allowable due
to the existence of an Insolvency Proceeding involving Borrower.
4. Delivery of the Collateral. All certificates or instruments, if any,
representing or evidencing the Collateral shall be promptly delivered to and
held by or on behalf of the Administrative Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
undated instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Administrative Agent. The
Administrative Agent shall have the right, at any time after the occurrence and
during the continuance of an Event of Default and without notice to Borrower, to
transfer to or to register in the name of the Administrative Agent or any of its
nominees any or all of the Pledged Shares.
5. Representations and Warranties. Borrower represents and warrants as
follows:
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(a) The Pledged Shares set forth on Schedule I hereto represent on the
date hereof the percentage of all the issued and outstanding capital stock of
each direct Subsidiary of Borrower as identified on such Schedule I.
(b) Borrower is the legal and beneficial owner of the Collateral, as
indicated on Schedule I, pledged or assigned by Borrower hereunder free and
clear of any Lien, except for the lien and security interest created by this
Pledge Agreement or liens permitted under Section 8.
(c) As of the date of this Pledge Agreement, the Pledged Shares pledged
by Borrower hereunder have been duly authorized and validly issued by the
applicable issues and are fully paid and non-assessable.
(d) The execution and delivery by Borrower of this Pledge Agreement and
the pledge of the Collateral pledged by Borrower hereunder pursuant hereto
create a valid and perfected first priority security interest in the Collateral,
securing the payment of the Obligations.
(e) Borrower has full power, authority and legal right to pledge all
the Collateral pledged by Borrower pursuant to this Pledge Agreement and will
defend its and the Administrative Agent's title or interest thereto or therein
(and in the proceeds thereof) against any and all Liens (other than the Lien of
this Pledge Agreement), however arising, and all persons whomsoever.
(f) Borrower has furnished to the Administrative Agent true and
complete copies as of the date hereof of the charter and/or other organizational
documents of, and the bylaws of, each Subsidiary any of the shares of capital
stock of which constitute Pledged Shares, and Borrower is not a party as of the
date hereof to any shareholder agreement or other arrangement affecting the
voting rights of any capital stock of any such Subsidiary.
6. Further Assurances. Borrower agrees that at any time and from time
to time, at the expense of Borrower, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary, or that the Administrative Agent may reasonably request, in order to
perfect and protect any pledge, assignment or security interest granted or
purported to be granted hereby or to enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
7. Voting Rights; Dividends and Distributions; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
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(i) Borrower shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part thereof for any
purpose not prohibited by the terms of this Pledge Agreement or the other Loan
Documents.
(ii) The Administrative Agent shall execute and deliver (or cause to be
executed and delivered) to Borrower (at Borrower's expense) all such proxies and
other instruments as Borrower may reasonably request for the purpose of enabling
Borrower to exercise the voting and other rights that it is entitled to exercise
pursuant to paragraph (i) above.
(b) Subject to paragraph (c) below, Borrower shall be entitled to
receive and retain and use, free and clear of the Lien of this Pledge Agreement,
any and all dividends, distributions and interest paid in respect of the
Collateral; provided, however, that any and all dividends and other
distributions in equity securities included in the Collateral shall be, and
shall be forthwith delivered to the Administrative Agent to hold as, Collateral
and shall, if received by Borrower, be received in trust for the benefit of the
Administrative Agent, be segregated from the other property or funds of Borrower
and be forthwith delivered to the Administrative Agent as Collateral in the same
form as so received (with any necessary endorsement).
(c) Upon written notice to Borrower by the Administrative Agent
following the occurrence and during the continuance of an Event of Default:
(i) all rights of Borrower to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall
thereupon become vested in the Administrative Agent, which shall thereupon have
the sole right to exercise or refrain from exercising such voting and other
consensual rights during the continuance of such Event of Default;
(ii) all rights of Borrower to receive the dividends, distributions,
principal and interest payments that Borrower would otherwise be authorized to
receive and retain pursuant to Section 7(b) shall cease, and all such rights
shall thereupon become vested in the Administrative Agent, which shall thereupon
have the sole right to receive and hold as Collateral such dividends and
interest payments during the continuance of such Event of Default;
(iii) all dividends, principal and interest payments that are received
by Borrower contrary to the provisions of Section 7(b) shall be received in
trust for the benefit of the Administrative Agent, shall be segregated from
other funds of Borrower and shall forthwith be paid over to the Administrative
Agent as Collateral in the same form as so received (with any necessary
endorsements); and
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(iv) in order to permit the Administrative Agent to receive all
dividends and other distributions to which it may be entitled under Section
7(b), to exercise the voting and other consensual rights that it may be entitled
to exercise pursuant to Section 7(c)(i), and to receive all dividends,
distributions, principal and interest payments and other distributions that it
may be entitled to receive under Section 7(c)(ii), Borrower shall, if necessary,
upon written notice from the Administrative Agent, from time to time execute and
deliver to the Administrative Agent, appropriate proxies, dividend payment
orders and other instruments as the Administrative Agent may reasonably request.
8. Transfers and Other Liens; Additional Collateral; Documents; Etc.
Borrower shall:
(a) not (i) except as permitted by the Credit Agreement, sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Collateral or (ii) create or suffer to exist any consensual Lien upon or with
respect to any of the Collateral, except for the Lien under this Pledge
Agreement, provided that in the event Borrower sells or otherwise disposes of
assets as permitted by the Credit Agreement in accordance with the terms of the
Credit Agreement and such assets are or include Collateral, the Administrative
Agent shall (at the expense of Borrower) release such Collateral to Borrower
free and clear of the lien and security interest under this Pledge Agreement
concurrently with the consummation of such sale; and
(b) (i) except as may be permitted by the Credit Agreement, cause each
issuer of Pledged Shares not to issue any stock or other securities in
substitution for the Pledged Shares issued by such issuer, except to Borrower,
(ii) except as may be permitted by the Credit Agreement, pledge hereunder,
immediately upon the issuance thereof, any and all additional shares of stock or
other securities of each such issuer of Pledged Shares and (iii) not permit the
issuance of any additional shares of stock of such issuer unless permitted by
the Credit Agreement and, if so permitted, any proceeds thereof required to be
applied under the Credit Agreement are so applied in accordance therewith or, if
any such additional shares are issued to Borrower, such additional shares are
immediately pledged hereunder upon the issuance thereof;
provided, however, that, notwithstanding any provision to the contrary contained
herein or in any other Loan Document, Borrower shall, at all times during the
period from the date hereof until the payment in full in cash of the
Obligations, the termination of all Commitments, the termination or expiration
of all Letters of Credit and Swap Contracts and the maturing of all Acceptances,
have pledged to the Administrative Agent for the ratable benefit of the Secured
Creditors pursuant to the terms of this Pledge Agreement all of the outstanding
shares of the capital stock of each direct
6
<PAGE>
Material Restricted Subsidiary of Borrower; provided, however, that, in the
event such Subsidiary is a Foreign Subsidiary, Borrower shall not be required to
have so pledged to the Administrative Agent more than 65% of the outstanding
shares of the capital stock of such Subsidiary.
9. Administrative Agent Appointed Attorney-in-Fact. Borrower hereby
irrevocably appoints the Administrative Agent as Borrower's attorney-in-fact,
with full authority in the place and stead of Borrower and in the name of
Borrower or otherwise to take any action and to execute any instrument, in each
case after the occurrence and during the continuance of an Event of Default,
that the Administrative Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Pledge Agreement, including to receive, endorse
and collect all instruments made payable to Borrower representing any dividend,
interest payment or other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same and otherwise to collect on any
Collateral or enforce the rights of the Administrative Agent with respect
thereto. Borrower hereby acknowledges, consents and agrees that this power of
attorney is irrevocable and coupled with an interest.
10. The Administrative Agent's Duties. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Shares, whether or not the Administrative
Agent or any Secured Creditor has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any parties or any other rights pertaining to any Collateral. The Administrative
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property or if the Administrative Agent decides to take any action for such
purpose that has been requested by Borrower (it being understood and agreed that
the failure of the Administrative Agent to comply with any such request at any
time shall not in itself be deemed a failure to exercise reasonable care and
that the Administrative Agent is not obligated to comply with any such request
unless otherwise required to do so hereunder or under the Credit Agreement).
11. Remedies. If any Event of Default shall have occurred and be
continuing:
7
<PAGE>
(a) The Administrative Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured creditor upon default
under the Uniform Commercial Code in effect in the State of New York at such
time (the "UCC") and also may without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange broker's board or at any of the Administrative Agent's offices
or elsewhere, for cash, on credit or for future delivery, at such price or
prices and upon such other terms as are commercially reasonable irrespective of
the impact of any such sales on the market price of the Collateral. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Borrower, and Borrower hereby waives (to the
extent permitted by law) all rights of redemption, stay and/or appraisal which
it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Borrower agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to Borrower
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Administrative
Agent shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Administrative Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. To the extent permitted by law, Borrower
hereby waives any claim against the Administrative Agent arising by reason of
the fact that the price at which any Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale, even if the Administrative Agent accepts the first offer received and does
not offer such Collateral to more than one offeree.
(b) All cash proceeds received by the Administrative Agent in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 11.04 and 11.05 of the Credit
Agreement) by the Administrative Agent for the ratable benefit of the Secured
Creditors in the following order: first, against Obligations consisting of
unpaid and outstanding interest on the Loans, second, ratably against
Obligations consisting of unpaid and outstanding principal of the Loans,
Obligations then due and owing under all outstanding Swap Contracts and
Obligations consisting of unreimbursed and owing Special Facility Obligations
and other similar obligations, third, to collateralize Obligations consisting of
Special Facility Obligations and other similar obligations, and fourth, against
any other remaining Obligations. The Administrative Agent may assume that no
Obligations are outstanding with respect to Swap Contracts unless it has
received written notice thereof in accordance with this Pledge Agreement prior
to any such application by it, and if so notified may rely upon and deal with
the Secured Creditor party to such
8
<PAGE>
Swap Contract as to Obligations thereunder. Any surplus of such cash or cash
proceeds held by the Administrative Agent and remaining after payment in full of
all the Obligations (other than indemnities, costs and expenses that survive
termination of a Loan Document but as to which demand for payment has not then
been made), the termination of all Commitments, the termination or expiration of
all Letters of Credit and the maturity of all Acceptances shall be paid over to
Borrower or to any other Person notified in writing to the Administrative Agent
that may be lawfully entitled to receive such surplus.
(c) The Administrative Agent may exercise any and all rights and
remedies of Borrower in respect of the Collateral.
(d) All payments received by Borrower after the occurrence and during
the continuance of an Event of Default in respect of the Collateral shall be
received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of Borrower and, upon written notice to Borrower
from the Administrative Agent, shall be forthwith paid over to the
Administrative Agent in the same form as so received (with any necessary
endorsement).
(e) Borrower shall remain liable to the extent of any deficiency.
(f) Borrower agrees that in any sale of any of the Collateral in the
exercise of remedies hereunder whenever an Event of Default shall have occurred
and be continuing, the Administrative Agent is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is reasonably necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and Borrower further agrees that such compliance shall not result in such sale
being considered or deemed not to have been made in a commercially reasonable
manner, nor shall the Administrative Agent be liable nor accountable to Borrower
for any discount allowed by reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.
12. Amendments, etc. with Respect to the Obligations; Waiver of Rights.
Borrower shall remain obligated hereunder notwithstanding that, without any
reservation of rights against Borrower and without notice to or further assent
by Borrower, any demand for payment of any of the Obligations made by the
Administrative
9
<PAGE>
Agent or any Secured Creditor may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Secured Creditor, and
the Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith and the Swap Contracts and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Administrative
Agent (or the required Lenders under the terms of the Credit Agreement, as the
case may be, or, in the case of any Swap Contracts, the Secured Creditor party
thereto) may deem advisable from time to time (in accordance with the Credit
Agreement or such Swap Contract, as applicable), and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or any
Secured Creditor for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. Neither the Administrative Agent nor any
Secured Creditor shall have any obligation to protect, secure, perfect or insure
any Lien at any time held by it as security for the Obligations or for this
Pledge Agreement or any property subject thereto. When making any demand
hereunder against Borrower, the Administrative Agent or any Secured Creditor
may, but shall be under no obligation to, make a similar demand on any other
pledgor, or any other provider of collateral or guarantor, and any failure by
the Administrative Agent or any Secured Creditor to make any such demand or to
collect any payments from Borrower or any other pledgor, provider of collateral
or guarantor, and any release of Borrower or any other pledgor, provider of
collateral or guarantor shall not relieve Borrower of its obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent or any
Secured Creditor against Borrower. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
13. Continuing Security Interest, Assignments Under the Credit
Agreement. This Pledge Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the payment
in full in cash of the Obligations (other than indemnities, costs and expenses
that survive termination of a Loan Document but as to which demand for payment
has not then been made), the termination of all Commitments, the termination or
expiration of all Letters of Credit and the maturing of all Acceptances,
notwithstanding that from time to time prior thereto Borrower may be free from
any Obligations, (b) be binding upon Borrower, its successors and assigns and
(c) inure, together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Administrative Agent, the Secured Creditors and
their respective successors, transferees and assigns.
10
<PAGE>
Without limiting the foregoing clause (c), any Secured Creditor may assign or
otherwise transfer (in whole or in part) any Note, Loan or other Obligation held
by it to any other Person, and such other Person shall thereupon become vested
with all the rights and benefits in respect thereof granted to such Secured
Creditor under any Loan Document (including this Pledge Agreement) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Section 11.8 and Article X of the Credit Agreement.
14. Reinstatement. This Pledge Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Secured Creditor upon
the filing or commencement of any Insolvency Proceeding in respect of Borrower,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, Borrower or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
15. Notices. All notices, requests and demands pursuant hereto shall be
made in accordance with Section 11.02 of the Credit Agreement.
16. Counterparts. This Pledge Agreement may be executed by Borrower and
the Administrative Agent on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Pledge Agreement signed by
Borrower and the Administrative Agent shall be lodged with the Administrative
Agent and Borrower.
17. Severability. Any provision of this Pledge Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. Integration; Loan Document. This Pledge Agreement represents the
entire agreement of Borrower and the Administrative Agent with respect to the
subject matter hereof and there are no agreements relative to the subject matter
hereof not reflected herein or, to the extent expressly referred to herein, in
the other Loan Documents. This Pledge Agreement constitutes a Loan Document and,
as such, is subject to the provisions of Section 11.15 of the Credit Agreement
(Governing Law and Jurisdiction) and Section 11.16 of the Credit Agreement
(Waiver of Jury Trial).
11
<PAGE>
19. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Pledge Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Borrower and the Administrative Agent in accordance with Section 11.01 of the
Credit Agreement.
(b) Neither the Administrative Agent nor any Secured Creditor shall by
any act (except by a written instrument pursuant to Section 19(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Secured
Creditor, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Secured Creditor of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Administrative Agent
or such Secured Creditor would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
20. Section Headings. The Section headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
21. Successors and Assigns. This Pledge Agreement shall be binding upon
the successors and assigns of Borrower and shall inure to the benefit of the
Agents and the Secured Creditors and their successors and assigns, except that
Borrower may not assign, transfer or delegate any of its rights or obligations
under this Pledge Agreement without the prior written consent of the
Administrative Agent.
22. Protection of Collateral. The Administrative Agent may from time to
time take any action which the Administrative Agent reasonably deems necessary
for the maintenance, preservation or protection of any of the Collateral or of
its security interest therein, and at any time after and during the continuance
of an Event of Default, the Administrative Agent may from time to time, at its
option and at the expense of Borrower, perform any act which Borrower agrees
hereunder to perform and which Borrower shall fail to perform.
12
<PAGE>
23. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
[SIGNATURE PAGE FOLLOWS]
13
<PAGE>
S-1
IN WITNESS WHEREOF, each of the undersigned has caused this Pledge
Agreement to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
EVENFLO COMPANY, INC.
By:
------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent
By:
------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
TO THE PLEDGE AGREEMENT
PLEDGED SHARES
<TABLE>
<CAPTION>
Class of Stock Percentage of
Stock/Par Certificate Number of Outstanding
Issuer Value No(s) Shares Shares
- ------ --------- ----------- --------- -------------
<S> <C> <C> <C> <C>
None
</TABLE>
<PAGE>
EXHIBIT I-1
[FORM OF REVOLVING NOTE]
$______________________ August [ ], 1998
FOR VALUE RECEIVED, the undersigned, EVENFLO COMPANY, INC., a
Delaware corporation ("Borrower"), unconditionally promises to pay to the
order of ______________ (the "Lender") on the Revolving Commitment
Termination Date (as defined in the Credit Agreement referred to below) for
Revolving Loans (as defined in such Credit Agreement), the principal sum of
Dollars ($ ) or, if less, the aggregate unpaid principal amount of
all Revolving Loans (as defined in the Credit Agreement referred to below)
made by the Lender pursuant to the Credit Agreement, dated as of August 20,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Borrower, the various financial institutions
(including the Lender) from time to time parties thereto, Bank of America
National Trust and Savings Association ("BofA"), as Administrative Agent for
the Lenders (in such capacity, the "Administrative Agent"), together with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Lead Arranger and Syndication Agent and DLJ Capital Funding Inc., as
Documentation Agent.
Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from and including the date hereof until
maturity (whether by acceleration or otherwise) and, after maturity, until paid,
at the rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made without set-off
or counterclaim in lawful money of the United States of America in same day or
immediately available funds to the account designated by the Administrative
Agent pursuant to the Credit Agreement.
This Note is one of the Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the terms
and conditions on which Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be or shall automatically become
immediately due and payable. Unless otherwise defined, terms used herein have
the meanings provided in the Credit Agreement.
Borrower hereby irrevocably authorizes the Lender to make (or cause to
be made) appropriate notations on the schedule attached to this Note (or on any
continuation of such schedule), which notations, if made, shall evidence, inter
alia,
<PAGE>
the date of, the outstanding principal of, and the interest rate and Interest
Period applicable to, the Revolving Loans evidenced hereby. Such notations shall
be conclusive evidence of the information so set forth (absent clearly
demonstrable error); provided, however, that the failure of the Lender to make,
or an error in making, a notation thereon with respect to any Revolving Loan
shall not limit or otherwise affect any Obligations of Borrower.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
EVENFLO COMPANY, INC.
By:
------------------------------
Name:
Title:
2
<PAGE>
REVOLVING LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
Date Amount of Revolving Interest Period Amount of Principal Repaid Unpaid Principal Balance Total Notation
Loan Made (If Applicable) Made By
------------------- -------------------------- ------------------------
Base Eurodollar Base Eurodollar Base Eurodollar
Rate Rate Rate Rate Rate Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT I-2
[FORM OF SWING LINE NOTE]
$___________________ August [ ], 1998
FOR VALUE RECEIVED, the undersigned, EVENFLO COMPANY, INC., a
Delaware corporation ("Borrower"), unconditionally promises to pay to the order
of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Lender") on the
Revolving Commitment Termination Date (as defined in the Credit Agreement
referred to below) for Swing Line Loans (as defined in such Credit Agreement),
the principal sum of ___________________ Dollars ($____________) or, if less,
the aggregate unpaid principal amount of all Swing Line Loans (as defined in the
Credit Agreement referred to below) made by the Lender pursuant to the Credit
Agreement, dated as of August 20, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Borrower, the various
financial institutions (including the Lender) from time to time parties thereto,
Bank of America National Trust and Savings Association ("BofA") as
Administrative Agent for the Lenders (in such capacity, the "Administrative
Agent"), together with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Lead Arranger and Syndication Agent and DLJ Capital
Funding, Inc., as Documentation Agent.
Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from and including the date hereof until
maturity (whether by acceleration or otherwise) and, after maturity, until paid,
at the rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made without set-off
or counterclaim in lawful money of the United States of America in same day or
immediately available funds to the account designated by the Administrative
Agent pursuant to the Credit Agreement.
This Note is one of the Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the terms
and conditions on which Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be or shall automatically become
immediately due and payable. Unless otherwise defined, terms used herein have
the meanings provided in the Credit Agreement.
Borrower hereby irrevocably authorizes the Lender to make (or cause to
be made) appropriate notations on the schedule attached to this Note (or on any
continuation of such schedule), which notations, if made, shall evidence, inter
alia, the date of, the outstanding principal of, and the interest rate and
Interest Period
<PAGE>
applicable to, the Swing Line Loans evidenced hereby. Such notations shall be
conclusive evidence of the information so set forth (absent clearly demonstrable
error); provided, however, that the failure of the Lender to make, or an error
in making, a notation thereon with respect to any Swing Line Loan shall not
limit or otherwise affect any Obligations of Borrower.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
EVENFLO COMPANY, INC.
By:
-----------------------------
Name:
Title:
2
<PAGE>
SWING LINE LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
Date Amount of Swing Interest Period Amount of Principal Unpaid Principal Total Notation
Line Loan Made (If Applicable) Repaid Balance Made By
-------------- ------------------- ----------------
Base Rate Base Rate Base Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT J
[FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT]
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________ ___, _____ is made between
______________________________ (the "Assignor") and __________________________
(the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement, dated
as of August 20, 1998 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among Evenflo Company, Inc., a Delaware
corporation ("Borrower"), the various financial institutions (collectively, the
"Lenders") from time to time parties thereto, Bank of America National Trust and
Savings Association ("BofA"), as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), BofA as Swing Line Lender and Fronting
Lender, together with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Lead Arranger and Syndication Agent and DLJ Capital Funding,
Inc., as Syndication Agent. Any terms defined in the Credit Agreement and not
defined in this Assignment and Acceptance are used herein as defined in the
Credit Agreement;
[WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Revolving Loans (the "Revolving Loans") to Borrower in an
aggregate amount not to exceed $__________ (the "Revolving Commitment");]
[WHEREAS, as provided under the Credit Agreement, the Assignor has made
Revolving Loans to Borrower in an aggregate amount equal to $__________;]
WHEREAS, [the Assignor has acquired a participation in the Fronting
Lender's liability under the Special Facility Obligations in an aggregate
principal amount of $____________ (the "Special Facility Obligations")] [all
Letters of Credit are terminated or expired and all Acceptances are matured
under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Revolving Commitment, together with a corresponding portion of
each of its outstanding
<PAGE>
Revolving Loans and Special Facility Obligations, in an amount equal to
$__________ (the "Assigned Amount") on the terms and subject to the conditions
set forth herein, and the Assignee wishes to accept assignment of such rights
and to assume such obligations from the Assignor on such terms and subject to
such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) ____% (the "Assignee's Percentage
Share") of (A) the Revolving Commitment and the Revolving Loans and the Special
Facility Obligations of the Assignor and (B) all related rights, benefits,
obligations, liabilities and indemnities of the Assignor under and in connection
with the Credit Agreement and the other Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor by Assignee of
outstanding principal of, accrued interest on, and fees with respect to,
Revolving Loans and Special Facility Obligations, if any, assigned.]
(b) With effect on and after the Effective Date (as defined in Section
5 hereof), the Assignee shall be a party to the Credit Agreement and succeed to
all of the rights and be obligated to perform all of the obligations of a Lender
under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Revolving Commitment
and Revolving Loans in an aggregate amount equal to the Assigned Amount. The
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender. It is the intent of the parties hereto that the
Revolving Commitment of the Assignor shall, as of the Effective Date, be reduced
by an amount equal to the Assigned Amount and the Assignor shall relinquish its
rights and be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee; provided, however,
the Assignor shall not relinquish its rights under the Sections of the Credit
Agreement which by their terms expressly survive the termination of the Credit
Agreement to the extent such rights relate to the time prior to the Effective
Date.
2
<PAGE>
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Revolving Commitment will be
$__________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Revolving Commitment will be
$__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer contemplated
in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective
Date in immediately available funds an amount equal to $__________, representing
the Assignee's Pro Rata Share of the principal amount of all Revolving Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the
Administrative Agent a processing fee in the amount specified in Section
11.08(a) of the Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Revolving Commitment and Revolving Loans and Assigned
Special Facility Obligations shall be for the account of the Assignor. Any
interest, fees and other payments accrued on and after the Effective Date with
respect to the Assigned Amount shall be for the account of the Assignee. Each of
the Assignor and the Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt. From and
after the Effective Date, the Administrative Agent shall make all payments with
respect to the Revolving Commitment and Revolving Loans and Assigned Special
Facility Obligations (including payments of interest, principal, fees and other
amounts) to the Assignee.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 7.01 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own
3
<PAGE>
credit and legal analysis and decision to enter into this Assignment and
Acceptance; and (b) agrees that it will, independently and without reliance upon
the Assignor, the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit and legal decisions in taking or not taking action under the
Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective date for
this Assignment and Acceptance shall be __________ ___, _____ (the "Effective
Date"); provided that the following conditions precedent have been satisfied on
or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and delivered by
the Assignor and the Assignee;
(ii) the consent of Borrower [, the Fronting Lender] and the
Administrative Agent required for an effective assignment of the Assigned Amount
by the Assignor to the Assignee under Section 11.08(a) of the Credit Agreement
shall have been duly obtained and shall be in full force and effect as of the
Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to the
Assignor under this Assignment and Acceptance;
(iv) [ the Assignee shall have complied with Section 4.01(d) of the
Credit Agreement (if applicable); and (v) the processing fee referred to in
Section 2(b) hereof and in Section 11.08(a) of the Credit Agreement shall have
been paid to the Administrative Agent.
(b) Promptly following the execution of this Assignment and Acceptance,
the Assignor shall deliver to Borrower[, the Fronting Lender] and the
Administrative Agent for acknowledgment by the Administrative Agent, a Notice of
Assignment substantially in the form attached hereto as Schedule 1.
6. Administrative Agent.
[(a)] The Assignee hereby appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under
4
<PAGE>
the Credit Agreement as are delegated to the Administrative Agent by the Lenders
pursuant to the terms of the Credit Agreement.
(a)[(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Administrative Agent under the Credit Agreement.]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Assignor, the
Administrative Agent and Borrower that under applicable law and treaties no tax
[or no more than __________ in tax] will be required to be withheld by the
Assignor with respect to any payments to be made to the Assignee hereunder, (b)
agrees to furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to the Administrative Agent and
Borrower prior to the time that the Administrative Agent or Borrower is required
to make any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein the Assignee claims entitlement to the
benefits of a tax treaty that provides for a complete exemption from, or reduced
rate of, U.S. federal income withholding tax on all payments hereunder) and
agrees to provide new Forms 4224 or 1001 upon the expiration of any previously
delivered form or comparable statements in accordance with applicable U.S. law
and regulations and amendments thereto, duly executed and completed by the
Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any Lien or other adverse claim created by it;
(ii) it is duly organized and existing and it has the full power and authority
to take, and has taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or permitted to be
executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due
- -----------------------------
a [INCLUDE ONLY IF ASSIGNOR IS ADMINISTRATIVE AGENT]
5
<PAGE>
execution, delivery and performance of this Assignment and Acceptance, and apart
from any agreements or undertakings or filings required by the Credit Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iv) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignor, enforceable against the Assignor
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of Borrower or any of its Subsidiaries, or the performance or observance by
Borrower or any of its Subsidiaries, of any of their respective obligations
under the Credit Agreement or any other instrument or document furnished in
connection therewith.
(c) The Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder; (ii) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance; and apart
from any agreements or undertakings or filings required by the Credit Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is an Eligible Assignee.
6
<PAGE>
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to Borrower or the Administrative Agent, which may be
required in connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS THEREOF. The Assignor and the Assignee each
irrevocably submits to the non-exclusive jurisdiction of any State or Federal
court sitting in the County of New York of the State of New York over any suit,
action or proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal court.
Each party to this Assignment and Acceptance hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding.
7
<PAGE>
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND
AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER
ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the Assignor and the
Assignee, provided that such provisions are not inconsistent with the Credit
Agreement.]
8
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
-------------------------------------
Name:
Title:
Address:
[ASSIGNEE]
By:
-------------------------------------
Name:
Title:
Address:
9
<PAGE>
SCHEDULE 1
[FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE]
_______________, 19__
Bank of America National Trust
and Savings Association, as
Administrative Agent
Agency Administrative Services 5596
1455 Market Street, 13th Floor
San Francisco, California 94103
Attention: [ ]
[Bank of America National Trust
and Savings Association, as
Fronting Lender
International Trade Banking Group 33666
231 South LaSalle Street, Suite 1945
Chicago, Illinois
Attention: [ ]
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attention: [ ]
Ladies and Gentlemen:
We refer to that certain Credit Agreement, dated as of August [ ], 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Evenflo Company, Inc., a Delaware corporation ("Borrower"),
the various financial institutions (collectively, the "Lenders") from time to
time parties thereto, Bank of America National Trust and Savings Association, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), BofA as Swing Line Lender and Fronting Lender, together with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporation, as Lead
Arranger and Syndication
<PAGE>
Agent and DLJ Capital Funding, Inc., as Documentation Agent. Terms defined in
the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Revolving Commitments of the Assignor[,]
[and] all outstanding Revolving Loans made by the Assignor [and the Assignor's
participation in the Letters of Credit and Acceptances]) pursuant to the
Assignment and Acceptance Agreement attached hereto (the "Assignment and
Acceptance"). Before giving effect to such assignment the Assignor's Revolving
Commitment is $ ___________[,] [and] the aggregate amount of its outstanding
Revolving Loans is $_____________[, and its participation in Special Facility
Obligations is $_____________].
2. The Assignee agrees that, upon receiving the consent of the
Administrative Agent[, the Fronting Lender] and, if applicable, Borrower to such
assignment, the Assignee will be bound by the terms of the Credit Agreement as
fully and to the same extent as if the Assignee were the Lender originally
holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(a) Notice Address:
Assignee name:
--------------------------------------
Address:
--------------------------------------
--------------------------------------
Attention:
--------------------------------------
Telephone:
--------------------------------------
Telecopier:
--------------------------------------
Telex (Answerback):
--------------------------------------
(b) Payment Instructions:
Account No.:
--------------------------------------
At:
--------------------------------------
Reference:
--------------------------------------
2
<PAGE>
Attention:
--------------------------------------
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
---------------------------------
Name:
Title:
[NAME OF ASSIGNEE]
By:
---------------------------------
Name:
Title:
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
EVENFLO COMPANY, INC.
By:
---------------------------------
Name:
Title:
3
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent
By:
---------------------------------
Name:
Title:
[BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Fronting
Lender
By:
---------------------------------
Name:
Title:
4
<PAGE>
EXHIBIT K
[FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE]
---------------- --- , -----
[NAME OF LENDER]
- ---------------------------------
- ---------------------------------
Attention:
-----------------------
Ladies and Gentlemen:
Pursuant to subsection 2.05(b)(i) of that certain Credit Agreement,
dated as of August 20, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Evenflo Company, Inc., a Delaware
corporation ("Borrower"), the various financial institutions (collectively, the
"Lenders") from time to time parties thereto, Bank of America National Trust and
Savings Association ("BofA"), as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), BofA as Swing Line Lender and Fronting
Lender, together with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Lead Arranger and Syndication Agent and DLJ Capital Funding,
Inc., as Documentation Agent, the undersigned hereby acknowledges receipt from
you on the date hereof of _______________________ DOLLARS ($______________) as
payment for a participating interest in the following Swing Line Loan(s):
Date(s) of Swing Line Loan(s): ______________ ___, _____
Principal Amount of Swing Line Loan(s): $___________________
Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Swing Line Lender
By:
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT L
[SECURITY AGREEMENT]
SECURITY AGREEMENT, dated as of August 20, 1998, among EVENFLO COMPANY,
INC., a Delaware corporation ("Borrower"), the undersigned Domestic
Subsidiaries of Borrower (each a "Subsidiary Grantor" and collectively,
the "Subsidiary Grantors"; Borrower and the Subsidiary Grantors,
collectively, the "Grantors") and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("BofA"), as administrative agent (in such
capacity, the "Administrative Agent") for the lenders (the "Lenders")
from time to time parties to the Credit Agreement, dated as of August
20, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Borrower, the Lenders, BofA, as
swing line lender and as fronting lender and as Administrative Agent,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as lead arranger and syndication agent (in such capacity,
the "Lead Arranger"), and DLJ Capital Funding, Inc., as documentation
agent (in such capacity, the "Documentation Agent") for the Lenders,
for the ratable benefit of the Secured Parties (as defined below).
WITNESSETH:
WHEREAS, (a) pursuant to the Credit Agreement, the Lenders have
severally agreed to make Credit Extensions (such capitalized term, and other
capitalized terms used in these recitals, to have the meanings set forth, or
defined by reference, in Section 1) to Borrower upon the terms and subject to
the conditions set forth therein and (b) one or more Lenders (including those of
its Affiliates that have appointed the Administrative Agent to act on such
Affiliates' behalf hereunder on terms substantially similar to those set forth
in Article X of the Credit Agreement, including the provisions relating to
exculpation and indemnification therein) may from time to time enter into Swap
Contracts with Borrower (such Affiliates, together with such Lenders, the Lead
Arranger, the Administrative Agent, and the Documentation Agent, being referred
to herein as the "Secured Parties");
WHEREAS, (a) Borrower owns a majority of the capital stock of each
Subsidiary Grantor and (b) each Subsidiary Grantor has, pursuant to the Guaranty
(as the same may be amended, supplemented or otherwise modified), guaranteed to
the Administrative Agent, for the ratable benefit of the Secured Parties and
their respective successors, endorsees, transferees and assigns, the prompt and
complete payment and performance by Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations;
WHEREAS, the proceeds of the Credit Extensions will be used in part to
enable Borrower to make valuable transfers to the Subsidiary Grantors in
connection with the operation of their respective businesses;
<PAGE>
WHEREAS, Borrower and the Subsidiary Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the Credit Extensions; and
WHEREAS, it is a condition precedent to (a) the obligation of the
Lenders to continue to make their respective Credit Extensions to Borrower under
the Credit Agreement and (b) the effectiveness of the Credit Agreement, that
Borrower and the Subsidiary Grantors shall have executed and delivered this
Security Agreement to the Administrative Agent for the ratable benefit of the
Secured Parties;
NOW, THEREFORE, in consideration of the premises and to induce the
Secured Parties (as defined below) to make Credit Extensions, each of the
Grantors hereby agrees with the Administrative Agent, for the ratable benefit of
the Secured Parties, as follows:
1. Defined Terms.
1.1 Definitions. (a) Unless otherwise noted, references to sections are
to sections of this Agreement. Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given in the Credit
Agreement, and the following terms which are defined in the Code in effect in
the State of New York on the date hereof are used herein as so defined: Chattel
Paper, Farm Products, Instruments and Investment property.
(b) The following terms shall have the following meanings:
"Accounts": with respect to each Grantor, any and all right,
title and interest of such Grantor to payment for goods and services
sold or leased, including any such right evidenced by Chattel Paper,
whether due or to become due, whether or not it has been earned or
performed, and whether now or hereafter acquired or arising in the
future, including, without limitation, accounts receivable from
Affiliates of such person, except to the extent that the grant of a
security interest in Accounts owed by Affiliates not incorporated or
otherwise organized in the United States of America would result in
material adverse tax or legal consequences to such Grantor.
"Accounts Receivable": with respect to each Grantor, all
right, title and interest of such Grantor to Accounts and all of its
right, title and interest in any returned goods, together with all
rights, titles, securities and guaranties with respect thereto,
including any rights to stoppage in transit, replevin, reclamation and
resales, and all related security interests, liens and pledges, whether
voluntary or involuntary in each case whether due or become due,
whether now or hereafter arising in the future.
"Agreement": this Security Agreement, as the same may be
amended, amended and restated, modified or otherwise supplemented from
time to time.
"Code": the Uniform Commercial Code as from time to time in
effect in any applicable jurisdiction.
2
<PAGE>
"Collateral": as defined in Section 2.1.
"Collateral Account": any collateral account established by
the Administrative Agent as provided in Section 5.3 or Section 7.2.
"Computer Hardware and Software Collateral": with respect to
each Grantor, its interests in the following, in each case to the
extent the grant by such Grantor of a security interest pursuant to
this Agreement is not prohibited without the consent of any other
Person:
(a) all computer and other electronic data processing
hardware, integrated computer systems, central processing
units, memory units, display terminals, printers, features,
computer elements, card readers, tape drives, hard and soft
disk drives, cables, electrical supply hardware, generators,
power equalizers, accessories and all peripheral devices and
other related computer hardware
(b) all software programs (including both source
code, object code and all related applications and data
files), whether now owned, licensed or leased or hereafter
acquired by each Grantor, designed for use on the computers
and electronic data processing hardware described in the
preceding clause (a);
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic
diagrams, manuals, guides and specifications) with respect to
such hardware, software and firmware described in the
preceding clauses (a) through (c); and
(e) all rights with respect to all of the foregoing,
including any and all copyrights, licenses, options,
warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights,
renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the
foregoing.
"Contracts": with respect to each Grantor, all rights of such
Grantor under contracts and agreements to which such Grantor is a party
or under which such Grantor has any right, title or interest or to
which such Grantor or any property of such Grantor is subject, as the
same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (a) all rights of such Grantor
to receive moneys due and to become due to it thereunder or in
connection therewith, (b) all rights of such Grantor to damages arising
out of, or for, breach or default in respect thereof and (c) all rights
of such Grantor to exercise all remedies thereunder, in each case to
the extent the grant by such Grantor of a security interest pursuant to
this Agreement in its rights under such contract or agreement is not
prohibited without the consent of any other person, or is permitted
with consent if all necessary consents to such grant of a security
interest have been obtained from all such other persons.
3
<PAGE>
"Copyright Collateral": with respect to each Grantor, its
interests in the following, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement is not
prohibited without the consent of any other Person:
(a) all copyrights (including copyrights for
semi-conductor chip product mask works) of each Grantor,
whether statutory or at common law, registered or
unregistered, now or hereafter in force throughout the world
including, without limitation, all of each Grantor's right,
title and interest in and to all copyrights and mask works
registered in the United States Copyright Office or anywhere
else in the world and also including, without limitation, the
copyrights and mask works referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof
(including pending applications), including the copyright and
mask works registrations and applications referred to in Item
A of Schedule IV attached hereto, if any, and all copyrights
resulting from such applications;
(b) all extensions and renewals of any of the items
described in clause (a);
(c) all copyright and mask works licenses and other
agreements providing each Grantor with the right to use any of
the items of the type referred to in clauses (a) and (b),
including each copyright license referred to in Item B of
Schedule IV attached hereto, if any;
(d) the right to sue third parties for past, present
and future infringements of any of the Copyright Collateral
referred to in clauses (a) and (b) and, to the extent
applicable, clause (c); and
(e) all proceeds of, and rights associated with, the
foregoing, including, without limitation, licenses, royalties,
income, payments, claims, damages and proceeds of infringement
suits and all rights corresponding thereto throughout the
world.
"Documents": with respect to each Grantor, all Instruments,
files, records, ledger sheets and documents covering or relating to any
of the Accounts, Equipment, General Intangibles, Intellectual Property,
Inventory or Proceeds.
"General Intangibles": with respect to each Grantor, as
defined in the Code in effect in the State of New York on the date
hereof to the extent, in the case of any General Intangibles arising
under any contract or agreement, that the grant by such Grantor of a
security interest pursuant to this Agreement in its rights under such
contract or agreement is not prohibited without the consent of any
other person, or is permitted with consent if all necessary consents to
such grant of a security interest have been obtained from all such
other persons (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided,
that the foregoing limitation shall not affect, limit, restrict or
impair the grant by such Grantor of a security interest pursuant to
this Agreement in any Account or General Intangible or any money or
other amounts due or to become due under any such
4
<PAGE>
contract or agreement to the extent provided in Section 9-318 of the
Code as in effect on the date hereof, and provided, further, that
"General Intangibles" shall not include any of the items within
Section 2.1(h) and any General Intangibles owned by Affiliates not
incorporated or otherwise organized in the United States of America
to the extent that the grant of a security interest in such General
Intangibles would result in material adverse tax or legal consequences
to such Grantor.
"Indemnitee": the Secured Parties and their respective
officers, directors, trustees, affiliates and controlling persons.
"Intellectual Property Collateral": collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory": with respect to each Grantor, all right, title
and interest of such Grantor in and to goods intended for sale or lease
by such person, or consumed in such person's business (including,
without limitation, all operating parts and supplies), together with
all raw materials and finished goods, whether now owned or hereafter
acquired or arising.
"Material Intellectual Property Collateral": the following
Trademarks: "Evenflo", "Snugli" and "Dudley".
"Obligations": the collective reference to (i) the unpaid
principal of and interest on the Credit Extensions and all other
obligations and liabilities of the Grantors to the Administrative Agent
or any Lender (including, without limitation, interest accruing at the
then-applicable rate provided in the Credit Agreement after the
maturity of the Credit Extensions and interest accruing at the
then-applicable rate provided in the Credit Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to Borrower, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter incurred, that may arise
under, out of, or in connection with, the Credit Agreement, the
Guaranties, the other Loan Documents, the Letters of Credit,
Acceptances or any other documents made, delivered or given in
connection therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required
to be paid by Borrower or any Subsidiary Grantor pursuant to the terms
of the Credit Agreement or any other Loan Document), (ii) all
obligations and liabilities of Borrower to any Secured Party, whether
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred, that may arise under, out of, or in
connection with, any Swap Contract or any other document made,
delivered or given in connection therewith and (iii) all obligations of
each Obligor (other than Borrower) now or hereafter existing under this
Agreement and each other Loan Document to which it is or may become a
party.
5
<PAGE>
"Patent Collateral": with respect to each Grantor, its
interests owned in the following, in each case to the extent the grant
by such Grantor of a security interest pursuant to this Agreement is
not prohibited without the consent of any other Person:
(a) all letters patent and applications for letters
patent throughout the world, including all patent applications
in preparation for filing anywhere in the world and including
each patent and patent application referred to in Item A of
Schedule V attached hereto;
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations
of any of the items described in the preceding clause (a);
(c) all patent licenses and other agreements
providing each Grantor with the right to use any of the items
of the type referred to in the preceding clauses (a) and (b),
including each patent license referred to in Item B of
Schedule V attached hereto;
(d) the right to sue third parties for past, present
or future infringements of any Patent Collateral described in
the preceding clauses (a) and (b) and, to the extent
applicable, clause (c); and
(e) all proceeds of, and rights associated with, the
foregoing (including license royalties and proceeds of
infringement suits), the right to sue third parties for past,
present or future infringements of any patent or patent
application, including any patent or patent application
referred to in Item A of Schedule V attached hereto, and for
breach or enforcement of any patent license, including any
patent license referred to in Item B of Schedule V attached
hereto, and all rights corresponding thereto throughout the
world.
"Permitted Lien": as defined in Section 2.1.
"Proceeds": with respect to each Grantor, any consideration
received from the sale, exchange or other disposition of any asset or
property which constitutes Collateral, any value received as a
consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of
whatever nature of any asset or property which constitutes Collateral,
and shall include, without limitation, (a) all cash and negotiable
Instruments received or held on behalf of the Administrative Agent
pursuant to Section 5.3 and (b) any claim of such Grantor against a
third party for (and the right to sue and recover for and the rights to
damages or profits due or accrued arising out of or in connection with)
any and all amounts from time to time paid or payable under or in
connection with any of the Collateral.
"Secured Parties": as defined in the first recital.
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"Select Liens": Liens permitted pursuant to Section 8.01 of
the Credit Agreement other than Specified Liens and Liens permitted
pursuant to Section 8.01(a) of the Credit Agreement.
"Specified Liens": Liens permitted pursuant to Sections
8.01(b), (f), (h), (l), (q) and (r) of the Credit Agreement, which
Liens do not, as of the date hereof, in the aggregate, secure
obligations valued in excess of $2,000,000.
"Subject IP Collateral": as defined in clause (a) of Section
3.7.
"Subsidiary": a Subsidiary incorporated or otherwise organized
in the United States of America.
"Trademark Collateral": with respect to each Grantor, its
interests owned in the following, in each case to the extent the grant
by such Grantor of a security interest pursuant to this Agreement is
not prohibited without the consent of any other Person:
(a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names,
trade styles, trade dress, service marks, certification marks,
collective marks, logos, other source of business identifiers,
prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature
and designs (all of the foregoing items in this clause (a)
being collectively called a "Trademark"), now existing in the
United States or hereafter adopted or acquired in the United
States, and all registrations and recordings thereof and all
applications in connection therewith, including registrations,
recordings and applications in the United States Patent and
Trademarks Office, including those referred to in Item A of
Schedule VI attached hereto, and all renewals thereof;
(b) all Trademark licenses and other agreements
providing each Grantor with the right to use any items of the
type described in the preceding clause (a), including each
Trademark license referred to in Item B of Schedule VI
attached hereto, and all renewals thereof;
(c) all of the goodwill of the business connected
with the use of, and symbolized by the items described in, the
preceding clause (a);
(d) the right to sue third parties for past, present
and future infringements of any Trademark Collateral described
in the preceding clause (a) and, to the extent applicable,
clause (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by each Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, Trademark registration or Trademark license,
including any Trademark, Trademark registration or Trademark
license referred to in Item A and Item B of Schedule VI
attached hereto, or for any injury to the goodwill associated
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with the use of any such Trademark or for breach or
enforcement of any Trademark license and all rights
corresponding thereto throughout the world.
"Trade Secrets Collateral": with respect to each Grantor, its
interests in the following, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement is not
prohibited without the consent of any other Person: all common law and
statutory trade secrets and all other confidential or proprietary or
useful information (to the extent such confidential, proprietary or
useful information is protected by each Grantor against disclosure and
is not readily ascertainable) and all know-how obtained by or used in
or contemplated at any time for use in the business of each Grantor
(all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other
tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade
Secret licenses, including each Trade Secret license referred to in
Schedule VII attached hereto, and including the right to sue for and to
enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement
of any such Trade Secret license.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Section references are to this Agreement unless otherwise
specified. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation".
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Security Interest.
2.1 Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due, whether at the stated maturity,
by acceleration, upon one or more dates set for prepayment or otherwise of the
Obligations (including the payment of all amounts that constitute part of the
Obligations and would be owed by the Obligors to the Administrative Agent or the
Secured Parties under the Loan Documents and any Swap Contracts but for the fact
that they are unenforceable or not allowable due to the existence of an
Insolvency Proceeding involving any such Obligor), each Grantor hereby grants to
the Administrative Agent, for the ratable benefit of the Secured Parties, a
first priority security interest in all of the following property now owned or
at any time hereafter acquired by such Grantor, subject only to Liens permitted
pursuant to Section 3.3 (collectively, with respect to each Grantor, the
"Collateral"):
(a) all Accounts Receivable;
(b) all Contracts;
(c) all General Intangibles;
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(d) all Inventory;
(e) all Intellectual Property Collateral;
(f) all books and records pertaining to the Collateral; and
(g) to the extent not otherwise included, all Proceeds, products,
offspring, rents, issues, profits, returns and income of any and all of the
foregoing.
Notwithstanding anything contained in this Agreement or any Loan
Document to the contrary, "Collateral" shall not include any property of the
type specified in Sections 2.1(b), (c) and (d) if the granting of a Lien by such
Grantor hereunder would violate the terms of, or otherwise constitute a default
under, any document or instrument to which any Grantor is a party (other than
those documents or Instruments between or among any of the Grantors only)
relating to the ownership of, or pertaining to any rights or interests held in,
such property.
Such security interests are granted as security only and shall not
subject any Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
2.2 Security Interest Absolute. All rights of the Administrative Agent
and the security interests granted to the Administrative Agent hereunder, and
all Obligations of the Grantors hereunder, shall be absolute and unconditional,
irrespective of
(a) any lack of validity or enforceability of the Credit
Agreement, any Note, any Letters of Credit, any Acceptances or any
other Loan Document;
(b) the failure of any Secured Party:
(i) to assert any claim or demand or to enforce any right or
remedy against Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any Letters of
Credit, any Acceptances, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any guarantor of,
or collateral securing, any Obligations,
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations or any other
extension, compromise or renewal of any Obligation;
(d) any reduction, limitation, impairment or termination of
any Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and
each Grantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of
the invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Obligations or otherwise;
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(e) any amendment to, rescission, waiver, or other
modification of, or any consent to or departure from, any of the terms
of the Credit Agreement, any Note, any Letters of Credit, any
Acceptances or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Obligations; or
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, Borrower,
any other Obligor, any surety or any guarantor.
2.3 Postponement of Subrogation, etc. No Grantor will exercise any
rights which it may acquire by reason of any payment made hereunder, whether by
way of subrogation, reimbursement or otherwise, until the prior payment, in full
and in cash, of all Obligations, the irrevocable termination of all Commitments,
the termination or expiration of all Letters of Credit and the maturity of all
Acceptances. Any amount paid to a Grantor on account of any payment made
hereunder prior to the payment in full in cash of all Obligations, the
termination or expiration of all Letters of Credit and the maturity of all
Acceptances, shall be held in trust for the benefit of the Secured Parties and
shall immediately be paid to the Secured Parties and credited and applied
against the Obligations, whether matured or unmatured, in accordance with the
terms of Section 7.3; provided, however, that if
(a) any Grantor has made payment to the Secured Parties of all
or any part of the Obligations, and
(b) all Obligations have been paid in full in cash and all
Commitments have been irrevocably terminated, the Letters of Credit are
terminated or expired and the Acceptances are matured,
each Secured Party agrees that, at such Grantor's request and expense,
the Secured Parties will execute and deliver to the applicable Grantor
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to such Grantor of an interest
in the Obligations resulting from such payment by such Grantor. In furtherance
of the foregoing, for so long as any Obligations remain outstanding or
Commitments remain outstanding, each Grantor shall refrain from taking any
action or commencing any proceeding against Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Agreement to any Secured Party.
3. Representations and Warranties. Each Grantor hereby represents as
follows:
3.1 Title; No Other Liens. Except for the security interest granted to
the Administrative Agent for the ratable benefit of the Secured Parties pursuant
to this Agreement and any other Liens permitted to exist pursuant to the Credit
Agreement, if any (the "Permitted Liens"), each
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Grantor owns each item of the Collateral free and clear of any and all Liens or
claims of others. No security agreement, financing statement or other public
notice with respect to all or any part of such Collateral is on file or of
record in any public office, except such as have been filed, pursuant to this
Agreement, in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, or in respect of Permitted Liens.
3.2 Authority. Each Grantor has full power and authority to grant to
the Administrative Agent the security interest in the Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other person other
than any consent or approval that has been obtained.
3.3 Enforceable Obligation; Perfected, First Priority Security
Interests. This Agreement constitutes a legal, valid and binding obligation of
each Grantor, enforceable against such Grantor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), and the security interests granted pursuant to this Agreement
(a) upon completion of the filings and other actions specified in Schedule I
attached hereto shall constitute perfected security interests in the Collateral
in favor of the Administrative Agent for the ratable benefit of the Secured
Parties, and (b) are prior to all other Liens on the Collateral in existence on
the date hereof, except for (i) any Specified Liens and (ii) any Select Liens.
3.4 Inventory. The Inventory owned by such Grantor is kept at the
locations listed in Schedule II attached hereto, which shall be updated from
time to time in accordance with Section 4.4, or at such other locations as shall
be permitted by Section 3.4.
3.5 Chief Executive Office. As of the Closing Date, each Grantor's
chief executive office and chief place of business is located at the location
under its signature set forth below.
3.6 Intentionally Omitted.
3.7 Intellectual Property Collateral. With respect to any Material
Intellectual Property Collateral maintained in the United States and any other
market material to Borrower's and its Subsidiaries' businesses, each Grantor has
kept such Material Intellectual Property Collateral registered with the
applicable federal, state or foreign authority, as the case may be, with an
appropriate notice of such registration and has taken all reasonable steps to
maintain such Material Intellectual Property Collateral and any and all rights
with respect thereto and has not abandoned, or permitted to become
unenforceable, any Material Intellectual Property Collateral, in each case,
except where the same could not reasonably be expected to have a Material
Adverse Effect. No consent of any other Person is required in order for any
Grantor to grant a first priority security interest in the Material Intellectual
Property Collateral to the Administrative Agent pursuant to this Agreement.
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4. Covenants. Each Grantor covenants and agrees with the Secured
Parties that, from and after the date of this Agreement until (a) the payment in
full in cash of all Obligations, (b) this Agreement is terminated and the
security interests created hereby are released, (c) all Commitments are
terminated, (d) the Letters of Credit are terminated or expired and (e) the
Acceptances are matured, such Grantor will perform, comply with and be bound by
the obligations set forth in this Section:
4.1 Delivery of Instruments and Chattel Paper. If an Event of Default
shall have occurred and be continuing and if any amount payable under or in
connection with any of the Collateral owned by such Grantor shall be or become
evidenced by any promissory note, other instrument or Chattel Paper, upon the
request of the Administrative Agent, such promissory note, instrument or Chattel
Paper shall be immediately delivered to the Administrative Agent, duly endorsed
in a manner reasonably satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
4.2 Maintenance of Insurance. Each Grantor shall maintain insurance
policies in accordance with the requirements of Section 7.06 of the Credit
Agreement. On the date hereof and throughout the term of this Agreement,
Borrower shall provide the Administrative Agent with effective certificates of
insurance with respect to each insurance policy maintained by Borrower and it
Subsidiaries, which certificates shall name the Administrative Agent as "loss
payee" or "additional insure", in accordance with customary practice for
transactions of this type, in each case as reasonably satisfactory to the
Administrative Agent and as customary for transactions of this type.
4.3 Maintenance of Perfected Security Interest; Further Documentation.
(a) Each Grantor shall cause all filings and other actions listed in Schedule I
attached hereto to be taken. Each Grantor shall maintain the security interests
created by this Agreement as first, perfected security interests subject only to
Liens permitted pursuant to Section 3.3, and shall defend such security
interests against all claims and demands of all persons whomsoever (other than
those pursuant to Liens permitted pursuant to Section 3.3).
(b) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of a Grantor, such Grantor shall
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Code with respect
to the security interests created hereby and the taking of actions outside the
United States to perfect the security interests in the Intellectual Property
Collateral created hereby.
4.4 Changes in Locations, Name, etc. A Grantor shall not, except (x)
upon ten (10) days' prior written notice to the Administrative Agent and
delivery to the Administrative Agent of a written supplement to Schedule II
attached hereto showing the additional location or locations at which Inventory
shall be kept, and (y) if filings under the Code or otherwise have been made
which maintain in favor of the Administrative Agent a valid, legal and perfected
security interest in the
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Collateral subject to no Liens, other than Liens permitted pursuant to Section
3.3,
(a) permit any of the Inventory to be kept at a location other
than those listed in Schedule II hereto, except for Inventory (i) in
transit between locations described in this paragraph (a), (ii) in
transit as part of a delivery to a purchaser thereof or (iii)
transferred to a Foreign Subsidiary in a transaction, in each case, as
permitted by the Credit Agreement;
(b) change the location of its chief executive office and
chief place of business from that specified in Section 3.5; or
(c) change its (i) corporate name or any trade name used to
identify it in its conduct of business or in the ownership of its
properties, (ii) identity or (iii) corporate structure to such an
extent that any financing statement filed in favor of the
Administrative Agent in connection with this Agreement would become
seriously misleading.
4.5 Further Identification of Collateral. Each Grantor shall furnish to
the Administrative Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with such Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
4.6 Notices. A Grantor shall advise the Administrative Agent promptly
in reasonable detail, at its address set forth pursuant to Section 11.02 of the
Credit Agreement of:
(a) any Lien (other than security interests created hereby or
Permitted Liens) on, any material portion of the Collateral; and
(b) the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the security interests
created hereby or on the aggregate value of (i) the Collateral and (ii)
all other Collateral (as such term is defined in the Pledge Agreement)
of Borrower and its Subsidiaries taken as a whole.
4.7 Administrative Agent's Liabilities and Expenses; Indemnification.
(a) Notwithstanding anything to the contrary provided herein, the Administrative
Agent assumes no liabilities with respect to any claims regarding each Grantor's
ownership (or purported ownership) of, or rights or obligations (or purported
rights or obligations) arising from, the Collateral or any use (or actual or
alleged misuse) whether arising out of any past, current or future event,
circumstance, act or omission or otherwise, or any claim, suit, loss, damage,
expense or liability of any kind or nature arising out of or in connection with
the Collateral or the production, marketing, delivery, sale or provision of
goods or services under or in connection with any of the Collateral. All of such
liabilities shall, as between the Administrative Agent and the Grantors, be
borne exclusively by the Grantors.
(b) Each Grantor hereby agrees to pay all expenses of the
Administrative Agent and to indemnify the Administrative Agent with respect to
any and all losses, claims, damages, liabilities and related expenses in respect
of this Agreement or the Collateral in each case to the extent Borrower is
required to do so pursuant to Section 10.07 of the Credit Agreement.
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(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the Pledge Agreement. Without prejudice to the
survival of any other agreements contained herein, all indemnification and
reimbursement obligations contained herein shall survive the payment in cash in
full of the principal and interest under the Credit Agreement and the
termination of the Commitments or this Agreement.
4.8 Use and Disposition of Collateral. A Grantor shall not (a) make or
permit to be made an assignment, pledge or hypothecation of the Collateral, and
shall grant no other security interest in such Collateral (other than (i)
pursuant hereto or, (ii) any Permitted Liens) or (b) make or permit to be made
any transfer of such Collateral, and shall remain at all times in possession
thereof other than transfers to the Administrative Agent pursuant to the
provisions hereof; notwithstanding the foregoing, such Grantor may use and
dispose of such Collateral in any lawful manner not in violation of the
provisions of this Agreement, the Credit Agreement or any other Loan Document,
unless the Administrative Agent shall, after an Event of Default shall have
occurred and during the continuance thereof, notify such Grantor not to sell,
convey, lease, assign, transfer or otherwise dispose of any such Collateral
other than Inventory in the ordinary course of business and other than any other
transfers between the Grantors.
4.9 As to Intellectual Property Collateral. With respect to any
Material Intellectual Property Collateral maintained in the United States and
any other market material to Borrower's and its Subsidiaries' businesses, each
Grantor covenants and agrees to keep such Material Intellectual Property
Collateral registered with the applicable federal, state or foreign authority,
as the case may be, with an appropriate notice of such registration and
covenants and agrees to take all reasonable steps to maintain such Material
Intellectual Property Collateral and any and all rights with respect thereto and
will not abandon, or permit to become unenforceable, any Material Intellectual
Property Collateral, in each case, except where the same could not reasonably be
expected to have a Material Adverse Effect. If any Grantor shall own any
Intellectual Property, such Grantor shall execute and deliver to the
Administrative Agent any documents required to acknowledge or register or
perfect the Administrative Agent's interest in any part of the Intellectual
Property Collateral.
5. Provisions Relating to Accounts.
5.1 Grantors Remain Liable under Accounts. Anything herein to the
contrary notwithstanding, a Grantor shall remain liable under each of the
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. No Secured Party shall have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any Secured Party of any payment relating to such
Account pursuant hereto, nor shall any Secured Party be obligated in any manner
to perform any of the obligations of a Grantor under or pursuant to any Account
(or any agreement giving rise thereto), to make any payment, to make any inquiry
as to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it
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or to which it may be entitled at any time or times.
5.2 Analysis of Accounts. The Administrative Agent shall have the right
upon the occurrence and during the continuance of an Event of Default to make
test verifications of the Accounts in any manner and through any medium that it
considers reasonably advisable, and each Grantor shall furnish all such
assistance and information as the Administrative Agent may reasonably require in
connection with such test verifications. At any time and from time to time upon
the occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's reasonable request and at the expense of each Grantor,
each Grantor shall cause independent public accountants or others reasonably
satisfactory to the Administrative Agent to furnish to the Administrative Agent
reports showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts. Upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent in its own name or in the name of
others may communicate with account debtors on the Accounts to verify with them
to the Administrative Agent's reasonable satisfaction the existence, amount and
terms of any Accounts.
5.3 Collections on Accounts. (a) The Administrative Agent hereby
authorizes each Grantor to collect the Accounts, and the Administrative Agent
may curtail or terminate said authority at any time after the occurrence and
during the continuance of an Event of Default. If required by the Administrative
Agent at any time after the occurrence and during the continuance of an Event of
Default, any payments of Accounts, when collected by a Grantor during the
continuance of such Event of Default, (i) shall be forthwith (and, in any event,
within two Business Days) deposited by such Grantor in the exact form received,
duly indorsed by such Grantor to the Administrative Agent if required, in a
Collateral Account maintained under the sole dominion and control of and on
terms and conditions reasonably satisfactory to the Administrative Agent,
subject to withdrawal by the Administrative Agent as provided in Section 7.3,
and (ii) until so turned over, shall be held by such Grantor in trust for the
Secured Parties, segregated from other funds of such Grantor.
(b) At the Administrative Agent's reasonable request after the
occurrence and during the continuance of an Event of Default, each Grantor shall
deliver to the Administrative Agent all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
Accounts, including, without limitation, all original orders, invoices and
shipping receipts.
5.4 Representations and Warranties. As of the Closing Date, the place
where each Grantor keeps its records concerning its Accounts is at the location
listed in Schedule III attached hereto.
5.5 Covenants. (a) The amount represented by each Grantor to the
Secured Parties from time to time as owing by each account debtor or by all
account debtors in respect of the Accounts shall at such time be in all material
respects the correct amount actually owing by such account debtor or debtors
thereunder.
(b) Upon the occurrence and during the continuance of an Event of
Default, a Grantor shall not grant any extension of the time of payment of any
of the Accounts Receivable, compromise,
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compound or settle the same for less than the full amount thereof, release,
wholly or partly, any person liable for the payment thereof, or allow any credit
or discount whatsoever thereon other than in the ordinary course of such
Grantor's business, in each case if the Administrative Agent has instructed such
Grantor not to do so.
(c) Unless a Grantor shall deliver ten (10) days' prior written notice
identifying the change of location for its books and records, such Grantor shall
not remove its books and records from the location specified in Section 5.4.
6. Provisions Relating to Contracts.
6.1 Grantors Remain Liable Under Contracts. Anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each Contract
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with and pursuant to the terms and
provisions of such Contract. No Secured Party shall have any obligation or
liability under any Contract by reason of or arising out of this Agreement or
the receipt by any such Secured Party of any payment relating to such Contract
pursuant hereto, nor shall any Secured Party be obligated in any manner to
perform any of the obligations of a Grantor under or pursuant to any Contract,
to make any payment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any performance by any
party under any Contract, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
6.2 Communication With Contracting Parties. Upon the occurrence and
during the continuance of an Event of Default, the Administrative Agent in its
own name or in the name of others may communicate with parties to the Contracts
to verify with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Contracts.
7. Remedies.
7.1 Notice to Account Debtors and Contract Parties. Upon the request of
the Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, a Grantor shall notify account debtors on
the Accounts and parties to the Contracts that the Accounts and the Contracts
have been assigned to the Administrative Agent for the ratable benefit of the
Secured Parties and that payments in respect thereof during the continuance of
such an Event of Default shall be made directly to the Administrative Agent.
7.2 Proceeds to be Turned Over To Administrative Agent. In addition to
the rights of the Administrative Agent and the Secured Parties specified in
Section 5.3 with respect to payments of Accounts, if an Event of Default shall
occur and be continuing all Proceeds received by a Grantor consisting of cash,
checks and other near-cash items shall upon the Administrative Agent's request
be held by such Grantor in trust for the Secured Parties, segregated from other
funds of such Grantor, and shall, upon the Administrative Agent's request (it
being understood that the exercise of remedies by the Secured Parties in
connection with an Event of Default under Sections 9.01 (f) or (g)
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of the Credit Agreement, shall be deemed to constitute a request by the
Administrative Agent for the purposes of this sentence) forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required) and held by the Administrative Agent in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent and
on terms and conditions reasonably satisfactory to the Administrative Agent. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by
such Grantor in trust for the Administrative Agent and the Secured Parties)
shall subject to Section 7.3 continue to be held as collateral security for all
the Obligations and shall not constitute payment thereof until applied as
provided in Section 7.3.
7.3 Application of Proceeds. If an Event of Default shall have occurred
and be continuing, and the Administrative Agent shall have requested that a
Grantor take any action set forth in Section 5.3(a) or 7.2 or the Administrative
Agent shall have taken any action pursuant to Section 7.4, the Administrative
Agent shall apply the proceeds as follows:
First, to the payment of the reasonable costs and expenses of
the Administrative Agent as set forth in Sections 7.4 and 15;
Second, to the payment of all amounts of the Obligations owed
to the Secured Parties constituting interest on the Credit Extensions
made by them, pro rata as among the Secured Parties in accordance with
the amount of such Obligations owed to them;
Third, ratably against Obligations consisting of unpaid and
outstanding principal of the Revolving Loans, Obligations then due and
owing under all outstanding Swap Contracts and Obligations consisting
of unreimbursed and owing Special Facility Obligations and other
similar obligations;
Fourth, to collateralize Obligations consisting of Special
Facility Obligations and other similar obligations; and
Fifth, against any other remaining Obligations.
Then to the Applicable Guarantor or whoever is entitled
thereto under applicable court direction.
The Administrative Agent may assume that no Obligations are outstanding
with respect to Swap Contracts unless it has received written notice thereof in
accordance with this Agreement prior to any such application by it, and if so
notified may rely upon and deal with the Secured Party party to such Swap
Contract as to Obligations thereunder.
7.4 Code Remedies. If an Event of Default shall have occurred and be
continuing, the Administrative Agent, on behalf of the Secured Parties may
exercise, in addition to all other rights and remedies granted to them under
applicable law, in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
17
<PAGE>
a secured party under the Code (whether or not, because of the jurisdiction of
the Collateral, the Code applies to the applicable Collateral). Without limiting
the generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon a
Grantor or any other person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
any Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. Any Secured Party shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of (to the extent permitted by law) any right or
equity of redemption in a Grantor, which right or equity is hereby, to the
extent permitted by law, waived or released. Each Grantor further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at such Grantor's premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses incurred therein or incidental to the care or
safekeeping of any of such Collateral or reasonably relating to such Collateral
or the rights of the Administrative Agent and the Secured Parties hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in accordance with Section
7.3, and only after such application and after the payment by the Administrative
Agent of any other amount required by any provision of law, including, without
limitation, Section 9-504(l)(c) of the Code, need the Administrative Agent
account for the surplus, if any, to such Grantor. If any notice of a proposed
sale or other disposition of such Collateral shall be required by law, such
notice shall be in writing and deemed reasonable and proper if given at least
ten (10) days before such sale or other disposition. The Administrative Agent
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Administrative Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
The Administrative Agent shall have absolute discretion as to the time
of application of any such proceeds, money or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Administrative Agent
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the Administrative Agent or of 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
Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.
7.5 Waiver; Deficiency. Each Grantor waives and agrees not to assert
any rights
18
<PAGE>
or privileges it may acquire under Section 9-112 of the Code. Each Grantor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
reasonable fees and disbursements of any attorneys employed by any Secured Party
to collect such deficiency.
8. Administrative Agent's Appointment as Attorney-in-Fact;
Administrative Agent's Performance of Grantors' Obligations.
8.1 Powers. Each Grantor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent thereof, with full power of
substitution, during the continuance of an Event of Default, as its true and
lawful attorney-in-fact, with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name
from time to time in the Administrative Agent's discretion, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, such Grantor hereby gives the Administrative
Agent the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do the following upon the occurrence and during the
continuance of an Event of Default:
(a) in the name of such Grantor or its own name, or otherwise,
to take possession of and indorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due
under any Account, Instrument, General Intangible or Contract or with
respect to any other Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such money due under any Account, Instrument,
General Intangible or Contract or with respect to any other Collateral
whenever payable;
(b) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral (other than Permitted Liens), to
effect any repairs or any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the
costs thereof,
(c) to execute, in connection with any sale provided for in
Section 7.4, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(d) (i) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (ii) to ask or demand for, collect,
receive payment of and receipt for, any and all money, claims and other
amounts due or to become due at any time in respect of or arising out
of any Collateral; (iii) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with
19
<PAGE>
any of the Collateral; (iv) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any thereof and to enforce
any other right in respect of any Collateral; (v) to defend any suit,
action or proceeding brought against any Grantor with respect to any
Collateral; (vi) to settle, compromise or adjust any such suit, action
or proceeding and, in connection therewith, to give such discharges or
releases as the Administrative Agent may deem appropriate; and (vii)
generally, to use, sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's
option and at the expense of such Grantor, at any time, or from time to
time, all acts and things which the Administrative Agent reasonably
deems necessary to protect, preserve or realize upon such Collateral
and the Administrative Agent's and the Secured Parties' security
interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.
8.2 Performance by Administrative Agent of Grantor's Obligations. If
any Grantor fails to perform or comply with any of its agreements contained
herein, the Administrative Agent, at its option, but without any obligation to
do so, may perform or comply, or otherwise cause performance or compliance, with
such agreement.
8.3 Grantor's Reimbursement Obligation. The expenses of the
Administrative Agent reasonably incurred in connection with actions undertaken
as provided in this Section 8, together with interest thereon at a rate per
annum equal to the default rate of interest set forth in Section 2.10(c) of the
Credit Agreement, from the date payment is demanded by the Administrative Agent
to the date reimbursed by such Grantor, shall be payable by Borrower to the
Administrative Agent on demand.
8.4 Ratification; Power Coupled With an Interest. Each Grantor hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
9. Duty of Administrative Agent. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. No Secured Party nor any of its
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of a Grantor or any other person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on the Secured Parties hereunder are solely to protect the
Secured Parties' interests in the Collateral and shall not impose any duty upon
any Secured Party to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or wilful
20
<PAGE>
misconduct.
10. Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, each Grantor authorizes the Administrative Agent to file financing
statements with respect to the Collateral without the signature of such Grantor
in such form and in such filing offices as the Administrative Agent reasonably
determines appropriate to perfect the security interests of the Administrative
Agent under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
11. Authority of Administrative Agent. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the other
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the other Secured
Parties with full and valid authority so to act or refrain from acting.
12. Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Administrative Agent or any Secured Party upon the filing or commencement of
any Insolvency Proceeding in respect of any Grantor, or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, such Grantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
13. Notices. All notices, requests and demands to or upon the Secured
Parties or the Grantors under this Agreement shall be given or made in
accordance with Section 11.02 of the Credit Agreement and addressed as follows:
(a) if to any Grantor other than Borrower, in care of Borrower
in accordance with Section 11.02 of the Credit Agreement;
(b) if to Borrower, in accordance with Section 11.02 of the
Credit Agreement; and
(c) if to any Secured Party, in accordance with Section 11.02
of the Credit Agreement.
14. Survival of Agreement. All covenants, agreements, representations
and warranties made by any Grantor herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Secured Parties and shall survive the making by the Lenders of the
Credit Extensions, the execution and delivery to the Lenders of the Loan
Documents,
21
<PAGE>
the issuance of any Letters of Credit and the creation of any Acceptances,
regardless of any investigation made by the Secured Parties or on their behalf,
and shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or Special Facility Obligation, or any fee or any
other amount payable under or in respect of this Agreement or any other Loan
Document is outstanding and unpaid and so long as the Commitments have not been
terminated, all Letters of Credit have not terminated or expired and all
Acceptances have not matured.
15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.
16. Jurisdiction; Consent to Service of Process. (a) Each Grantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Grantor or any Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Grantor or any Secured Party
or its properties in the courts of any jurisdiction.
(b) Each Grantor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 13. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
22
<PAGE>
17. Release. (a) Unless the Grantors and the Administrative Agent
otherwise agree, this Agreement and the security interest created hereunder
shall terminate when all Obligations have been fully and indefeasibly paid in
full in cash, when the Secured Parties have no further Commitments under the
Credit Agreement, the Letters of Credit are terminated or expired and the
Acceptances are matured, at which time the Administrative Agent shall execute
and deliver to each Grantor, or to such person or persons as such Grantor shall
reasonably designate, all at such Grantor's sole expense, all Uniform Commercial
Code termination statements and similar documents prepared by such Grantor which
such Grantor shall reasonably request to evidence such termination. Any
execution and delivery of termination statements or documents pursuant to this
Section 17(a) shall be without recourse to or warranty by the Administrative
Agent.
(b) All Collateral used, sold, transferred or otherwise disposed of, in
accordance with the terms of the Credit Agreement (including pursuant to a
waiver or amendment of the terms thereof and including by virtue of the sale or
other disposition of any Guarantor permitted by the Credit Agreement) shall be
used, sold, transferred or otherwise disposed of free and clear of the Lien and
the security interest created hereunder. In connection with the foregoing, (i)
the Administrative Agent shall execute and deliver to each Grantor, or to such
person or persons as such Grantor shall reasonably designate, all at such
Grantor's sole expense, all Uniform Commercial Code termination statements and
similar documents prepared by such Grantor which such Grantor shall reasonably
request to evidence the release of the Lien and security interest created
hereunder with respect to such Collateral and (ii) any representation, warranty
or covenant contained herein relating to such Collateral shall no longer be
deemed to be made with respect to such used, sold, transferred or otherwise
disposed Collateral.
18. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The parties hereunder
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
19. Amendments in Writing; No Waiver; Cumulative Remedies.
19.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Grantors and the Administrative Agent (on
behalf of the Lenders or the Required Lenders, as the case may be).
19.2 No Waiver by Course of Conduct. No Secured Party shall by any act
(except by a written instrument pursuant to Section 19.1) or delay be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or
23
<PAGE>
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by any Secured Party of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which such
Secured Party would otherwise have on any future occasion.
20. Remedies Cumulative. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
21. Section Headings. The section and Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
22. Successors and Assigns; This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of each
Grantor and the Secured Parties and their successors and assigns; provided,
however, that this Agreement may not be assigned by any Grantor without the
prior written consent of the Administrative Agent.
23. Loan Document, etc. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions of the Credit Agreement.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
25. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
26. Additional Grantors. Pursuant to the Credit Agreement, each
Domestic Subsidiary that was not in existence or not a Domestic Subsidiary on
the date thereof is required to enter into this Agreement as a Grantor upon
becoming a Domestic Subsidiary. Upon execution and delivery, after the date
hereof, by the Administrative Agent and such Domestic Subsidiary of an
instrument in the form of Annex 1 attached hereto, such Domestic Subsidiary
shall become a Grantor hereunder with the same force and effect as if originally
named as a Grantor hereunder. The execution and delivery of any such instrument
shall not require the consent of any Grantor hereunder. The rights and
obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
[SIGNATURE PAGE FOLLOWS]
24
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Security Agreement
to be duly executed and delivered as of the date first above written.
EVENFLO COMPANY, INC.
By:
-----------------------------------
Name:
Title:
LISCO FEEDING, INC.
By:
-----------------------------------
Name:
Title:
LISCO FURNITURE, INC.
By:
-----------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
-----------------------------------
Name:
Title:
S-1
<PAGE>
Schedules:
<TABLE>
<S> <C>
Schedule I Filings and Other Actions Required to Perfect Security Interests
Schedule II Inventory and Equipment
Schedule III Records of Accounts
Schedule IV Copyrights and Mask Works
Schedule V Patents
Schedule VI Trademarks
Schedule VII Trade Secrets
</TABLE>
<PAGE>
SCHEDULE I
TO THE SECURITY AGREEMENT
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
<TABLE>
<CAPTION>
Name of Grantor Filing Jurisdictions
- --------------- ---------------------
<S> <C>
Evenflo Company, Inc. Alabama Secretary of State
Ohio Secretary of State
Miami County, Ohio (Piqua)
Montgomery County, Ohio (Vandalia)
Shelby County, Ohio (Sidney)
Cherokee County, Georgia (Canton)
Wisconsin Secretary of State
Oconto County, Wisconsin (Suring)
Shawano County, Wisconsin (Shawano)
Lisco Feeding, Inc. Ohio Secretary of State
Montgomery County, Ohio (Vandalia)
Lisco Furniture, Inc. Ohio Secretary of State
Montgomery County, Ohio (Vandalia)
</TABLE>
<PAGE>
SCHEDULE II
TO THE SECURITY AGREEMENT
INVENTORY AND EQUIPMENT LOCATIONS
<TABLE>
<CAPTION>
Name of Grantor Location
- --------------- --------
<S> <C>
Evenflo Company, Inc. Tom Bevill Industrial Park
3300 Industrial Drive
Jasper, Alabama 35501
4501 Highway 78E
Jasper, Alabama 35501
1801 Commerce Drive
Piqua, Ohio 45356
501 Young Street
Building C
Piqua, Ohio 45356
1900 Covington Avenue
Piqua, Ohio 45356
1 Aerovent Drive
Piqua, Ohio 45356
707 Crossroads Court
Vandalia, Ohio 45377
Campbell Avenue
Sidney, Ohio 45356
1000 Evenflo Drive
P.O. Box 709
Canton, Georgia 30144
214 Nu-Line Street
Suring, Wisconsin 54174
</TABLE>
<PAGE>
<TABLE>
<S> <C>
307 South Krueger
Suring, Wisconsin 54174
145 North Mill Street
Suring, Wisconsin 54174
13305 Hayes Road
Suring, Wisconsin 54174
924 East Main Street
Suring, Wisconsin 54174
N6362 Arbulus Lane
Shawano, Wisconsin 54186
Lisco Feeding, Inc. 707 Crossroads Court
Vandalia, Ohio 45377
Lisco Furniture, Inc. 707 Crossroads Court
Vandalia, Ohio 45377
</TABLE>
<PAGE>
SCHEDULE III
TO THE SECURITY AGREEMENT
RECORDS OF ACCOUNTS
<TABLE>
<CAPTION>
Name of Grantor Location
- --------------- ---------
<S> <C>
Evenflo Company, Inc. Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Lisco Feeding, Inc. Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Lisco Furniture, Inc. Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
</TABLE>
<PAGE>
SCHEDULE IV
TO THE SECURITY AGREEMENT
Item A. Copyrights/Mask Works
Registered Copyrights/Mask Works
<TABLE>
<CAPTION>
Grantor Registration No. Registration Date Author(s) Title
- ------- ---------------- ----------------- --------- ------
<S> <C> <C> <C> <C>
None
</TABLE>
Copyright/Mask Work Pending Registration Applications
<TABLE>
<CAPTION>
Grantor Serial No. Filing Date Author(s) Title
- ------- ---------- ----------- --------- ------
<S> <C> <C> <C> <C>
None
</TABLE>
Item B. Copyright/Mask Work Licenses
<TABLE>
<CAPTION>
Effective Expiration Subject
Grantor Licensor Licensee Registration No. Date Date Matter
- ------- -------- -------- ---------------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
None
</TABLE>
<PAGE>
SCHEDULE V
TO THE SECRUITY AGREEMENT
Item A. Patents
Item B. Patent Licenses
See Attached
<PAGE>
SCHEDULE VI
TO THE SECURITY AGREEMENT
Item A. Trademarks
Item B. Trademark Licenses
See Attached
<PAGE>
SCHEDULE VII
TO THE SECURITY AGREEMENT
Trade Secret or Know-How Licenses
<TABLE>
<CAPTION>
Effective Expiration Subject
Grantor Licensor Licensee Date Date Matter
- ------- -------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
None
</TABLE>
<PAGE>
ANNEX 1 TO
SECURITY AGREEMENT
SUPPLEMENT NO. dated as of , to the Security
Agreement dated as of August 20, 1998 (the "Security Agreement"),
among EVENFLO COMPANY, INC., a Delaware corporation ("Borrower"),
each of the Subsidiaries (such term and each other capitalized term
used but not defined herein having the meaning given it in the
Security Agreement) and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("BofA"), as administrative agent (in such capacity,
the "Administrative Agent") for the Secured Parties.
A. Reference is made to the Credit Agreement, dated as of August 20,
1998 (as it may be otherwise amended, amended and restated, supplemented or
modified from time to time, the "Credit Agreement"), among Borrower, the
Lenders, the Lead Arranger, the Documentation Agent, and the Administrative
Agent.
B. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make additional Credit Extensions and as consideration for
Credit Extensions previously made pursuant to, and upon the terms and subject to
the conditions specified in, the Credit Agreement. Pursuant to the Credit
Agreement, each Domestic Subsidiary that was not in existence or not a Domestic
Subsidiary on the date thereof is required to enter into the Security Agreement
as a Grantor upon becoming a Domestic Subsidiary. Section 26 of the Security
Agreement provides that additional Domestic Subsidiaries may become Grantors
under the Security Agreement by execution and delivery of an instrument in the
form of this Supplement. The undersigned (the "New Grantor") is a Domestic
Subsidiary of Borrower and is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Grantor under the Security
Agreement in order to induce the Lenders to make additional Credit Extensions
and as consideration for Credit Extensions previously made.
Accordingly, the Administrative Agent and the New Grantor agree as
follows:
SECTION 1. In accordance with Section 26 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby agrees to all the terms and provisions of the
Security Agreement applicable to it as a Grantor thereunder. Each reference to a
"Grantor" in the Security Agreement shall be deemed to include the New Grantor.
The Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Secured
Parties that this Supplement has been duly authorized, executed and delivered by
it and constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms, subject to the effects of applicable
bankruptcy, insolvency or similar laws effecting creditors' rights generally and
equitable principles of general applicability.
<PAGE>
SECTION 3. This Supplement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Supplement shall become
effective when the Administrative Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Grantor and
the Administrative Agent.
SECTION 4. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS THEREOF.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in the Security Agreement. All communications and notices
hereunder to the New Grantor shall be given to it at the address set forth under
its signature, with a copy to Borrower.
<PAGE>
IN WITNESS WHEREOF, the New Grantor and the Administrative
Agent have duly executed this Supplement to the Security Agreement as of the day
and year first above written.
[NAME OF NEW GRANTOR]
By:
---------------------------------
Name:
Title:
Address:
----------------------------
Fax No.:
----------------------------
Attention:
----------------------------
BANK OF AMERICA NATIONAL SAVINGS AND TRUST
ASSOCIATION, as Administrative Agent
By:
---------------------------------
Name:
Title:
Address:
----------------------------
Fax No.:
----------------------------
Attention:
----------------------------
<PAGE>
Exhibit 10.2
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated as of August 20, 1998 among
Evenflo Company, Inc., a Delaware corporation (the "Company"), KKR 1996 Fund
L.P., a Delaware limited partnership (the "KKR Fund") and Lisco, Inc. ("Lisco")
RECITALS
WHEREAS, pursuant to a Stock Purchase Agreement dated as of
July 30, 1998 between the KKR Fund and Lisco (the "Stock Purchase Agreement"),
the KKR Fund will purchase shares of Common Stock (as defined herein);
WHEREAS, immediately following the consummation of the
transactions contemplated by the Stock Purchase Agreement, the KKR Fund and
Lisco will own approximately 51% and 49% of the issued and outstanding Common
Stock, respectively; and
WHEREAS, the Company, the KKR Fund and Lisco wish to provide
for certain matters relating to the respective holdings by KKR Fund and Lisco of
Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I. INTRODUCTORY MATTERS
1.1. Defined Terms. In addition to the terms defined elsewhere
herein, the following terms have the following meanings when used herein with
initial capital letters:
"Affiliate" shall have the meaning given to that term in Rule
405 promulgated under the Securities Act and shall include members of a
Person's immediate family or trusts for the benefit of members of the
immediate family of such Person; provided that officers, directors and
employees of the Company will not be deemed to be Affiliates of a
stockholder of the Company for purposes hereof solely by reason of
being officers, directors or employees of the Company.
"Agreement" means this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Assumption Agreement" means a writing reasonably satisfactory
in form and substance to the KKR Fund whereby a Permitted Transferee of
shares of Common Stock becomes a party to, and agrees to be bound to
the same extent as its transferor, by the terms of this Agreement.
"Board" means the Board of Directors of the Company.
<PAGE>
"Business Day" means a day other than a Saturday, Sunday,
federal or New York State holiday or other day on which commercial
banks in New York City are authorized or required by law to close.
"Common Stock" means the shares of Class A Common Stock, $1.00
par value per share, of the Company and any stock into which such
common stock may thereafter be converted or exchanged.
"New Common Stock" means any Common Stock issued by the
Company for cash. New Common Stock shall not include (i) Common Stock
issuable upon exercise or conversion of securities convertible or
exchangeable for Common Stock; (ii) Common Stock or any options,
warrants or rights offered to the public generally pursuant to a
registration statement under the Securities Act; (iii) Common Stock
issuable upon the exercise of any options, warrants or rights or
exchanged for any other equity securities of the Company; (iv) any
shares of the Company's Common Stock issued to the officers, directors
or employees of the Company; (v) Common Stock, or Common Stock issuable
upon options, rights or warrants or securities convertible or
exchangeable for Common Stock, which are issued in connection with any
acquisition, merger, purchase of assets; or (vi) shares of the
Company's Common Stock issued in connection with any stock split, stock
dividend or recapitalization of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the
same may be amended from time to time.
"Other Registration Rights Agreement" means any written
agreement to which the Company and any holder of shares of Common Stock
are parties that provides for the registration of shares of Common
Stock of such holder by the Company.
"Permitted Transferee" means any Person to whom shares of
Common Stock are Transferred in a Transfer in accordance with Section
2.2 or otherwise not in violation of this Agreement and who is required
to, and does, enter into an Assumption Agreement, and includes any
Person to whom a Permitted Transferee (or a Permitted Transferee of a
Permitted Transferee) so further Transfers shares of Common Stock and
who is required to, and does, become bound by the terms of this
Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, trust, joint stock company, business trust,
unincorporated association, joint venture, governmental authority or
other legal entity of any nature whatsoever.
"Public Offering" means the sale of shares of Common Stock to
the public pursuant to an effective registration statement (other than
a registration statement on Form S-4 or S-8 or any similar or successor
form) filed under the Securities Act.
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"Registrable Securities" means (i) Common Stock held by Lisco
on the date hereof and (ii) Common Stock acquired by the KKR Fund from
the Company or any affiliate of the Company (including, without
limitation, Lisco) whether by purchase or otherwise and (iii), in the
case of (i) and (ii) above, any Common Stock which may be issued or
distributed in respect thereof by way of stock dividend or stock split
or other distribution, recapitalization or reclassification. As to any
particular Registrable Securities, once issued, such Registrable
Securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale by the holder of such
securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (b) such securities shall have been distributed
to the public pursuant to Rule 144 (or any successor provision) under
the Securities Act, (c) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company
and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities
Act or any state securities or blue sky law then in force, or (d) such
securities shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
the performance by the Company of its obligations under Sections 3.1
and 3.2, including without limitation (i) all SEC, stock exchange, or
National Association of Securities Dealers, Inc. (the "NASD")
registration and filing fees (including, if applicable, the fees and
expenses of any "qualified independent underwriter," as such term is
defined in Rule 2720 of the NASD, and of its counsel), (ii) all fees
and expenses of complying with securities or blue sky laws (including
fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) all fees and expenses
incurred in connection with the listing of the Registrable Securities
on any securities exchange and all rating agency fees, (v) the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and
compliance, (vi) any fees and disbursements of underwriters customarily
paid by the issuers or sellers of securities, including liability
insurance if the Company so desires or if the underwriters so require,
and the reasonable fees and expenses of any special experts retained in
connection with the requested registration, but excluding underwriting
discounts and commissions and transfer taxes, if any, (vii) the
reasonable out-of-pocket expenses of not more than one law firm
incurred by Lisco and Lisco's Permitted Transferees in connection with
the registration, and (viii) the costs and expenses of the Company
relating to analyst and investor presentations or any "road show"
undertaken in connection with the registration and/or marketing of the
Registrable Securities; provided that nothing in this clause (viii)
shall obligate the Company to engage or participate in any such
presentations or road show.
"Registration Rights Holders" means, collectively, Lisco and
Lisco's Permitted Transferees.
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<PAGE>
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"Transfer" means a transfer, sale, assignment, pledge,
hypothecation or other disposition, whether directly or indirectly
pursuant to the creation of a derivative security, the grant of an
option or other right, the imposition of a restriction on disposition
or voting or transfer by operation of law.
1.2. Construction. (a) The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
Unless the context otherwise requires: (i) "or" is disjunctive but not
exclusive, (ii) words in the singular include the plural, and in the plural
include the singular, and (iii) the words "hereof", "herein", and "hereunder"
and words of similar import when used in this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section
references are to this Agreement unless otherwise specified.
ARTICLE II. TRANSFERS
2.1. Limitations on Transfer by Lisco. (a) Neither Lisco nor
any Permitted Transferee may Transfer any shares of Common Stock other than (i)
in connection with a Public Offering effected in accordance with Section 3.1 or
3.2, (ii) after a Public Offering, in a bona fide sale to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act or (iii) in
accordance with Sections 2.2, 2.3 or 2.4.
(b) In the event of any purported Transfer by Lisco or a
Permitted Transferee of any shares of Common Stock in violation of the
provisions of this Agreement, such purported Transfer will be void and of no
effect and the Company will not give effect to such Transfer.
(c) Each certificate representing shares of Common Stock held
by Lisco or any Permitted Transferee will bear a legend substantially to the
following effect (with such additions thereto or changes therein as the Company
may be advised by counsel are required by law or necessary to give full effect
to this Agreement, the "Legend"):
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A STOCKHOLDERS' AGREEMENT AMONG EVENFLO COMPANY, INC., KKR 1996 FUND
L.P. AND LISCO, INC., A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
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<PAGE>
STOCKHOLDERS' AGREEMENT. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
SUCH STOCKHOLDERS' AGREEMENT."
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
The Legend will be removed by the Company by the delivery of substitute
certificates without such Legend in the event of (i) a Transfer permitted by
this Agreement and in which the Transferee is not required to enter into an
Assumption Agreement or (ii) the termination of Article II pursuant to the terms
hereof, provided, however, that the second paragraph of the Legend will only be
removed if at such time it is no longer required for purposes of applicable
securities laws. If any shares of Common Stock cease to be Registrable
Securities under clause (a) or (b) of the second sentence of the definition
thereof, the Company shall, upon the written request of the holder thereof,
issue to such holder a new certificate or certificates evidencing such shares,
without the second paragraph of the Legend.
2.2. Transfers to Permitted Transferees. Lisco may Transfer
any or all of the shares of Common Stock held by it to any Person who duly
executes and delivers an Assumption Agreement; provided that in connection
therewith the Company, if it so requests promptly following its receipt of such
Assumption Agreement (and, in such event, such Assumption Agreement shall not be
effective unless and until this proviso has been satisfied), has been furnished
with an opinion in form and substance reasonably satisfactory to the Company of
counsel reasonably satisfactory to the Company that such Transfer is exempt from
or not subject to the provisions of Section 5 of the Securities Act and any
other applicable securities laws; and, provided, further, that no Transfer under
this Section 2.2 shall be permitted if such Transfer would require the Company
to register a class of equity securities under Section 12 of the Exchange Act
under circumstances where the Company does not then have securities of any class
registered under Section 12 of the Exchange Act and such transfer would cause
such registration to be required.
2.3. Tag-Along Rights. (a) So long as this Agreement remains
in effect, with respect to any proposed Transfer by the KKR Fund or any of its
Affiliates (collectively, the "Selling Partnership") of shares of Common Stock
to any Person not an Affiliate of the KKR Fund, other than (i) in a Public
Offering, (ii) pursuant to a bona fide sale to the public pursuant to Rule 144
under the Securities Act, (iii) pursuant to a distribution to the limited
partners of the KKR Fund or (iv) pursuant to any agreement or plan of merger or
combination, including any tender or exchange offer in respect thereof, that is
approved by the Board and that provides for equal treatment of all outstanding
shares of Common Stock (any such transaction, a "Proposed Sale"), Lisco and each
Permitted Transferee will have the right to require the proposed Transferee or
acquiring Person to purchase from Lisco and each Permitted Transferee who
exercises its rights under this Section 2.3(a) in accordance with this Section
2.3 (collectively, the "Tagging Stockholders") a number of shares of Common
Stock
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<PAGE>
up to the product (rounded up to the nearest whole number) of (i) the quotient
determined by dividing (A) the aggregate number of shares of Common Stock owned
by the Tagging Stockholders by (B) the aggregate number of shares of Common
Stock owned by the KKR Fund and its Affiliates and the Tagging Stockholders and
(ii) the total number of shares of Common Stock proposed to be directly or
indirectly Transferred to the transferee or acquiring Person in the Proposed
Sale (a "Proposed Transferee"), at the same price per share of Common Stock and
upon the same terms and conditions (including, without limitation, time of
payment, form of consideration and adjustments to purchase price) as the Selling
Partnership; provided that in order to be entitled to exercise its right to sell
shares of Common Stock to the Proposed Transferee pursuant to this Section 2.3,
each Tagging Stockholder (x) shall agree to the same covenants as the Selling
Partnership agrees to in connection with the Proposed Sale and (y) shall make
such representations and warranties as the Selling Partnership makes. Each
Tagging Stockholder will be responsible for funding its proportionate share of
any escrow arrangements in connection with the Proposed Sale and for its
proportionate share of any withdrawals therefrom, including without limitation
any such withdrawals that are made with respect to claims arising out of
agreements, covenants, representations, warranties or other provisions relating
the Proposed Sale that were not made by the Tagging Stockholder. Each Tagging
Stockholder will be responsible for its proportionate share of the fees,
commissions and other out-of-pocket expenses (collectively, "Costs") of the
Proposed Sale to the extent not paid or reimbursed by the Company, the Proposed
Transferee or another Person (other than the Selling Partnership). The Selling
Partnership shall be entitled to estimate the Tagging Stockholders'
proportionate share of such Costs and to withhold such amounts from payments to
be made to the Tagging Stockholder at the time of closing of such Proposed Sale;
provided that (i) such estimate shall not preclude the Selling Partnership from
recovering additional amounts from the Tagging Stockholder in respect of such
Tagging Stockholder's proportionate share of such Costs and (ii) the Selling
Partnership shall reimburse the Tagging Stockholder to the extent actual amounts
are ultimately less than the estimated amounts or any such amounts are paid by
the Company, the Proposed Transferee or another Person (other than the Selling
Partnership).
(b) The Selling Partnership will give notice to Lisco of each
Proposed Sale not more than ten days after the execution of the definitive
agreement relating to the Proposed Sale, setting forth the number of shares of
Common Stock proposed to be so Transferred, the name and address of the Proposed
Transferee, the proposed amount and form of consideration (and if such
consideration consists in part or in whole of property other than cash, the
Selling Partnership will provide such information, to the extent reasonably
available to the Selling Partnership, relating to such non-cash consideration as
Lisco may reasonably request in order to evaluate such non-cash consideration)
and other terms and conditions of payment offered by the Proposed Transferee.
The Selling Partnership will deliver or cause to be delivered to each Tagging
Stockholder copies of all transaction documents relating to the Proposed Sale
promptly as the same become available. The tag-along rights provided by this
Section 2.3 must be exercised by Lisco within seven days following receipt of
the notice required by the preceding sentence by delivery of a written notice to
the Selling Partnership indicating its desire to exercise its rights and
specifying the number of shares of Common Stock it desires to sell (the
"Tag-Along Notice"). The Tagging Stockholders will be entitled under this
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Section 2.3 to Transfer to the Proposed Transferee the number of shares of
Common Stock calculated in accordance with Section 2.3(a).
(c) If any Tagging Stockholder exercises its rights under
Section 2.3(a), the closing of the purchase of the Common Stock with respect to
which such rights have been exercised will take place concurrently with the
closing of the sale of the Selling Partnership's Common Stock to the Proposed
Transferee.
2.4. Drag-Along Rights. (a) So long as this Agreement remains
in effect, if the KKR Fund or any of its Affiliates (collectively, the "Dragging
Partnership") receive an offer from a Person other than an Affiliate of the KKR
Fund (a "Third Party") to purchase (in a transaction of a type referred to in
the first sentence of Section 2.3(a)) at least a majority of the shares of
Common Stock then outstanding and such offer is accepted by the Dragging
Partnership, then Lisco and each Permitted Transferee (collectively, the
"Drag-Along Stockholders") hereby agrees that, if requested by the Dragging
Partnership, it will Transfer to such Third Party, subject to Section 2.4(b), on
the terms of the offer so accepted by the Dragging Partnership, including,
without limitation, time of payment, form of consideration and adjustments to
purchase price, the number of shares of Common Stock equal to the number of
shares of Common Stock owned by it multiplied by the percentage of the then
outstanding shares of Common Stock to which the Third Party offer is applicable.
(b) The Dragging Partnership will give notice (the "Drag-Along
Notice") to the Drag-Along Stockholders of any proposed Transfer giving rise to
the rights of the Dragging Partnership set forth in Section 2.4(a) (a "Section
2.4 Transfer") within 10 days following the Dragging Partnership's acceptance of
the offer referred to in Section 2.4(a) and, in any event, no later than 10 days
prior to the proposed closing date for such Section 2.4 Transfer. The Drag-Along
Notice will set forth the number of shares of Common Stock proposed to be so
Transferred, the name of the proposed Transferee or acquiring Person, the
proposed amount and form of consideration (and if such consideration consists in
part or in whole of property other than cash, the Dragging Partnership will
provide such information, to the extent reasonably available to the Dragging
Partnership, relating to such non-cash consideration as the Drag-Along
Stockholders together may reasonably request in order to evaluate such non-cash
consideration), the number of shares of Common Stock sought and the other terms
and conditions of the offer. Each Drag-Along Stockholder (x) shall agree to the
same covenants as the Dragging Partnership agrees to in connection with the
Section 2.4 Transfer and (y) shall make such representations and warranties
concerning its title to the shares of Common Stock to be sold in connection with
the Section 2.4 Transfer and its authority to enter into and consummate the
Section 2.4 Transfer as the Dragging Partnership makes, but shall not be
required to make any other representations and warranties. Each Drag-Along
Stockholder will be responsible for funding its proportionate share of any
escrow arrangements in connection with the Section 2.4 Transfer and for its
proportionate share of any withdrawals therefrom, including without limitation
any such withdrawals that are made with respect to claims arising out of
agreements, covenants, representations, warranties or other provisions relating
the Section 2.4 Transfer that were not made by the Drag-Along Stockholder. Each
Drag-Along Stockholder will be responsible for its proportionate share of the
Costs of the Section 2.4 Transfer to the extent not paid or reimbursed by the
Company,
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<PAGE>
the Third Party or another Person (other than the Dragging Partnership. The
Dragging Partnership shall be entitled to estimate the Drag-Along Stockholders'
proportionate share of such Costs and to withhold such amounts from payments to
be made to the Drag-Along Stockholder at the time of closing of the Section 2.4
Transfer; provided that (i) such estimate shall not preclude the Dragging
Partnership from recovering additional amounts from the Drag-Along Stockholder
in respect of such Drag-Along Stockholder's proportionate share of such Costs
and (ii) the Dragging Partnership shall reimburse the Drag-Along Stockholder to
the extent actual amounts are ultimately less than the estimated amounts or any
such amounts are paid by the Company, the Third Party or another Person (other
than the Dragging Partnership). If the Section 2.4 Transfer is not consummated
within 180 days from the date of the Drag-Along Notice, the Dragging Partnership
must deliver another Drag-Along Notice in order to exercise its rights under
this Section 2.4 with respect to such Section 2.4 Transfer.
2.5. Custody Agreement and Power of Attorney. Upon delivering
a Tag Along Notice or receiving a Drag-Along Notice, Lisco and each Permitted
Transferee will, if requested by the Selling Partnership or the Dragging
Partnership, as the case may be, execute and deliver a custody agreement and
power of attorney in form and substance satisfactory to the Selling Partnership
or the Dragging Partnership, as the case may be, with respect to the shares of
Common Stock which are to be sold by Lisco and Permitted Transferees pursuant
hereto (a "Custody Agreement and Power of Attorney"). The Custody Agreement and
Power of Attorney will provide, among other things, that Lisco and each
Permitted Transferee will deliver to and deposit in custody with the custodian
and attorney-in-fact named therein a certificate or certificates representing
such shares of Common Stock (duly endorsed in blank by the registered owner or
owners thereof) and irrevocably appoint said custodian and attorney-in-fact as
its agent and attorney-in-fact with full power and authority to act under the
Custody Agreement and Power of Attorney on its behalf with respect to the
matters specified in Section 2.3 or Section 2.4, as the case may be.
ARTICLE III. REGISTRATION RIGHTS
3.1. Piggyback Rights. (a) Piggyback Rights. If the Company at
any time after the date hereof proposes to register Common Stock under the
Securities Act (other than a registration on Form S-4 or S-8, or any successor
or similar forms), whether or not for sale for its own account, it will, at each
such time, give prompt written notice to the Registration Rights Holders of its
intention to do so and of the Registration Rights Holders' rights under this
Section 3.1. Upon the written request of any Registration Rights Holder made
within 14 days after the receipt of any such notice (which request shall specify
the number of Registrable Securities intended to be disposed of by such
Registration Rights Holder), the Company will use its reasonable efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Registration Rights
Holders; provided that (i) if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
or any other holder of securities that initiated such registration (an
"Initiating Holder") shall determine for any reason not to proceed with the
proposed registration of the securities to be sold by it, the Company or such
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Initiating Holder may, at its election, give written notice of such
determination to the Registration Rights Holders and, thereupon, the Company
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses incurred in connection therewith), and (ii) if such
registration involves an underwritten offering, the Registration Rights Holders
requesting to be included in the registration must sell their Registrable
Securities to the underwriters selected by the Company or the Initiating
Holders, as the case may be, on the same terms and conditions as apply to the
Company or the Initiating Holders, as the case may be, with, in the case of a
combined primary and secondary offering, such differences, including any with
respect to indemnification and liability insurance, as may be customary or
appropriate in combined primary and secondary offerings. If a registration
requested pursuant to this Section 3.1(a) involves an underwritten public
offering, any Registration Rights Holder requesting to be included in such
registration may elect, in writing prior to the effective date of the
registration statement filed in connection with such registration, not to
register all or any portion of such securities in connection with such
registration.
(b) Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 3.1.
(c) Priority in Piggyback Registrations. If a registration
pursuant to this Section 3.1 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, so as to be reasonably likely to have an
adverse effect on the price, timing or distribution of the securities offered in
such offering, then the Company will include in such registration (i) first,
100% of the securities proposed to be sold by the Company and (ii) second, to
the extent of the number of securities requested to be included in such
registration which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above, which number of securities
shall be allocated pro rata among all such requesting holders of Common Stock on
the basis of the relative number of shares of Common Stock then held by each
such holder of Common Stock. In the event that (i) the Company did not initiate
the registration of securities intended to be registered for sale for its own
account and (ii) the number of Registrable Securities and shares of Common Stock
of other holders entitled to registration rights with respect to such Common
Stock, in each case requested to be included in such registration, is less than
the number which, in the opinion of the managing underwriter, can be sold, the
Company may include in such registration the securities it proposes to sell up
to the number of securities that, in the opinion of the underwriter, can be
sold.
3.2. Demand Registration. (a) Demand Registration. At any time
after the 180th day following the initial Public Offering, upon the written
request of Lisco or its Affiliates (in such capacity, a "Demand Party")
requesting that the Company effect the registration under the Securities Act of
all or part of such Demand Party's Registrable Securities and specifying the
amount and intended method of disposition thereof, the Company will promptly
give written notice of such requested registration to the other holders of
Registrable Securities and other holders of securities entitled to notice of
such registration
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and thereupon will, as expeditiously as possible, file a registration statement
to effect the registration under the Securities Act of:
(i) such Registrable Securities which the Company has been so
requested to register by the Registration Rights Holders; and
(ii) the securities of other holders entitled to registration
rights pursuant to an Other Registration Rights Agreement which the
Company has been requested to register by written request given to the
Company within 15 days after the giving of such written notice by the
Company (which request shall specify the amount and intended method of
disposition of such securities);
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities and such
other securities to be so registered; provided that the Company shall not be
required to effect the registration of Registrable Securities at the request of
a Demand Party under this Section 3.2(a) on more than two occasions, and
provided further, that the Company shall not be obligated to file a registration
statement relating to any registration request under this Section 3.2(a):
(x) within a period of 180 days (or such lesser period as the
managing underwriters in an underwritten offering may permit) after the
effective date of any other registration statement relating to any
registration request under this Section 3.2(a) or relating to any
registration effected under Section 3.1;
(y) if with respect thereto the managing underwriter, the SEC,
the Securities Act or the rules and regulations thereunder, or the form
on which the registration statement is to be filed, would require the
conduct of an audit other than the regular audit conducted by the
Company at the end of its fiscal year, in which case the filing may be
delayed until the completion of such audit (and the Company shall, upon
request of the Demand Parties, use its reasonable efforts to cause such
audit to be completed expeditiously and without unreasonable delay); or
(z) if the Company is in possession of material non-public
information and the Board determines in good faith that disclosure of
such information would not be in the best interests of the Company and
its stockholders, in which case the filing of the registration
statement may be delayed until the earlier of the second business day
after such conditions shall have ceased to exist and the 180th day
after receipt by the Company of the written request from a Demand Party
to register Registrable Securities under this Section 3.2(a).
(b) Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 3.2.
(c) Effective Registration Statement. A registration requested
pursuant to this Article III will not be deemed to have been effected unless it
has become effective; provided that, if, within 180 days after it has become
effective, the offering of Registrable Securities
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pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the SEC or other governmental agency or court,
then such registration will be deemed not to have been effected.
(d) Selection of Underwriters. If a requested registration
pursuant to this Section 3.2 involves an underwritten offering, the Company
shall have the right to select the investment banker or bankers and managers to
administer the offering, including the lead managing underwriter.
(e) Priority in Demand Registrations. If a requested
registration pursuant to this Section 3.2 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, so as to be reasonably likely to
have an adverse effect on the price, timing or distribution of the securities
offered in such offering, then the Company will include in such registration the
number of shares of Common Stock requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, which number shall be allocated pro rata
among all such requesting holders of Registrable Securities and holders of
Common Stock who have piggyback registration rights pursuant to an Other
Registration Rights Agreement on the basis of the relative number of shares of
Common Stock then held by each such holder. In the event that the number of
Registrable Securities and shares of Common Stock of other holders, in each case
entitled to registration rights with respect to such Common Stock requested to
be included in such registration is less than the number which, in the opinion
of the managing underwriter, can be sold, the Company may include in such
registration securities it proposes to sell for its own account up to the number
of securities that, in the opinion of the underwriter, can be sold.
3.3. Registration Procedures. If and whenever the Company is
required to file a registration statement with respect to, or to use its
reasonable efforts to effect or cause the registration of, any Registrable
Securities under the Securities Act as provided in this Agreement the Company
will as expeditiously as possible:
(a) prepare and, in any event within 120 days after the end of
the period within which a request for registration may be given to the Company
pursuant to Section 3.2, file with the SEC a registration statement on an
appropriate form with respect to such Registrable Securities and use its
reasonable efforts to cause such registration statement to become effective;
provided, however, that the Company may discontinue any registration of
securities as to which it is the Initiating Party at any time prior to the
effective date of the registration statement relating thereto (and, in such
event, the Company shall pay the Registration Expenses incurred in connection
therewith); provided, further, that before filing a registration statement or
prospectus, or any amendments or supplements thereto, the Company will furnish
to counsel for the sellers of Registrable Securities covered by such
registration statement copies of all documents proposed to be filed, which
documents will be subject to the review of such counsel;
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(b) prepare and file with the SEC 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 not in excess of 270 days and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement; provided that before filing a
registration statement or prospectus, or any amendments or supplements thereto,
the Company will furnish to counsel for the sellers of Registrable Securities
covered by such registration statement copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and summary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably request
in order to facilitate the disposition of the Registrable Securities by such
seller;
(d) use its reasonable efforts to register or qualify such
Registrable Securities covered by such registration in such jurisdictions as
each seller shall reasonably request, 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, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this subsection (d), it would
not be obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) use its reasonable 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 seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 3.3(b), of the Company's becoming aware
that the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of any such seller, prepare and furnish to such seller a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact
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or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;
(g) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than 18 months) after
the effective date of the registration statement, an earnings statement which
shall satisfy the provisions of Section 11(a) of the Securities Act;
(h) use its reasonable efforts to list such Registrable
Securities on any securities exchange on which the Common Stock is then listed
if such Registrable Securities are not already so listed and if such listing is
then permitted under the rules of such exchange and use its reasonable efforts
to provide a transfer agent and registrar for such Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement;
(i) enter into such customary agreements (including an
underwriting agreement in customary form), which may include indemnification
provisions in favor of underwriters and other Persons in addition to, or in
substitution for the indemnification provisions hereof, and take such other
actions as sellers of a majority of shares of such Registrable Securities or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(j) obtain a "cold comfort" letter or letters from the
Company's independent public accounts in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller or sellers
of a majority of shares of such Registrable Securities shall reasonably request;
(k) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) notify counsel for the holders of Registrable Securities
included in such registration statement and the managing underwriter or agent,
immediately, and confirm the notice in writing (i) when the registration
statement, or any post-effective amendment to the registration statement, shall
have become effective, or any supplement to the prospectus or any amendment
prospectus shall have been filed, (ii) of the receipt of any comments from the
SEC, (iii) of any request of the SEC to amend the registration statement or
amend or supplement the prospectus or for additional information, and (iv) of
the issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the
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qualification of the registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings for any of
such purposes;
(m) make every reasonable effort to prevent the issuance of
any stop order suspending the effectiveness of the registration statement or of
any order preventing or suspending the use of any preliminary prospectus and, if
any such order is issued, to obtain the withdrawal of any such order at the
earliest possible moment;
(n) if requested by the managing underwriter or agent or any
holder of Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
being notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(o) cooperate with the holders of Registrable Securities
covered by the registration statement and the managing underwriter or agent, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under the
registration statement, and enable such securities to be in such denominations
and registered in such names as the managing underwriter or agent, if any, or
the Registration Rights Holders may request;
(p) obtain for delivery to the holders of Registrable
Securities being registered and to the underwriter or agent an opinion or
opinions from counsel for the Company in customary form and in form, substance
and scope reasonably satisfactory to such holders, underwriters or agents and
their counsel; and
(q) cooperate with each seller of Registrable Securities and
each underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD.
3.4. Other Registration-Related Matters. (a) The Company may
require any Person that is selling shares of Common Stock in a Public Offering
pursuant to Sections 3.1 or 3.2 to furnish to the Company in writing such
information regarding such Person and pertinent to the disclosure requirements
relating to the registration and the distribution of the Registrable Securities
which are included in such Public Offering as the Company may from time to time
reasonably request in writing.
(b) Each Registration Rights Holder agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 3.3(f), it will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until its receipt of the copies of the amended
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or supplemented prospectus contemplated by Section 3.3(f) and, if so directed by
the Company, each Registration Rights Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in their
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company gives any such
notice, the period for which the Company will be required to keep the
registration statement effective will be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 3.3(f) to and including the date when each seller of Registrable
Securities covered by such registration statement has received the copies of the
supplemented or amended prospectus contemplated by Section 3.3(f).
(c) Each Registration Rights Holder will, in connection with a
Public Offering of the Company's securities, upon the request of the Company or
of the underwriters managing any underwritten offering of the Company's
securities, agree in writing not to effect any sale, disposition or distribution
of Registrable Securities (other than those included in the Public Offering)
without the prior written consent of the managing underwriter for such period of
time commencing 7 days before and ending 180 days (or such earlier date as the
managing underwriter shall agree) after the effective date of such registration.
(d) Upon delivering the notice referred to either in (i) the
second sentence of Section 3.1(a) or (ii) the first sentence in Section 3.2(a),
Lisco and each Permitted Transferee will, if requested by the Company, execute
and deliver a Custody Agreement and Power of Attorney, as described in Section
2.5.
3.5. Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act pursuant to Section 3.1 or 3.2, the Company hereby indemnifies
and agrees to hold harmless, to the extent permitted by law, the sellers of any
Registrable Securities covered by such registration statement (each a "Holder"),
each Affiliate of such Holder and their respective directors and officers or
general and limited partners (and the directors, officers, employees, affiliates
and controlling Persons of any of the foregoing), each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such Holder or any such underwriter
within the meaning of the Securities Act (collectively, the "Indemnified
Parties"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses to which such Indemnified Party may become subject under
the Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof, whether or
not such Indemnified Party is a party thereto) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the case of a prospectus, in the light of the circumstances when they were made,
and the Company will reimburse such Indemnified Party for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, liability, action or proceeding; provided that the Company
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will not be liable to any Indemnified Party 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 any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, in any such preliminary, final or summary prospectus, or
any amendment or supplement thereto in reliance upon and in conformity with
written information with respect to such Indemnified Party furnished to the
Company by such Indemnified Party expressly for use in the preparation thereof.
Such indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any Indemnified Party and
will survive the Transfer of such securities by such Holder.
(b) Indemnification by the Holders and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed in accordance with Sections 3.1, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Holder of such Registrable Securities or any prospective underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 3.5(a)) the Company, all other Holders or any prospective
underwriter, as the case may be, and any of their respective Affiliates,
directors, officers and controlling Persons, with respect to any untrue
statement in or omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such untrue statement or omission was made in reliance upon and in conformity
with written information with respect to such Holder or underwriter furnished to
the Company by such Holder or underwriter expressly for use in the preparation
of such registration statement, preliminary, final or summary prospectus or
amendment or supplement, or a document incorporated by reference into any of the
foregoing. Such indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the Holders, or any
of their respective affiliates, directors, officers or controlling Persons and
will survive the Transfer of such securities by such Holder. In no event shall
the liability of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds actually received by
such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Notices of Claims. Etc. Promptly after receipt by an
Indemnified Party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 3.5, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the failure of the
Indemnified Party to give notice as provided herein will not relieve the
indemnifying party of its obligations under Section 3.5(a) or 3.5(b), except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an Indemnified Party,
unless in such Indemnified Party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified
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Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. If, in such Indemnified Party's reasonable judgment, having
common counsel would result in a conflict of interest between the interests of
such indemnified and indemnifying parties, then such Indemnified Party may
employ separate counsel reasonably acceptable to the indemnifying party to
represent or defend such Indemnified Party in such action, it being understood,
however, that the indemnifying party will not be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time for all
such Indemnified Parties (and not more than one separate firm of local counsel
at any time for all such Indemnified Parties) in such action. No indemnifying
party will 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 such Indemnified Party of a release from all liability in respect
of such claim or litigation.
(d) Contribution. If the indemnification provided for
hereunder from the indemnifying party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and Indemnified Parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and Indemnified Parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or Indemnified Parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party under this Section 3.5(d) as
a result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 3.5(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. 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.
(e) Other Indemnification. Indemnification similar to that
specified in this Section 3.5 (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under any law or with
any governmental entity other than as required by the Securities Act.
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(f) Non-Exclusivity. The obligations of the parties under this
Section 3.5 will be in addition to any liability which any party may otherwise
have to any other party.
ARTICLE IV. RIGHT OF FIRST OFFER
4.1. Right of First Offer. (a) If at any time on or after the
fifth anniversary of the Closing Date Lisco or any Permitted Transferee (Lisco
and each Permitted Transferee being referred to in this Article IV as a "Selling
Holder") desires to Transfer all or any portion of the Common Stock held by it
(other than pursuant to a Transfer to a Permitted Transferee), the Selling
Holder shall deliver to the KKR Fund a written notice (the "First Offer
Notice"), which shall set forth the number of shares of Common Stock (the
"Offered Shares") proposed to be Transferred and the terms on which the Selling
Holder irrevocably offers to Transfer such shares to the KKR Fund. The KKR Fund
shall have 30 days from the date the First Offer Notice is received to determine
whether to purchase all of the Offered Shares for the purchase price and upon
the terms specified in the First Offer Notice by giving written notice (a
"Section 4.1 Notice") to the Selling Holder and stating its acceptance of such
offer.
If the KKR Fund shall have agreed to purchase the Offered
Shares, it shall consummate its purchase of the Offered Shares by delivering,
against receipt of certificates or other instruments representing the Common
Stock being purchased, appropriately endorsed by the Selling Holder, the
aggregate purchase price to be paid by it (the "Required Funds") via wire
transfer of immediately available funds to an account specified by the Selling
Holder not less than one Business Day before the closing date, which closing
date will be the later of 30 days after the date of receipt of the Section 4.1
Notice by the Selling Holder and five Business Days after receipt of all
governmental and regulatory consents and approvals and the expiration of all
applicable waiting periods.
The right of first offer granted to the KKR Fund hereunder
shall terminate if unexercised within 30 days after receipt of the First Offer
Notice.
(b) If the Selling Holder shall be permitted to proceed with
the proposed Transfer of the Offered Shares, the Selling Holder shall have 90
days to consummate such proposed Transfer, on terms no more favorable to the
transferee(s) than those terms set forth in the First Offer Notice, before the
provisions of this Section 4.1 shall again be in effect with respect to such
shares of Common Stock. In connection with any Transfer of all or any portion of
the Offered Shares to the KKR Fund, the Selling Holder shall not be required to
make any representations and warranties, other than as to its beneficial
ownership of the Offered Shares and its authority as an entity to consummate
such Transfer, and shall not be required to provide any indemnities in respect
of the Offered Shares or any portion thereof; provided that the inclusion of any
such provisions in connection with a Transfer of the Offered Shares to a
transferee or transferees other than the KKR Fund will not be deemed to be on
terms more favorable to the purchaser(s) than those contained in the First Offer
Notice.
ARTICLE V. BOARD OF DIRECTORS
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5.1. Board of Directors. The KKR Fund, Lisco and the Company
agree that at all times after the date hereof, the Board shall consist of not
more than one individual designated by Lisco and reasonably acceptable to the
Company and the KKR Fund (the "Lisco Representative"). Lisco and the KKR Fund
shall take all such actions as may be necessary or appropriate to cause the
Lisco Representative to be elected or re-elected as a member of the board of
directors of the Company and to be maintained in such position at all times;
provided, that such designee may be removed by the board of directors of the
Company and in the case of any such removal, subject to the terms of this
Agreement, Lisco may appoint a new representative who shall fill such vacancy so
long as such appointee is reasonably satisfactory to the Company's board of
directors.
ARTICLE VI. PREEMPTIVE RIGHTS
6.1. Preemptive Right. Lisco shall have the right to purchase
for cash their Preemptive Right Pro Rata Share of New Common Stock which the
Company may from time to time propose to sell for cash. The "Preemptive Right
Pro Rata Share" shall be, at any given time, that proportion which the number of
shares of Common Stock held by Lisco at such time bears to the total Common
Stock issued and outstanding at such time.
6.2. Preemptive Notices. In the event the Company proposes to
undertake an issuance of New Common Stock for cash, it shall give Lisco written
notice (the "Preemptive Notice") of its intention to sell New Common Stock for
cash, the price, the identity of the purchaser and the principal terms upon
which the Company proposes to sell the same. Lisco shall have 15 Business Days
from the delivery date of any Preemptive Notice to agree to purchase a number of
shares of New Common Stock up to the Preemptive Right Pro Rata Share (in each
case calculated prior to the issuance) for the price and upon the terms
specified in the Preemptive Notice by giving written notice to the Company and
stating therein the number of shares of New Common Stock to be purchased.
6.3. Failure to Exercise Preemptive Right. In the event Lisco
fails to purchase all of the Preemptive Right Pro Rata Share pursuant to this
Article VI, the Company shall have 180 days after the date of the Preemptive
Notice to consummate the sale of the New Common Stock with respect to which
Lisco's preemptive right was not exercised, at or above the price and upon terms
not more favorable to the purchasers of such New Common Stock than the terms
specified in the initial Preemptive Notice given in connection with such sale.
In the event the Company has not sold the New Common Stock within said 180-day
period, the Company shall not thereafter issue or sell any New Common Stock
without first offering such New Common Stock to Great Star in the manner
provided in this Article VI.
ARTICLE VII. MISCELLANEOUS
7.1. Additional Securities Subject to Agreement. Lisco and
each Permitted Transferee to whom shares of Common Stock have been Transferred
pursuant to Section 2.2
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agrees that any other equity securities of the Company which it hereafter
acquires by means of a stock split, stock dividend, distribution, exercise of
options or warrants or otherwise (other than pursuant to a Public Offering) will
be subject to the provisions of this Agreement to the same extent as if held on
the date hereof.
7.2. Confidential Information. (a) Lisco and each Permitted
Transferee agrees that it will not use at any time any Confidential Information
(as defined below) of which Lisco or any Permitted Transferee is or becomes
aware except in connection with its investment in the Company.
(b) Lisco and each Permitted Transferee further agrees that
the Confidential Information will be kept strictly confidential and will not be
disclosed by it or its Representatives (as defined below), except (i) as
required by applicable law, regulation or legal process, and only after
compliance with Section 7.2(c) (provided that this clause (i) may not be relied
upon to the extent any action is taken by Lisco or a Permitted Transferee which
requires such disclosure and, but for such action, such disclosure would not
have been required) and (ii) that it may disclose the Confidential Information
or portions thereof to those of its officers, employees, directors and
representatives of its legal, accounting and financial advisors (the Persons to
whom such disclosure is permissible being "Representatives") who need to know
such information in connection with the investment by Lisco and any Permitted
Transferees in the Company; provided that such Representatives (x) are informed
of the confidential and proprietary nature of the Confidential Information and
(y) agree to be bound by and perform the provisions of this Section 7.2. Lisco
and each Permitted Transferee agrees to be responsible for any breach of this
Section 7.2 by its Representatives other than those Representatives who after
the date hereof execute a separate confidentiality agreement with the Company
(it being understood that such responsibility shall be in addition to and not by
way of limitation of any right or remedy the Company may have against such
Representatives with respect to any such breach).
(c) If Lisco or any Permitted Transferee or any Representative
becomes legally compelled (including by deposition, interrogatory, request for
documents, subpoena, civil investigative demand or similar process) to disclose
any of the Confidential Information, Lisco shall provide the Company with prompt
prior written notice of such requirement to disclose such Confidential
Information. Upon receipt of such notice, the Company may seek a protective
order or other appropriate remedy. If such protective order or other remedy is
not obtained, Lisco or such Permitted Transferee or Representative agrees to
disclose only that portion of the Confidential Information which is legally
required to be disclosed and to take all reasonable steps to preserve the
confidentiality of the Confidential Information. In addition, Lisco, the
Permitted Transferees and Representatives will not oppose any action (and will,
if and to the extent requested by the Company, cooperate with, assist and join
with the Company, at the Company's expense and on a reasonable basis, in any
reasonable action) by the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Confidential Information.
(d) "Confidential Information" means oral and written
information concerning the Company and its subsidiaries furnished to Lisco or
any Permitted Transferee by or on
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behalf of the Company (irrespective of the form of communication and whether
such information is so furnished before, on or after the date hereof), and all
analyses, compilations, data, studies, notes, interpretations, memoranda or
other documents prepared by Lisco or any Permitted Transferee or any
Representative containing or based in whole or in part on any such furnished
information. The term "Confidential Information" does not include any
information which (i) at the time of disclosure or thereafter is generally
available to the public (other than as a result of a disclosure directly or
indirectly by Lisco or any Permitted Transferee or Representative in violation
hereof) or (ii) is or becomes available to Lisco on a nonconfidential basis from
a source other than the Company or its advisors, provided that such source was
not known by Lisco or any Permitted Transferee to be prohibited from disclosing
such information to it by a legal, contractual or fiduciary obligation owed to
the Company.
7.3. Termination. This Agreement, other than Sections 3.1,
3.2, 5.1 and 7.2, will terminate and be of no further force and effect at such
time as there shall have been one or more Public Offerings such that there
exists a public trading market in 20% or more of the Common Stock. Sections 3.1
and 3.2 will terminate and be of no further force and effect on the earlier of
the second anniversary of the date of the initial Public Offering and the tenth
anniversary of the date hereof. Sections 3.2 and 5.1 will terminate and be of no
further force and effect at such time as Lisco and its Affiliates own less than
20% of the issued and outstanding shares of Common Stock of the Company. Section
7.2 will terminate and be of no further force and effect on the third
anniversary of the first date on which neither Lisco nor any Permitted
Transferee owns any shares of Common Stock.
7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or
registered or certified mail (postage prepaid, return receipt requested) as
follows (or at such other address for a party as shall be specified in a notice
given in accordance with this Section 7.4):
if to the KKR Fund:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street, Suite 4200
New York, NY 10019
Attention: Michael T. Tokarz
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Alan G. Schwartz, Esq.
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if to Lisco:
Lisco, Inc.
c/o Spalding & Evenflo Companies, Inc.
425 Meadow Street
Chicopee, Massachusetts 01021-0901
Attention: General Counsel
if to the Company:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attention: Richard Frank
7.5. Further Assurances. The parties hereto will sign such
further documents, cause such meetings to be held, resolutions passed, exercise
their votes and do and perform and cause to be done such further acts and things
as may be necessary in order to give full effect to this Agreement and every
provision hereof.
7.6. Non-Assignability. This Agreement will inure to the
benefit of and be binding on the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by any party hereto
without the express prior written consent of the other parties, and any
attempted assignment, without such consents, will be null and void; provided,
however, that the KKR Fund may assign or delegate its rights hereunder to any
Affiliate, and in the event of any such assignment references to the "KKR Fund"
herein shall be deemed to refer to such Affiliate.
7.7. Amendment; Waiver. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by any party of any of the provisions hereof will be
effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including without limitation, any investigation by or on
behalf of any party, will be deemed to constitute a waiver by the party taking
such action of compliance with any covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of this Agreement will
not operate or be construed as a waiver of any subsequent breach.
7.8. Third Parties. This Agreement does not create any rights,
claims or benefits inuring to any Person that is not a party hereto nor create
or establish any third party beneficiary hereto.
7.9. Governing Law; Waiver of Jury Trial. This Agreement will
be governed by, and construed in accordance with, the laws of the State of New
York. The parties to this Agreement hereby agree to submit to the jurisdiction
of the courts of the State of New York,
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the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof in any action or proceeding arising
out of or relating to this Agreement. The parties hereto irrevocably and
unconditionally waive trial by jury in any legal action or proceeding in
relation to this Agreement and for any counterclaim therein.
7.10. Specific Performance. Without limiting or waiving in any
respect any rights or remedies of the parties hereto under this Agreement now or
hereinafter existing at law or in equity or by statute, each of the parties
hereto will be entitled to seek specific performance of the obligations to be
performed by the other in accordance with the provisions of this Agreement.
7.11. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof.
7.12. Titles and Headings. The section headings contained in
this Agreement are for reference purposes only and will not affect the meaning
or interpretation of this Agreement.
7.13. Severability. If any provision of this Agreement is
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement will not be affected and
will remain in full force and effect.
7.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original and all
of which together will be deemed to be one and the same instrument.
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IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
EVENFLO COMPANY, INC.
By:
--------------------------
KKR 1996 FUND L.P.
By: KKR Associates 1996 L.P., its general
partner
By: KKR 1996 GP LLC, its general
partner
By:
----------------------------
LISCO, INC.
By:
-------------------------
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Exhibit 10.3
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated as of August 20, 1998 among
Evenflo Company, Inc., a Delaware corporation (the "Company"), KKR 1996 Fund
L.P., a Delaware limited partnership (the "KKR Fund") and Great Star
Corporation, a British Virgin Islands corporation ("Great Star")
RECITALS
WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated
as of August 20, 1998 between the Lisco, Inc., a Delaware corporation and Great
Star (the "Stock Purchase Agreement"), Great Star will purchase shares of Common
Stock (as defined herein);
WHEREAS, immediately following the consummation of the
transactions contemplated by the Stock Purchase Agreement, the KRR Fund and
Great Star will own approximately 51% and 6.6% of the issued and outstanding
Common Stock, respectively; and
WHEREAS, the Company, the KKR Fund and Great Star wish to
provide for certain matters relating to the respective holdings by KKR Fund and
Great Star of Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I. INTRODUCTORY MATTERS
1.1. Defined Terms. In addition to the terms defined elsewhere
herein, the following terms have the following meanings when used herein with
initial capital letters:
"Affiliate" shall have the meaning given to that term in Rule
405 promulgated under the Securities Act and shall include members of a
Person's immediate family or trusts for the benefit of members of the
immediate family of such Person; provided that officers, directors and
employees of the Company will not be deemed to be Affiliates of a
stockholder of the Company for purposes hereof solely by reason of
being officers, directors or employees of the Company.
"Agreement" means this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Assumption Agreement" means a writing reasonably satisfactory
in form and substance to the Company whereby a Permitted Transferee of
shares of Common Stock becomes a party to, and agrees to be bound to
the same extent as its transferor, by the terms of this Agreement.
<PAGE>
"Board" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday, Sunday,
federal or New York State holiday or other day on which commercial
banks in New York City are authorized or required by law to close.
"Common Stock" means the shares of Class A Common Stock, $1.00
par value per share, of the Company and any stock or other securities
or property of the Company into which such common stock may thereafter
be converted or exchanged and any other shares of the Company's common
equity securities.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the
same may be amended from time to time.
"New Common Stock" means, for purposes of Article IV of this
Agreement, any Common Stock issued by the Company for cash. New Common
Stock shall not include (i) Common Stock issuable upon exercise or
conversion of securities convertible or exchangeable for Common Stock;
(ii) Common Stock or any options, warrants or rights offered to the
public generally pursuant to a registration statement under the
Securities Act; (iii) Common Stock issuable upon the exercise of any
options, warrants or rights or exchanged for any other equity
securities of the Company; (iv) any shares of the Company's Common
Stock issued to the officers, directors or employees of the Company;
(v) Common Stock, or Common Stock issuable upon options, rights or
warrants or securities convertible or exchangeable for Common Stock,
which are issued in connection with any acquisition, merger, purchase
of assets; or (vi) shares of the Company's Common Stock issued in
connection with any stock split, stock dividend or recapitalization of
the Company.
"Other Registration Rights Agreement" means any written
agreement to which the Company and any holder of shares of Common Stock
are parties that provides for the registration of shares of Common
Stock of such holder by the Company.
"Permitted Transferee" means any Person to whom shares of
Common Stock are Transferred in a Transfer in accordance with Section
2.2 or otherwise not in violation of this Agreement and who is required
to, and does, enter into an Assumption Agreement, and includes any
Person to whom a Permitted Transferee (or a Permitted Transferee of a
Permitted Transferee) so further Transfers shares of Common Stock and
who is required to, and does, become bound by the terms of this
Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, trust, joint stock company, business trust,
unincorporated association, joint venture, governmental authority or
other legal entity of any nature whatsoever.
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"Public Offering" means the sale of shares of Common Stock to
the public pursuant to an effective registration statement (other than
a registration statement on Form S-4 or S-8 or any similar or successor
form) filed under the Securities Act.
"Registrable Securities" means (i) Common Stock held by Great
Star on the date hereof and (ii) Common Stock acquired by Great Star
from the Company or any affiliate of the Company whether by purchase or
otherwise and (iii), in the case of (i) and (ii) above, any Common
Stock which may be issued or distributed in respect thereof by way of
stock dividend or stock split or other distribution, recapitalization
or reclassification. As to any particular Registrable Securities, once
issued, such Registrable Securities shall cease to be Registrable
Securities when (a) a registration statement with respect to the sale
by the holder of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) such securities shall
have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) such securities
shall have been otherwise transferred, new certificates for such
securities not bearing a legend restricting further transfer shall have
been delivered by the Company and subsequent disposition of such
securities shall not require registration or qualification of such
securities under the Securities Act or any state securities or blue sky
law then in force, or (d) such securities shall have ceased to be
outstanding.
"Registration Expenses" means any and all expenses incident to
the performance by the Company of its obligations under Sections 3.1
and 3.2, including without limitation (i) all SEC, stock exchange, or
National Association of Securities Dealers, Inc. (the "NASD")
registration and filing fees (including, if applicable, the fees and
expenses of any "qualified independent underwriter," as such term is
defined in Rule 2720 of the NASD, and of its counsel), (ii) all fees
and expenses of complying with securities or blue sky laws (including
fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) all fees and expenses
incurred in connection with the listing of the Registrable Securities
on any securities exchange and all rating agency fees, (v) the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and
compliance, (vi) any fees and disbursements of underwriters customarily
paid by the issuers or sellers of securities, including liability
insurance if the Company so desires or if the underwriters so require,
and the reasonable fees and expenses of any special experts retained in
connection with the requested registration, but excluding underwriting
discounts and commissions and transfer taxes, if any, (vii) the
reasonable out-of-pocket expenses of not more than one law firm
incurred by Great Star and Great Star's Permitted Transferees in
connection with the registration, and (viii) the costs and expenses of
the Company relating to analyst and investor presentations or any "road
show" undertaken in connection with the registration and/or marketing
of the Registrable Securities.
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"Registration Rights Holders" means, collectively, Great Star
and Great Star's Permitted Transferees.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"Transfer" means a transfer, sale, assignment, or other
disposition, whether directly or indirectly pursuant to the creation of
a derivative security, the grant of an option or other right, the
imposition of a restriction on disposition or voting or transfer by
operation of law, but shall not include any pledge or hypothecation
unless followed by a transfer or assignment of such shares.
1.2. Construction. (a) The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
Unless the context otherwise requires: (i) "or" is disjunctive but not
exclusive, (ii) words in the singular include the plural, and in the plural
include the singular, and (iii) the words "hereof", "herein", and "hereunder"
and words of similar import when used in this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section
references are to this Agreement unless otherwise specified.
ARTICLE II. TRANSFERS
2.1. Limitations on Transfer by Great Star. (a) Neither Great
Star nor any Permitted Transferee may Transfer any shares of Common Stock other
than (i) in connection with a Public Offering effected in accordance with
Section 3.1, (ii) after a Public Offering, in a bona fide sale to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act or
(iii) in accordance with Sections 2.2, 2.3 or 2.4.
(b) In the event of any purported Transfer by Great Star or a
Permitted Transferee of any shares of Common Stock in violation of the
provisions of this Agreement, such purported Transfer will be void and of no
effect and the Company will not give effect to such Transfer.
(c) Each certificate representing shares of Common Stock held
by Great Star or any Permitted Transferee will bear a legend substantially to
the following effect (with such additions thereto or changes therein as the
Company may be advised by counsel are required by law or necessary to give full
effect to this Agreement, the "Legend"):
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A STOCKHOLDERS' AGREEMENT AMONG EVENFLO COMPANY, INC., KKR 1996 FUND
L.P. AND GREAT STAR, A COPY OF
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WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT."
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
The Legend will be removed by the Company by the delivery of substitute
certificates without such Legend in the event of (i) a Transfer permitted by
this Agreement and in which the Transferee is not required to enter into an
Assumption Agreement or (ii) the termination of Article II pursuant to the terms
hereof, provided, however, that the second paragraph of the Legend will only be
removed if at such time it is no longer required for purposes of applicable
securities laws. If any shares of Common Stock cease to be Registrable
Securities under clause (a) or (b) of the second sentence of the definition
thereof, the Company shall, upon the written request of the holder thereof,
issue to such holder a new certificate or certificates evidencing such shares,
without the second paragraph of the Legend.
2.2. Transfers to Permitted Transferees. Great Star may
Transfer any or all of the shares of Common Stock held by it to any Person who
duly executes and delivers an Assumption Agreement; provided that in connection
therewith the Company, if it so requests promptly following its receipt of such
Assumption Agreement (and, in such event, such Assumption Agreement shall not be
effective unless and until this proviso has been satisfied), has been furnished
with an opinion in form and substance reasonably satisfactory to the Company of
counsel reasonably satisfactory to the Company that such Transfer is exempt from
or not subject to the provisions of Section 5 of the Securities Act and any
other applicable securities laws; and, provided, further, that no Transfer under
this Section 2.2 shall be permitted if such Transfer would require the Company
to register a class of equity securities under Section 12 of the Exchange Act
under circumstances where the Company does not then have securities of any class
registered under Section 12 of the Exchange Act and such transfer would cause
such registration to be required.
2.3. Tag-Along Rights. (a) So long as this Agreement remains
in effect, with respect to any proposed Transfer by the KKR Fund or any of its
Affiliates (collectively, the "Selling Partnership") of shares of Common Stock
to any Person not an Affiliate of the KKR Fund, other than (i) in a Public
Offering, (ii) pursuant to a bona fide sale to the public pursuant to Rule 144
under the Securities Act, (iii) pursuant to a distribution to the limited
partners of the KKR Fund or (iv) pursuant to any agreement or plan of merger or
combination, including any tender or exchange offer in respect thereof, that is
approved by the Board and that provides for equal treatment of all outstanding
shares of Common Stock
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<PAGE>
(any such transaction, a "Proposed Sale"), Great Star and each Permitted
Transferee will have the right to require the proposed Transferee or acquiring
Person to purchase from Great Star and each Permitted Transferee who exercises
its rights under this Section 2.3(a) in accordance with this Section 2.3
(collectively, the "Tagging Stockholders") a number of shares of Common Stock up
to the product (rounded up to the nearest whole number) of (i) the quotient
determined by dividing (A) the aggregate number of shares of Common Stock owned
by the Tagging Stockholders by (B) the aggregate number of shares of Common
Stock owned by the KKR Fund and its Affiliates and the Tagging Stockholders and
(ii) the total number of shares of Common Stock proposed to be directly or
indirectly Transferred to the transferee or acquiring Person in the Proposed
Sale (a "Proposed Transferee"), at the same price per share of Common Stock and
upon the same terms and conditions (including, without limitation, time of
payment, form of consideration and adjustments to purchase price) as the Selling
Partnership; provided that in order to be entitled to exercise its right to sell
shares of Common Stock to the Proposed Transferee pursuant to this Section 2.3,
each Tagging Stockholder (x) shall agree to the same covenants as the Selling
Partnership agrees to in connection with the Proposed Sale and (y) shall make
such representations and warranties as to the title of the shares as the Selling
Partnership makes. Each Tagging Stockholder will be responsible for its
proportionate share of the fees, commissions and other out-of-pocket expenses
(collectively, "Costs") of the Proposed Sale to the extent not paid or
reimbursed by the Company, the Proposed Transferee or another Person (other than
the Selling Partnership). The Selling Partnership shall be entitled to estimate
the Tagging Stockholders' proportionate share of such Costs and to withhold such
amounts from payments to be made to the Tagging Stockholder at the time of
closing of such Proposed Sale; provided that (i) such estimate shall not
preclude the Selling Partnership from recovering additional amounts from the
Tagging Stockholder in respect of such Tagging Stockholder's proportionate share
of such Costs and (ii) the Selling Partnership shall reimburse the Tagging
Stockholder to the extent actual amounts are ultimately less than the estimated
amounts or any such amounts are paid by the Company, the Proposed Transferee or
another Person (other than the Selling Partnership).
(b) The Selling Partnership will give notice to Great Star of
each Proposed Sale not more than ten days after the execution of the definitive
agreement relating to the Proposed Sale, setting forth the number of shares of
Common Stock proposed to be so Transferred, the name and address of the Proposed
Transferee, the proposed amount and form of consideration (and if such
consideration consists in part or in whole of property other than cash, the
Selling Partnership will provide such information, to the extent reasonably
available to the Selling Partnership, relating to such non-cash consideration as
Great Star may reasonably request in order to evaluate such non-cash
consideration) and other terms and conditions of payment offered by the Proposed
Transferee. The Selling Partnership will deliver or cause to be delivered to
each Tagging Stockholder copies of all transaction documents relating to the
Proposed Sale promptly as the same become available. The tag-along rights
provided by this Section 2.3 must be exercised by Great Star within seven days
following receipt of the notice required by the preceding sentence by delivery
of a written notice to the Selling Partnership indicating its desire to exercise
its rights and specifying the number of shares of Common Stock it desires to
sell (the "Tag-Along Notice"). The Tagging Stockholders will be entitled under
this Section 2.3 to Transfer to the Proposed Transferee the number of shares of
Common Stock calculated in accordance with Section 2.3(a). The
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<PAGE>
closing of the Proposed Sale may not take place prior to the expiration of the
seven day period commencing after the receipt of the notice of the Proposed
Sale.
(c) If any Tagging Stockholder exercises its rights under
Section 2.3(a), the closing of the purchase of the Common Stock with respect to
which such rights have been exercised will take place concurrently with the
closing of the sale of the Selling Partnership's Common Stock to the Proposed
Transferee.
2.4. Drag-Along Rights. (a) So long as this Agreement remains
in effect, if the KKR Fund or any of its Affiliates (collectively, the "Dragging
Partnership") receive an offer from a Person other than an Affiliate of the KKR
Fund (a "Third Party") to purchase (in a transaction of a type referred to in
the first sentence of Section 2.3(a)) at least a majority of the shares of
Common Stock then outstanding and such offer is accepted by the Dragging
Partnership, then Great Star and each Permitted Transferee (collectively, the
"Drag-Along Stockholders") hereby agrees that, if requested by the Dragging
Partnership, it will Transfer to such Third Party, subject to Section 2.4(b), on
the terms of the offer so accepted by the Dragging Partnership, including,
without limitation, time of payment, form of consideration and adjustments to
purchase price, the number of shares of Common Stock equal to the number of
shares of Common Stock owned by it multiplied by the percentage of the then
outstanding shares of Common Stock to which the Third Party offer is applicable.
(b) The Dragging Partnership will give notice (the "Drag-Along
Notice") to the Drag-Along Stockholders of any proposed Transfer giving rise to
the rights of the Dragging Partnership set forth in Section 2.4(a) (a "Section
2.4 Transfer") within 10 days following the Dragging Partnership's acceptance of
the offer referred to in Section 2.4(a) and, in any event, no later than 10 days
prior to the proposed closing date for such Section 2.4 Transfer. The Drag-Along
Notice will set forth the number of shares of Common Stock proposed to be so
Transferred, the name of the proposed Transferee or acquiring Person, the
proposed amount and form of consideration (and if such consideration consists in
part or in whole of property other than cash, the Dragging Partnership will
provide such information, to the extent reasonably available to the Dragging
Partnership, relating to such non-cash consideration as the Drag-Along
Stockholders together may reasonably request in order to evaluate such non-cash
consideration), the number of shares of Common Stock sought and the other terms
and conditions of the offer. Each Drag-Along Stockholder (x) shall agree to the
same covenants as the Dragging Partnership agrees to in connection with the
Section 2.4 Transfer and (y) shall make such representations and warranties and
provide indemnity concerning its title to the shares of Common Stock to be sold
in connection with the Section 2.4 Transfer and its authority to enter into and
consummate the Section 2.4 Transfer as the Dragging Partnership makes, but shall
not be required to make any other representations and warranties or provide any
other indemnification or contribute to any escrow arrangement. Each Drag-Along
Stockholder will be responsible for its proportionate share of the Costs of the
Section 2.4 Transfer to the extent not paid or reimbursed by the Company, the
Third Party or another Person (other than the Dragging Partnership. The Dragging
Partnership shall be entitled to estimate the Drag-Along Stockholders'
proportionate share of such Costs and to withhold such amounts from payments to
be made to the Drag-Along Stockholder at the time of closing of the Section 2.4
Transfer; provided that (i) such estimate shall not preclude the
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Dragging Partnership from recovering additional amounts from the Drag-Along
Stockholder in respect of such Drag-Along Stockholder's proportionate share of
such Costs and (ii) the Dragging Partnership shall reimburse the Drag-Along
Stockholder to the extent actual amounts are ultimately less than the estimated
amounts or any such amounts are paid by the Company, the Third Party or another
Person (other than the Dragging Partnership). If the Section 2.4 Transfer is not
consummated within 180 days from the date of the Drag-Along Notice, the Dragging
Partnership must deliver another Drag-Along Notice in order to exercise its
rights under this Section 2.4 with respect to such Section 2.4 Transfer.
2.5. Custody Agreement and Power of Attorney. Upon delivering
a Tag Along Notice or receiving a Drag-Along Notice, Great Star and each
Permitted Transferee will, if reasonably requested by the Selling Partnership or
the Dragging Partnership, as the case may be, execute and deliver a custody
agreement and power of attorney in form and substance reasonably satisfactory to
the Selling Partnership or the Dragging Partnership, as the case may be, and
Great Star and its Permitted Transferees with respect to the shares of Common
Stock which are to be sold by Great Star and Permitted Transferees pursuant
hereto (a "Custody Agreement and Power of Attorney"). The Custody Agreement and
Power of Attorney will provide, among other things, that Great Star and each
Permitted Transferee will deliver to and deposit in custody with the custodian
and attorney-in-fact named therein a certificate or certificates representing
such shares of Common Stock (duly endorsed in blank by the registered owner or
owners thereof) and irrevocably appoint said custodian and attorney-in-fact as
its agent and attorney-in-fact with full power and authority to act under the
Custody Agreement and Power of Attorney on its behalf with respect to the
matters specified in Section 2.3 or Section 2.4, as the case may be.
ARTICLE III. REGISTRATION RIGHTS
3.1. Piggyback Rights. (a) Piggyback Rights. If the Company at
any time after the date hereof proposes to register Common Stock under the
Securities Act (other than a registration on Form S-4 or S-8, or any successor
or similar forms), whether or not for sale for its own account, it will, at each
such time, give prompt written notice to the Registration Rights Holders of its
intention to do so and of the Registration Rights Holders' rights under this
Section 3.1. Upon the written request of any Registration Rights Holder made
within 14 days after the receipt of any such notice (which request shall specify
the number of Registrable Securities intended to be disposed of by such
Registration Rights Holder), the Company will use its reasonable efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Registration Rights
Holders; provided that (i) if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
or any other holder of securities that initiated such registration (an
"Initiating Holder") shall determine for any reason not to proceed with the
proposed registration of the securities to be sold by it, the Company or such
Initiating Holder may, at its election, give written notice of such
determination to the Registration Rights Holders and, thereupon, the Company
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its
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obligation to pay the Registration Expenses incurred in connection therewith),
and (ii) if such registration involves an underwritten offering, the
Registration Rights Holders requesting to be included in the registration must
sell their Registrable Securities to the underwriters selected by the Company or
the Initiating Holders, as the case may be, on the same terms and conditions as
apply to the Company or the Initiating Holders, as the case may be, with, in the
case of a combined primary and secondary offering, such differences, including
any with respect to indemnification and liability insurance, as may be customary
or appropriate in combined primary and secondary offerings. If a registration
requested pursuant to this Section 3.1(a) involves an underwritten public
offering, any Registration Rights Holder requesting to be included in such
registration may elect, in writing prior to the effective date of the
registration statement filed in connection with such registration, not to
register all or any portion of such securities in connection with such
registration.
(b) Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 3.1.
(c) Priority in Piggyback Registrations. If a registration
pursuant to this Section 3.1 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, so as to be reasonably likely to have an
adverse effect on the price, timing or distribution of the securities offered in
such offering, then the Company will include in such registration (i) first,
100% of the securities proposed to be sold by the Company and (ii) second, to
the extent of the number of securities requested to be included in such
registration which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above, which number of securities
shall be allocated pro rata among all such requesting holders of Common Stock on
the basis of the relative number of shares of Common Stock then held by each
such holder of Common Stock. In the event that (i) the Company did not initiate
the registration of securities intended to be registered for sale for its own
account and (ii) the number of Registrable Securities and shares of Common Stock
of other holders entitled to registration rights with respect to such Common
Stock, in each case requested to be included in such registration, is less than
the number which, in the opinion of the managing underwriter, can be sold, the
Company may include in such registration the securities it proposes to sell up
to the number of securities that, in the opinion of the underwriter, can be
sold.
3.2. Demand Registration. (a) Demand Registration. At any time
after the 180th day following the initial Public Offering, upon the written
request of Great Star or its Permitted Transferees (in such capacity, a "Demand
Party") requesting that the Company effect the registration under the Securities
Act of all or part of such Demand Party's Registrable Securities and specifying
the amount and intended method of disposition thereof, the Company will promptly
give written notice of such requested registration to the other holders of
Registrable Securities and other holders of securities entitled to notice of
such registration and thereupon will, as expeditiously as possible, file a
registration statement to effect the registration under the Securities Act of:
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(i) such Registrable Securities which the Company has been so
requested to register by the Registration Rights Holders; and
(ii) the securities of other holders entitled to registration
rights pursuant to an Other Registration Rights Agreement which the
Company has been requested to register by written request given to the
Company within 15 days after the giving of such written notice by the
Company (which request shall specify the amount and intended method of
disposition of such securities);
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities and such
other securities to be so registered; provided that the Company shall not be
required to effect the registration of Registrable Securities at the request of
a Demand Party under this Section 3.2(a) on more than two occasions, and
provided further, that the Company shall not be obligated to file a registration
statement relating to any registration request under this Section 3.2(a):
(v) within a period of 180 days (or such lesser period as the
managing underwriters in an underwritten offering may permit) after the
effective date of any other registration statement relating to any
registration request under this Section 3.2(a) or relating to any
registration effected under Section 3.1;
(w) if with respect thereto the managing underwriter, the SEC,
the Securities Act or the rules and regulations thereunder, or the form
on which the registration statement is to be filed, would require the
conduct of an audit other than the regular audit conducted by the
Company at the end of its fiscal year, in which case the filing may be
delayed until the completion of such audit (and the Company shall, upon
request of the Demand Parties, use its reasonable efforts to cause such
audit to be completed expeditiously and without unreasonable delay);
(x) if the Company is in possession of material non-public
information and the Board determines in good faith that disclosure of
such information would not be in the best interests of the Company and
its stockholders, in which case the filing of the registration
statement may be delayed until the earlier of the second business day
after such conditions shall have ceased to exist and the 180th day
after receipt by the Company of the written request from a Demand Party
to register Registrable Securities under this Section 3.2(a);
(y) if the Company furnishes a written opinion of counsel,
which shall be reasonably satisfactory to Great Star or its Permitted
Transferees, to the effect that no registration of such shares is
required in order to consummate the transaction for which registration
has been demanded; or
(z) if Great Star, or its Permitted Transferees making the
demand, demand the registration of less than 50% of the shares of
Common Stock that Great Star beneficially owns on the date of this
Agreement.
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(b) Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 3.2.
(c) Effective Registration Statement. A registration requested
pursuant to this Article III will not be deemed to have been effected unless it
has become effective; provided that, if, within 180 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court, then such registration will be
deemed not to have been effected.
(d) Selection of Underwriters. If a requested registration
pursuant to this Section 3.2 involves an underwritten offering, the Company
shall have the right to select the investment banker or bankers and managers to
administer the offering, including the lead managing underwriter.
(e) Priority in Demand Registrations. If a requested
registration pursuant to this Section 3.2 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, so as to be reasonably likely to
have an adverse effect on the price, timing or distribution of the securities
offered in such offering, then the Company will include in such registration the
number of shares of Common Stock requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, which number shall be allocated pro rata
among all such requesting holders of Registrable Securities and holders of
Common Stock who have piggyback registration rights pursuant to an Other
Registration Rights Agreement on the basis of the relative number of shares of
Common Stock then held by each such holder. In the event that the number of
Registrable Securities and shares of Common Stock of other holders, in each case
entitled to registration rights with respect to such Common Stock requested to
be included in such registration is less than the number which, in the opinion
of the managing underwriter, can be sold, the Company may include in such
registration securities it proposes to sell for its own account up to the number
of securities that, in the opinion of the underwriter, can be sold.
3.3. Registration Procedures. If and whenever the Company is
required to file a registration statement with respect to, or to use its
reasonable efforts to effect or cause the registration of, any Registrable
Securities under the Securities Act as provided in this Agreement the Company
will as expeditiously as possible:
(a) prepare and, in any event within 120 days after the end of
the period within which a request for registration may be given to the Company
pursuant to Section 3.2, file with the SEC a registration statement on an
appropriate form with respect to such Registrable Securities and use its
reasonable efforts to cause such registration statement to become effective;
provided, however, that the Company may discontinue any registration of
securities as to which it is the Initiating Party at any time prior to the
effective date of the registration statement relating thereto (and, in such
event, the Company shall pay the Registration Expenses incurred in connection
therewith); provided, further, that before filing a
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registration statement or prospectus, or any amendments or supplements thereto,
the Company will furnish to counsel for the sellers of Registrable Securities
covered by such registration statement copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel;
(b) prepare and file with the SEC 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 not in excess of 270 days and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement; provided that before filing a
registration statement or prospectus, or any amendments or supplements thereto,
the Company will furnish to counsel for the sellers of Registrable Securities
covered by such registration statement copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and summary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably request
in order to facilitate the disposition of the Registrable Securities by such
seller;
(d) use its reasonable efforts to register or qualify such
Registrable Securities covered by such registration in such jurisdictions as
each seller shall reasonably request, 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, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this subsection (d), it would
not be obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) use its reasonable 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 seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 3.3(b), of the Company's becoming aware
that the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading
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in the light of the circumstances then existing, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include 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 not misleading in the light of the circumstances then existing;
(g) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than 18 months) after
the effective date of the registration statement, an earnings statement which
shall satisfy the provisions of Section 11(a) of the Securities Act;
(h) use its reasonable efforts to list such Registrable
Securities on any securities exchange on which the Common Stock is then listed
if such Registrable Securities are not already so listed and if such listing is
then permitted under the rules of such exchange and use its reasonable efforts
to provide a transfer agent and registrar for such Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement;
(i) enter into such customary agreements (including an
underwriting agreement in customary form), which may include indemnification
provisions in favor of underwriters and other Persons in addition to, or in
substitution for the indemnification provisions hereof, and take such other
actions as sellers of a majority of shares of such Registrable Securities or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(j) obtain a "cold comfort" letter or letters from the
Company's independent public accounts in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller or sellers
of a majority of shares of such Registrable Securities shall reasonably request;
(k) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) notify counsel for the holders of Registrable Securities
included in such registration statement and the managing underwriter or agent,
immediately, and confirm the notice in writing (i) when the registration
statement, or any post-effective amendment to the registration statement, shall
have become effective, or any supplement to the prospectus or any amendment
prospectus shall have been filed, (ii) of the receipt of any comments from the
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SEC, (iii) of any request of the SEC to amend the registration statement or
amend or supplement the prospectus or for additional information, and (iv) of
the issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
registration statement for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for any of such purposes;
(m) make every reasonable effort to prevent the issuance of
any stop order suspending the effectiveness of the registration statement or of
any order preventing or suspending the use of any preliminary prospectus and, if
any such order is issued, to obtain the withdrawal of any such order at the
earliest possible moment;
(n) if requested by the managing underwriter or agent or any
holder of Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
being notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(o) cooperate with the holders of Registrable Securities
covered by the registration statement and the managing underwriter or agent, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under the
registration statement, and enable such securities to be in such denominations
and registered in such names as the managing underwriter or agent, if any, or
the Registration Rights Holders may request;
(p) obtain for delivery to the holders of Registrable
Securities being registered and to the underwriter or agent an opinion or
opinions from counsel for the Company in customary form and in form, substance
and scope reasonably satisfactory to such holders, underwriters or agents and
their counsel; and
(q) cooperate with each seller of Registrable Securities and
each underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD.
3.4. Other Registration-Related Matters. (a) The Company may
require any Person that is selling shares of Common Stock in a Public Offering
pursuant to Sections 3.1 or 3.2 to furnish to the Company in writing such
information regarding such Person and pertinent to the disclosure requirements
relating to the registration and the distribution of the Registrable Securities
which are included in such Public Offering as the Company may from time to time
reasonably request in writing.
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(b) Each Registration Rights Holder agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 3.3(f), it will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until its receipt of the copies of the amended or
supplemented prospectus contemplated by Section 3.3(f) and, if so directed by
the Company, each Registration Rights Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in their
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company gives any such
notice, the period for which the Company will be required to keep the
registration statement effective will be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 3.3(f) to and including the date when each seller of Registrable
Securities covered by such registration statement has received the copies of the
supplemented or amended prospectus contemplated by Section 3.3(f).
(c) Each Registration Rights Holder will, in connection with a
Public Offering of the Company's securities, upon the request of the Company or
of the underwriters managing any underwritten offering of the Company's
securities, agree in writing not to effect any sale, disposition or distribution
of Registrable Securities (other than those included in the Public Offering)
without the prior written consent of the managing underwriter for such period of
time commencing 7 days before and ending 180 days (or such earlier date as the
managing underwriter shall agree) after the effective date of such registration.
(d) Upon delivering the notice referred to either in (i) the
second sentence of Section 3.1(a) or (ii) the first sentence in Section 3.2(a),
Great Star and each Permitted Transferee will, if requested by the Company,
execute and deliver a Custody Agreement and Power of Attorney, as described in
Section 2.5.
3.5. Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act pursuant to Section 3.1 or 3.2, the Company hereby indemnifies
and agrees to hold harmless, to the extent permitted by law, the sellers of any
Registrable Securities covered by such registration statement (each a "Holder"),
each Affiliate of such Holder and their respective directors and officers or
general and limited partners (and the directors, officers, employees, affiliates
and controlling Persons of any of the foregoing), each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such Holder or any such underwriter
within the meaning of the Securities Act (collectively, the "Indemnified
Parties"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses to which such Indemnified Party may become subject under
the Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof, whether or
not such Indemnified Party is a party thereto) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to
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make the statements therein not misleading, in the case of a prospectus, in the
light of the circumstances when they were made, and the Company will reimburse
such Indemnified Party for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided that the Company will not be liable to any
Indemnified Party 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 any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, in any such
preliminary, final or summary prospectus, or any amendment or supplement thereto
in reliance upon and in conformity with written information with respect to such
Indemnified Party furnished to the Company by such Indemnified Party expressly
for use in the preparation thereof. Such indemnity will remain in full force and
effect regardless of any investigation made by or on behalf of such Holder or
any Indemnified Party and will survive the Transfer of such securities by such
Holder.
(b) Indemnification by the Holders and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed in accordance with Sections 3.1, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Holder of such Registrable Securities or any prospective underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 3.5(a)) the Company, all other Holders or any prospective
underwriter, as the case may be, and any of their respective Affiliates,
directors, officers and controlling Persons, with respect to any untrue
statement in or omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such untrue statement or omission was made in reliance upon and in conformity
with written information with respect to such Holder or underwriter furnished to
the Company by such Holder or underwriter expressly for use in the preparation
of such registration statement, preliminary, final or summary prospectus or
amendment or supplement, or a document incorporated by reference into any of the
foregoing. Such indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the Holders, or any
of their respective affiliates, directors, officers or controlling Persons and
will survive the Transfer of such securities by such Holder. In no event shall
the liability of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds actually received by
such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Notices of Claims. Etc. Promptly after receipt by an
Indemnified Party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 3.5, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the failure of the
Indemnified Party to give notice as provided herein will not relieve the
indemnifying party of its obligations under Section 3.5(a) or 3.5(b), except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an Indemnified Party,
unless in such Indemnified Party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to
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assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. If, in such
Indemnified Party's reasonable judgment, having common counsel would result in a
conflict of interest between the interests of such indemnified and indemnifying
parties, then such Indemnified Party may employ separate counsel reasonably
acceptable to the indemnifying party to represent or defend such Indemnified
Party in such action, it being understood, however, that the indemnifying party
will not be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such Indemnified Parties (and not
more than one separate firm of local counsel at any time for all such
Indemnified Parties) in such action. No indemnifying party will 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 such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(d) Contribution. If the indemnification provided for
hereunder from the indemnifying party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and Indemnified Parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and Indemnified Parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or Indemnified Parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party under this Section 3.5(d) as
a result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 3.5(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. 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.
(e) Other Indemnification. Indemnification similar to that
specified in this Section 3.5 (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect to any
required registration or other qualification of
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securities under any law or with any governmental entity other than as required
by the Securities Act.
(f) Non-Exclusivity. The obligations of the parties under this
Section 3.5 will be in addition to any liability which any party may otherwise
have to any other party.
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ARTICLE IV. PREEMPTIVE RIGHTS
4.1. Preemptive Right. Great Star shall have the right to
purchase for cash their Preemptive Right Pro Rata Share of New Common Stock
which the Company may from time to time propose to sell for cash. The
"Preemptive Right Pro Rata Share" shall be, at any given time, that proportion
which the number of shares of Common Stock held by Great Star at such time bears
to the total Common Stock issued and outstanding at such time.
4.2. Preemptive Notices. In the event the Company proposes to
undertake an issuance of New Common Stock for cash, it shall give Great Star
written notice (the "Preemptive Notice") of its intention to sell New Common
Stock for cash, the price, the identity of the purchaser and the principal terms
upon which the Company proposes to sell the same. Great Star shall have 15
Business Days from the delivery date of any Preemptive Notice to agree to
purchase a number of shares of New Common Stock up to the Preemptive Right Pro
Rata Share (in each case calculated prior to the issuance) for the price and
upon the terms specified in the Preemptive Notice by giving written notice to
the Company and stating therein the number of shares of New Common Stock to be
purchased.
4.3. Failure to Exercise Preemptive Right. In the event Great
Star fails to purchase all of the Preemptive Right Pro Rata Share pursuant to
this Article IV, the Company shall have 180 days after the date of the
Preemptive Notice to consummate the sale of the New Common Stock with respect to
which the Great Star's preemptive right was not exercised, at or above the price
and upon terms not more favorable to the purchasers of such New Common Stock
than the terms specified in the initial Preemptive Notice given in connection
with such sale. In the event the Company has not sold the New Common Stock
within said 180-day period, the Company shall not thereafter issue or sell any
New Common Stock without first offering such New Common Stock to Great Star in
the manner provided in this Article IV.
ARTICLE V. MISCELLANEOUS
5.1. Additional Securities Subject to Agreement. Great Star
and each Permitted Transferee to whom shares of Common Stock have been
Transferred pursuant to Section 2.2 agrees that any other equity securities of
the Company which it hereafter acquires by means of a stock split, stock
dividend, distribution, exercise of options or warrants or otherwise (other than
pursuant to a Public Offering) will be subject to the provisions of this
Agreement to the same extent as if held on the date hereof.
5.2. Confidential Information. (a) Great Star and each
Permitted Transferee agrees that it will not use at any time any Confidential
Information (as defined below) of which Great Star or any Permitted Transferee
is or becomes aware except in connection with its investment in the Company.
(b) Great Star and each Permitted Transferee further agrees
that the Confidential Information will be kept strictly confidential and will
not be disclosed by it or its
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Representatives (as defined below), except (i) as required by applicable law,
regulation or legal process, and only after compliance with Section 6.2(c)
(provided that this clause (i) may not be relied upon to the extent any action
is taken by Great Star or a Permitted Transferee which requires such disclosure
and, but for such action, such disclosure would not have been required) and (ii)
that it may disclose the Confidential Information or portions thereof to those
of its officers, employees, directors and representatives of its legal,
accounting and financial advisors (the Persons to whom such disclosure is
permissible being "Representatives") who need to know such information in
connection with the investment by Great Star and any Permitted Transferees in
the Company; provided that such Representatives (x) are informed of the
confidential and proprietary nature of the Confidential Information and (y)
agree to be bound by and perform the provisions of this Section 6.2. Great Star
and each Permitted Transferee agrees to be responsible for any breach of this
Section 6.2 by its Representatives other than those Representatives who after
the date hereof execute a separate confidentiality agreement with the Company
(it being understood that such responsibility shall be in addition to and not by
way of limitation of any right or remedy the Company may have against such
Representatives with respect to any such breach).
(c) If Great Star or any Permitted Transferee or any
Representative becomes legally compelled (including by deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar process) to disclose any of the Confidential Information, Great Star
shall provide the Company with prompt prior written notice of such requirement
to disclose such Confidential Information. Upon receipt of such notice, the
Company may seek a protective order or other appropriate remedy. If such
protective order or other remedy is not obtained, Great Star or such Permitted
Transferee or Representative agrees to disclose only that portion of the
Confidential Information which is legally required to be disclosed and to take
all reasonable steps to preserve the confidentiality of the Confidential
Information. In addition, Great Star, the Permitted Transferees and
Representatives will not oppose any action (and will, if and to the extent
requested by the Company, cooperate with, assist and join with the Company, at
the Company's expense and on a reasonable basis, in any reasonable action) by
the Company to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.
(d) "Confidential Information" means oral and written
information concerning the Company and its subsidiaries furnished to Great Star
or any Permitted Transferee by or on behalf of the Company (irrespective of the
form of communication and whether such information is so furnished before, on or
after the date hereof), and all analyses, compilations, data, studies, notes,
interpretations, memoranda or other documents prepared by Great Star or any
Permitted Transferee or any Representative containing or based in whole or in
part on any such furnished information. The term "Confidential Information" does
not include any information which (i) at the time of disclosure or thereafter is
generally available to the public (other than as a result of a disclosure
directly or indirectly by Great Star or any Permitted Transferee or
Representative in violation hereof) or (ii) is or becomes available to Great
Star on a nonconfidential basis from a source other than the Company or its
advisors, provided that such source was not known by Great Star or any Permitted
Transferee to be prohibited from disclosing such information to it by a legal,
contractual or fiduciary obligation owed to the Company.
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<PAGE>
5.3. Termination. This Agreement, other than Sections 3.1 and
6.2, will terminate and be of no further force and effect at such time as there
shall have been one or more Public Offerings such that there exists a public
trading market in 20% or more of the Common Stock. Section 3.1 will terminate
and be of no further force and effect on the earlier of the second anniversary
of the date of the initial Public Offering and the tenth anniversary of the date
hereof. Section 6.2 will terminate and be of no further force and effect on the
third anniversary of the first date on which neither Great Star nor any
Permitted Transferee owns any shares of Common Stock.
5.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or
registered or certified mail (postage prepaid, return receipt requested) as
follows (or at such other address for a party as shall be specified in a notice
given in accordance with this Section 6.4):
if to the KKR Fund:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street, Suite 4200
New York, NY 10019
Attention: Michael T. Tokarz
Fax (212) 750-0003
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Alan G. Schwartz, Esq.
Fax (212) 455-2502
21
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if to Great Star:
Great Star Corporation
c/o Arias Fabrega & Fabrega Trust Co.
Omar Hodge Building, Wickham's Cay
Road Town, Tortola
British Virgin Islands
Fax (284) 494-4980
with a copy to:
Finser Corporation
550 Biltmore Way, Suite 900
Coral Gables, Florida 33134
Attn: Alejandro Rivera B.
Fax (305) 445-9667
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005-1413
Attn: Robert S. O' Hara, Jr.
Fax (212) 530-0175
if to the Company:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attention: Richard Frank
5.5. Further Assurances. The parties hereto will sign such
further documents, cause such meetings to be held, resolutions passed, exercise
their votes and do and perform and cause to be done such further acts and things
as may be necessary in order to give full effect to this Agreement and every
provision hereof.
5.6. Non-Assignability. This Agreement will inure to the
benefit of and be binding on the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by any party hereto
without the express prior written consent of the other parties, and any
attempted assignment, without such consents, will be null and void; provided,
however, that the KKR Fund may assign or delegate its rights hereunder to any
Affiliate, and in the event of any such assignment references to the "KKR Fund"
herein shall be deemed to refer to such Affiliate.
22
<PAGE>
5.7. Amendment; Waiver. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by any party of any of the provisions hereof will be
effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including without limitation, any investigation by or on
behalf of any party, will be deemed to constitute a waiver by the party taking
such action of compliance with any covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of this Agreement will
not operate or be construed as a waiver of any subsequent breach.
5.8. Third Parties. This Agreement does not create any rights,
claims or benefits inuring to any Person that is not a party hereto nor create
or establish any third party beneficiary hereto.
5.9. Governing Law; Jurisdiction and Waiver of Jury Trial.
This Agreement will be governed by, and construed in accordance with, the laws
of the State of New York. The parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby may only be brought in the United States District Court for the Southern
District of New York or any New York State court sitting in New York City, and
each of the parties hereby consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 5.4 shall be deemed
effective service of process on such party. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
5.10. Specific Performance. Without limiting or waiving in any
respect any rights or remedies of the parties hereto under this Agreement now or
hereinafter existing at law or in equity or by statute, each of the parties
hereto will be entitled to seek specific performance of the obligations to be
performed by the other in accordance with the provisions of this Agreement.
5.11. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof.
5.12. Titles and Headings. The section headings contained in
this Agreement are for reference purposes only and will not affect the meaning
or interpretation of this Agreement.
23
<PAGE>
5.13. Severability. If any provision of this Agreement is
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement will not be affected and
will remain in full force and effect.
5.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original and all
of which together will be deemed to be one and the same instrument.
24
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
EVENFLO COMPANY, INC.
By:
-----------------------------
KKR 1996 FUND L.P.
By: KKR Associates 1996 L.P., its general
partner
By: KKR 1996 GP LLC, its general
partner
By:
------------------------
GREAT STAR CORPORATION
By:
----------------------
25
<PAGE>
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
August 20, 1998, between EVENFLO COMPANY, INC., a Delaware corporation (the
"Company"), and KKR 1996 FUND L.P., a Delaware limited partnership (the "KKR
Fund").
RECITALS
WHEREAS, pursuant to the Stock Purchase Agreement dated as of July 30,
1998 between Lisco, Inc. ("Lisco)" and the KKR Fund, the KKR Fund has purchased
5,100,000 shares of Common Stock, representing approximately 51% of the issued
and outstanding Common Stock.
WHEREAS, the KKR Fund, Lisco and the Company are parties to a
Stockholders' Agreement dated as of August 20, 1998 which sets forth certain
rights and obligations of each of the KKR Fund, Lisco and the Company relating
to the ownership by the KKR Fund and Lisco of the Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the
representations warranties and agreements contained in this Agreement, the
parties agree as follows:
1. Definitions. As used in this Agreement, the following
capitalized terms shall have the following respective meanings:
"Common Stock": The shares of Class A Common Stock, $1.00 par
value per share, of the Company and any stock into which such common
stock may thereafter be converted or exchanged.
"Demand Party": (a) the KKR Fund or (b) any other Holder or
Holders, including, without limitation, any Person that may become an
assignee of the KKR Fund's rights hereunder; provided that to be a
Demand Party under this clause (b), a Holder or Holders must either
individually or in aggregate with all other Holders with whom it is
acting together to demand registration, own at least 1% of the total
number of Registrable Securities.
"Exchange Act": The Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall be deemed to include a reference
to the comparable section, if any, of any such similar federal statute.
"Holder": The KKR Fund and any other holder of Registrable
Securities (including any direct or indirect transferee of the KKR Fund
who agrees in writing to be bound by the provisions of this Agreement).
<PAGE>
"Person": Any individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any
department or agency thereof.
"Other Registration Rights Agreement" means any written
agreement to which the Company and any holder of shares of Common Stock
are parties that provides for the registration of shares of Common
Stock of such holder by the Company.
"Registrable Securities": shall mean (i) any Common Stock
(including the shares of Common Stock purchased from Lisco) held by any
Holder, including shares issued or issuable upon the conversion,
exchange or exercise of any security convertible, exchangeable or
exercisable into Common Stock, (ii) any security of the Company held by
any Holder which is convertible, exchangeable or exercisable into
Common Stock and (iii) any Common Stock or any security convertible,
exchangeable or exercisable into Common Stock which may be issued or
distributed in respect thereof by way of stock dividend or stock split
or other distribution, recapitalization or reclassification. As to any
particular Registrable Securities, once issued, such Registrable
Securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale by the Holder of such
securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (b) such securities shall have been distributed
to the public pursuant to Rule 144 (or any successor provision) under
the Securities Act, (c) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company
and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities
Act or any state securities or blue sky law then in force, or (d) such
securities shall have ceased to be outstanding. For purposes of this
Agreement, any required calculation of the amount of, or percentage of,
Registrable Securities shall be based on the number of shares of Common
Stock which are Registrable Securities, including shares issuable upon
the conversion, exchange or exercise of any security convertible,
exchangeable or exercisable into Common Stock.
"Registration Expenses": Any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation, (i) all SEC and stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees
(including, if applicable, the fees and expenses of any "qualified
independent underwriter," as such term is defined in Rule 2720 of the
NASD, and of its counsel), (ii) all fees and expenses of complying with
securities or blue sky laws (including fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications
of the Registrable Securities), (iii) all printing, messenger and
delivery expenses, (iv) all fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities
exchange pursuant to clause (viii) of Section 4 and all rating agency
fees, (v) the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any
special audits and/or "cold comfort" letters required by or incident to
such performance and compliance, (vi) the reasonable fees and
disbursements of counsel
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<PAGE>
selected pursuant to Section 7 hereof by the Holders of the Registrable
Securities being registered to represent such Holders in connection
with each such registration, (vii) any fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities,
including liability insurance if the Company so desires or if the
underwriters so require, and the reasonable fees and expenses of any
special experts retained in connection with the requested registration,
but excluding underwriting discounts and commissions and transfer
taxes, if any, and (viii) other reasonable out-of-pocket expenses of
Holders (provided, that such expenses shall not include expenses of
counsel other than those provided for in clause (vi) above).
"Securities Act": The Securities Act of 1933, as amended, or
any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to
the comparable section, if any, of any such similar federal statute.
"SEC": The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the
Exchange Act.
2. Incidental Registrations. (a) Right to Include Common
Stock. If the Company at any time after the date hereof proposes to register its
Common Stock (or any security which is convertible, exchangeable or exercisable
into Common Stock) under the Securities Act (other than a registration on Form
S-4 or S-8, or any successor or other forms promulgated for similar purposes),
whether or not for sale for its own account, in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it will, at each such time, give prompt written notice to all
Holders of Common Stock of its intention to do so and of such Holders' rights
under this Section 2. Upon the written request of any such Holder made within 30
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder), the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the Holders thereof, to the extent requisite to permit the disposition of the
Registrable Securities to be so registered; provided, that (i) if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
proceed with the proposed registration of the securities to be sold by it, the
Company may, at its election, give written notice of such determination to each
Holder of Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) if such registration involves an underwritten
offering, all Holders requesting to be included in the Company's registration
must sell their Registrable Securities to the underwriters selected by the
Company on the same terms and conditions as apply to the Company, with such
differences, including any with respect to indemnification and liability
insurance, as may be customary or appropriate in combined primary and secondary
offerings. If a registration requested pursuant to this Section 2(a) involves an
underwritten public offering, any Holder requesting to be included in such
registration may elect, in writing prior to the effective date of the
registration statement
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<PAGE>
filed in connection with such registration, not to register such securities in
connection with such registration. Nothing in this Section shall operate to
limit the right of any Holder to (i) request the registration of Common Stock
issuable upon conversion, exchange or exercise of securities held by such Holder
notwithstanding the fact that at the time of request such Holder does not hold
the Common Stock underlying such securities or (ii) request the registration at
one time of both securities convertible, exchangeable or exercisable into Common
Stock and the Common Stock underlying any such securities.
(b) Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.
(c) Priority in Incidental Registrations. If a registration
pursuant to this Section 2 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
Registrable Securities requested to be included in such registration exceeds the
number which can be sold in such offering, so as to be reasonably likely to have
an adverse effect on the price, timing or distribution of the securities offered
in such offering, then the Company will include in such registration (i) first,
100% of the securities proposed to be sold by the Company and (ii) second, to
the extent of the number of securities requested to be included in such
registration which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above, which number of securities
shall be allocated pro rata among all such requesting Holders of Registrable
Securities and requesting holders of similar securities who have piggyback
registration rights pursuant to an Other Registration Rights Agreement, on the
basis of the relative number of shares of Registrable Securities then held by
each such holder of Registrable Securities (provided, that any such amount
thereby allocated to any such Holder that exceeds such Holder's request shall be
reallocated among the remaining requesting Holders in like manner). In the event
that (i) the Company did not initiate the registration of securities intended to
be registered for sale for its own account and (ii) the number of Registrable
Securities of the Holders and the other holders entitled to registration rights
with respect to such Common Stock pursuant to an Other Registration Rights
Agreement, in each case requested to be included in such registration, is less
than the number which, in the opinion of the managing underwriter, can be sold,
the Company may include in such registration the securities it proposes to sell
up to the number of securities that, in the opinion of the underwriter, can be
sold.
3. Registration on Request. (a) Request by the Demand Party.
At any time upon the written request of the Demand Party requesting that the
Company effect the registration under the Securities Act of all or part of such
Demand Party's Registrable Securities and specifying the amount and intended
method of disposition thereof, the Company will promptly give written notice of
such requested registration to all other Holders of such Registrable Securities,
and thereupon will, as expeditiously as possible, use its best efforts to effect
the registration under the Securities Act of:
(i) such Registrable Securities which the Company has been so
requested to register by the Demand Party; and
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<PAGE>
(ii) all other securities of the same class or series as
are to be registered at the request of a Demand Party and which the
Company has been requested to register by any other Holder thereof or
holder of Common Stock who has piggyback registration rights pursuant
to an Other Registration Rights Agreement by written request given to
the Company within 15 days after the giving of written notice by the
Company,
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities and Common
Stock to be so registered; provided that, with respect to any Demand Party other
than the KKR Fund, the Company shall not be obligated to effect any registration
of Registrable Securities or Common Stock under this Section 3(a) unless such
Demand Party requests that the Company register at least 1% of the total number
of Registrable Securities; and provided, further, that, unless Holders of a
majority of the shares of Registrable Securities held by Holders consent thereto
in writing, the Company shall not be obligated to file a registration statement
relating to any registration request under this Section 3(a):
(x) within a period of 180 days (or such lesser period as the
managing underwriters in an underwritten offering may permit) after the
effective date of any other registration statement relating to any
registration request under this Section 3(a) which was not effected on
Form S-3 (or any successor or similar short-form registration
statement) or relating to any registration effected under Section 2
(unless Holders of a majority of the shares of Registrable Securities
held by all Holders consent in writing to the filing of such
registration statement);
(y) if with respect thereto the managing underwriter, the SEC,
the Securities Act or the rules and regulations thereunder, or the form
on which the registration statement is to be filed, would require the
conduct of an audit other than the regular audit conducted by the
Company at the end of its fiscal year, in which case the filing may be
delayed until the completion of such audit (and the Company shall, upon
request of the requesting Demand Holder, use its best efforts to cause
such audit to be completed expeditiously and without unreasonable
delay); or
(z) if the Company is in possession of material non-public
information and the Board of Directors of the Company determines in
good faith that disclosure of such information would not be in the best
interests of the Company and its stockholders, in which case the filing
of the registration statement may be delayed until the earlier of the
second business day after such conditions shall have ceased to exist
and the 90th day after receipt by the Company of the written request
from a Demand Holder to register Registrable Securities under this
Section 3(a).
Nothing in this Section 3 shall operate to limit the right of any Holder to (i)
request the registration of Common Stock issuable upon conversion, exchange or
exercise of securities held by such Holder notwithstanding the fact that at the
time of request such Holder does not hold the Common Stock underlying such
securities (ii) request the registration at one time of
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<PAGE>
both securities convertible, exchangeable or exercisable into Common Stock and
the Common Stock underlying any such securities.
(b) Registration Statement Form. If any registration requested
pursuant to this Section 3 which is proposed by the Company to be effected by
the filing of a registration statement on Form S-3 (or any successor or similar
short-form registration statement) shall be in connection with an underwritten
public offering, and if the managing underwriter shall advise the Company in
writing that, in its opinion, the use of another form of registration statement
is of material importance to the success of such proposed offering, then such
registration shall be effected on such other form.
(c) Expenses. The Company will pay all Registration Expenses
in connection with the first six (6) registrations of each class or series of
Registrable Securities pursuant to this Section 3 upon the written request of
any of the Holders. All expenses for any subsequent registrations of Registrable
Securities pursuant to this Section 3 shall be paid pro rata by the Company and
all other Persons (including the Holders) participating in such registration on
the basis of the relative number of shares of Common Stock of each such Person
whose Registrable Securities are included in such registration.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 3 will not be deemed to have been effected unless it
has become effective; provided that, if within 180 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court, such registration will be
deemed not to have been effected.
(e) Selection of Underwriters. If a requested registration
pursuant to this Section 3 involves an underwritten offering, the Holders of a
majority of the shares of Registrable Securities which are held by Holders and
which the Company has been requested to register shall have the right to select
the investment banker or bankers and managers to administer the offering;
provided, however, that such investment banker or bankers and managers shall be
reasonably satisfactory to the Company.
(f) Priority in Requested Registrations. If a requested
registration pursuant to this Section 3 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, so as to be reasonably likely to
have an adverse effect on the price, timing or distribution of the securities
offered in such offering, then the Company will include in such registration the
number of shares of Common Stock requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, which number shall be allocated pro rata
among all such requesting holders of Registrable Securities and requesting
holders of Common Stock who have piggyback registration rights pursuant to an
Other Registration Rights Agreement on the basis of the relative number of
shares of Registrable Securities then held by each such holder. In the event
that the number of Registrable Securities entitled to registration rights with
respect to
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<PAGE>
such Common Stock requested to be included in such registration is less than the
number which, in the opinion of the managing underwriter, can be sold, the
Company may include in such registration securities it proposes to sell for its
own account up to the number of securities that, in the opinion of the
underwriter, can be sold.
(g) Additional Rights. If the Company at any time grants to
any other holders of securities any rights to request the Company to effect the
registration under the Securities Act of any such securities on terms more
favorable to such holders than the terms set forth in this Section 3, the terms
of this Section 3 shall be deemed amended or supplemented to the extent
necessary to provide the Holders such more favorable rights and benefits.
4. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the
end of the period within which a request for registration may be given
to the Company, file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, provided, however, that the
Company may discontinue any registration of its securities which is
being effected pursuant to Section 2 at any time prior to the effective
date of the registration statement relating thereto;
(ii) prepare and file with the SEC 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 not in excess of 270 days and to
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC thereunder with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement; provided that before filing a registration
statement or prospectus, or any amendments or supplements thereto, the
Company will furnish to counsel selected pursuant to Section 7 hereof
by the Holders of the Registrable Securities covered by such
registration statement to represent such Holders, copies of all
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(iii) furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of
each amendment and supplement thereto (in each case including all
exhibits filed therewith, including any documents incorporated by
reference), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and
summary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable
Securities by such seller;
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<PAGE>
(iv) use its best efforts to register or qualify such
Registrable Securities covered by such registration in such
jurisdictions as each seller shall reasonably request, 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,
except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this clause (iv), it
would not be obligated to be so qualified, to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(v) use its 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 seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) notify each seller of any such Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in clause (ii)
of this Section 4, of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing,
and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include 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 not misleading in the light of the circumstances
then existing;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration
statement, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(viii) (a) if such Registrable Securities are Common Stock
(including Common Stock issuable upon conversion, exchange or exercise
of another security), use its best efforts to list such Registrable
Securities on any securities exchange on which the Common Stock is then
listed if such Registrable Securities are not already so listed and if
such listing is then permitted under the rules of such exchange; (b) if
such Registrable Securities are convertible, exchangeable or
exercisable into Common Stock, upon the reasonable request of sellers
of a majority of such Registrable Securities, use its best efforts to
list such securities and, if requested, the Common Stock underlying
such securities, notwithstanding that at the time of request such
sellers hold only such securities, on any securities exchange so
requested, if such
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<PAGE>
Registrable Securities are not already so listed and if such listing is
then permitted under the rules of such exchange; and (c) use its best
efforts to provide a transfer agent and registrar for such Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form), which may include
indemnification provisions in favor of underwriters and other persons
in addition to, or in substitution for the provisions of Section 5
hereof, and take such other actions as sellers of a majority of shares
of such Registrable Securities or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the
Company's independent public accounts in customary form and covering
matters of the type customarily covered by "cold comfort" letters as
the seller or sellers of a majority of shares of such Registrable
Securities shall reasonably request (provided that Registrable
Securities constitute at least 25% of the securities covered by such
registration statement);
(xi) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other
agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents
and properties of the Company, and cause all of the Company's officers,
directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(xii) notify counsel (selected pursuant to Section 7
hereof) for the Holders of Registrable Securities included in such
registration statement and the managing underwriter or agent,
immediately, and confirm the notice in writing (i) when the
registration statement, or any post-effective amendment to the
registration statement, shall have become effective, or any supplement
to the prospectus or any amendment prospectus shall have been filed,
(ii) of the receipt of any comments from the SEC, (iii) of any request
of the SEC to amend the registration statement or amend or supplement
the prospectus or for additional information, and (iv) of the issuance
by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the
qualification of the registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings
for any of such purposes;
(xiii) make every reasonable effort to prevent the
issuance of any stop order suspending the effectiveness of the
registration statement or of any order preventing or
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suspending the use of any preliminary prospectus and, if any such order
is issued, to obtain the withdrawal of any such order at the earliest
possible moment;
(xiv) if requested by the managing underwriter or agent
or any Holder of Registrable Securities covered by the registration
statement, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter
or agent or such Holder reasonably requests to be included therein,
including, without limitation, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter or
agent, the purchase price being paid therefor by such underwriter or
agent and with respect to any other terms of the underwritten offering
of the Registrable Securities to be sold in such offering; and make all
required filings of such prospectus supplement or post-effective
amendment as soon as practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective amendment;
(xv) cooperate with the Holders of Registrable
Securities covered by the registration statement and the managing
underwriter or agent, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing securities to be sold under the registration statement,
and enable such securities to be in such denominations and registered
in such names as the managing underwriter or agent, if any, or such
Holders may request;
(xvi) obtain for delivery to the Holders of Registrable
Securities being registered and to the underwriter or agent an opinion
or opinions from counsel for the Company in customary form and in form,
substance and scope reasonably satisfactory to such Holders,
underwriters or agents and their counsel; and
(xvii) cooperate with each seller of Registrable
Securities and each underwriter or agent participating in the
disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the NASD.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in clause (vi) of this Section 4, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by clause (vi)
of this Section 4, and, if so directed by the Company, such Holder will deliver
to the Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the
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<PAGE>
time of receipt of such notice. In the event the Company shall give any such
notice, the period mentioned in clause (ii) of this Section 4 shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to clause (vi) of this Section 4 and including
the date when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 4.
5. Indemnification. (a) Indemnification by the Company. In the
event of any registration of any securities of the Company under the Securities
Act pursuant to Section 2 or 3, the Company will, and it hereby does, indemnify
and hold harmless, to the extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, each affiliate of such seller
and their respective directors and officers or general and limited partners
(including any director, officer, affiliate, employee, agent and controlling
Person of any of the foregoing), each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorney's fees and reasonable expenses of investigation)
to which such Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof, whether or not such Indemnified
Party is a party thereto) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement thereto, or (b) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, and the Company will
reimburse such Indemnified Party for any legal or any other expenses reasonably
incurred by it in connection with investigating or defending against any such
loss, claim, liability, action or proceeding; provided that the Company shall
not be liable to any Indemnified Party 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 any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement or
amendment or supplement thereto or in any such preliminary, final or summary
prospectus in reliance upon and in conformity with written information furnished
to the Company with respect to such seller through an instrument duly executed
by such seller specifically stating that it is for use in the preparation
thereof; and provided, further, that the Company will not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
5(a) with respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is
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<PAGE>
most recent, if the Company has previously furnished copies thereof to such
underwriter. For purposes of the last proviso to the immediately preceding
sentence, the term "prospectus" shall not be deemed to include the documents
incorporated therein by reference, and no Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, shall be obligated to send or give any supplement or amendment
to any document incorporated by reference in any preliminary prospectus or the
final prospectus to any person other than a person to whom such underwriter had
delivered such incorporated document or documents in response to a written
request therefor. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any
Indemnified Party and shall survive the transfer of such securities by such
seller.
In addition, the Company will, and it hereby does, indemnify
and hold harmless, to the extent permitted by law, the KKR Fund, each affiliate
of the KKR Fund and their respective directors and officers or general and
limited partners (including any director, officer, affiliate, employee, agent
and controlling Person of any of the foregoing), against any and all losses,
claims, damages or liabilities, joint or several, and expenses (including
reasonable attorney's fees and reasonable expenses of investigation) in any
manner arising out of or relating to (x) the purchase or ownership of capital
stock or other securities of the Company by the KKR Fund or any such other
Person or (y) any litigation to which the KKR Fund or any such other Person is
made a party in its capacity as a stockholder or owner of securities (or a
partner, director, officer, affiliate, employee, agent or controlling Person of
a stockholder or owner of securities) of the Company.
(b) Indemnification by the Seller. The Company may require, as
a condition to including any Registrable Securities in any registration
statement filed in accordance with Section 4 herein, that the Company shall have
received an undertaking reasonably satisfactory to it from the prospective
seller of such Registrable Securities or any underwriter to indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this Section 5) the Company and all other prospective sellers with
respect to any untrue statement or alleged untrue statement in or omission or
alleged omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to such seller through an instrument duly executed by
such seller or underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any of
the prospective sellers, or any of their respective affiliates, directors,
officers or controlling Persons and shall survive the transfer of such
securities by such seller. In no event shall the liability of any selling Holder
of Registrable Securities hereunder be greater in amount than the dollar amount
of the proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
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<PAGE>
(c) Notices of Claims, Etc. Promptly after receipt by an
Indemnified Party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 5, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the failure of the
Indemnified Party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, unless in such Indemnified Party's reasonable
judgment a conflict of interest between such Indemnified Party and indemnifying
parties may exist in respect of such claim, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the indemnifying party to such Indemnified Party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party will 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 such Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Section 5 from the indemnifying party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and Indemnified Parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and Indemnified Parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or Indemnified Parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party under this Section 5(d) as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. 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.
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<PAGE>
(e) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 5 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
(f) Non-Exclusivity. The obligations of the parties under this
Section 5 shall be in addition to any liability which any party may otherwise
have to any other party.
6. Rule 144. 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 (or, if the Company
is not required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available such information), and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding anything contained in this Section 6, the Company may deregister
under Section 12 of the Exchange Act if it then is permitted to do so pursuant
to the Exchange Act and the rules and regulations thereunder.
7. Selection of Counsel. In connection with any registration
of Registrable Securities pursuant to Sections 2 and 3 hereof, the Holders of a
majority of the Registrable Securities covered by any such registration may
select one counsel to represent all Holders of Registrable Securities covered by
such registration; provided, however, that in the event that the counsel
selected as provided above is also acting as counsel to the Company in
connection with such registration, the remaining Holders shall be entitled to
select one additional counsel to represent all such remaining Holders.
8. Miscellaneous. (a) Other Investors. The Company may enter
into agreements with other purchasers of Common Stock who are then employees of
the Company or any of its subsidiaries, making them parties hereto (and thereby
giving them all, or a portion, of the rights, preferences and privileges of an
original party hereto) with respect to additional shares of Common Stock (the
"Supplemental Agreements"); provided, however, that pursuant to any such
Supplemental Agreement, such purchaser expressly agrees to be bound by all of
the terms, conditions and obligations of this Agreement as if such purchaser
were an original party hereto. All shares of Common Stock issued or issuable
pursuant to such Supplemental Agreements shall be deemed to be Registrable
Securities.
(b) Holdback Agreement. If any such registration shall be in
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any equity securities of
the Company, or of any security convertible into or exchangeable
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or exercisable for any equity security of the Company (in each case, other than
as part of such underwritten public offering), within 7 days before or such
period not to exceed 180 days as the underwriting agreement may require (or such
lesser period as the managing underwriters may permit) after the effective date
of such registration (except as part of such registration), and the Company
hereby also so agrees and agrees to cause each other holder of any equity
security, or of any security convertible into or exchangeable or exercisable for
any equity security, of the Company purchased from the Company (at any time
other than in a public offering) to so agree.
(c) Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the Holders
of a majority of the Registrable Securities then outstanding; provided, however,
that no amendment, waiver or consent to the departure from the terms and
provisions of this Agreement that is adverse to the KKR Fund or any of its
successors and assigns shall be effective as against any such Person for so long
as such Person holds any Registrable Securities unless consented to in writing
by such Person. Each Holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
8(b), whether or not such Registrable Securities shall have been marked to
indicate such consent.
(d) Successors, Assigns and Transferees. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Upon any merger or consolidation of KKR Fund
with the Company or any liquidation of KKR Fund, the stockholder or stockholders
of KKR Fund shall succeed to all of KKR Fund's rights and obligations hereunder.
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 parties hereto
other than the Company shall also be for the benefit of and enforceable by any
subsequent Holder of any Registrable Securities, subject to the provisions
contained herein. Without limitation to the foregoing, in the event that the KKR
Fund or any of its successors or assigns or any other subsequent Holder of any
Registrable Securities distributes or otherwise transfers any shares of the
Registrable Securities to any of its present or future shareholders, members,
general or limited partners, the Company hereby acknowledges that the
registration rights granted pursuant to this Agreement shall be transferred to
such shareholders, members or partners on a pro rata basis, and that at or after
the time of any such distribution or transfer, any such shareholder, member,
partner or group of shareholders, members or partners may designate a Person to
act on its behalf in delivering any notices or making any requests hereunder.
(e) Notices. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telex,
telecopier or hand delivery:
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(i) if to the Company, to:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attn: Richard Frank
(ii) if to the KKR Fund, to:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attention: Michael T. Tokarz
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
(iii) if to any other holder of Registrable
Securities, to the address of such other
holder as shown in the stock record book of
the Company, or to such other address as any
of the above shall have designated in
writing to all of the other above.
All such notices and communications shall be deemed to have
been given or made (A) when delivered by hand, (B) five business days after
being deposited in the mail, postage prepaid, (C) when telexed answer-back
received or (D) when telecopied, receipt acknowledged.
(f) Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
(g) Severability. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
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<PAGE>
(h) Counterparts. This Agreement may be executed in
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument.
(i) Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of New York applicable to contracts made and to be performed therein.
The parties to this Agreement hereby agree to submit to the jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof in any
action or proceeding arising out of or relating to this Agreement.
(j) Specific Performance. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that they
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or in equity.
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be duly executed on its behalf as of the
date first written above.
EVENFLO COMPANY, INC.
By:
--------------------------------
KKR 1996 FUND L.P.
By: KKR Associates 1996 L.P., its general
partner
By: KKR 1996 GP LLC, its general partner
By:
--------------------------------
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<PAGE>
Exhibit 10.5
INDEMNITY AGREEMENT
This INDEMNITY AGREEMENT, dated as of August 20, 1998 (this
"Agreement") by and among EVENFLO AND SPALDING HOLDINGS CORPORATION, a Delaware
corporation ("Holdings") and EVENFLO COMPANY, INC., a Delaware corporation
("Evenflo").
W I T N E S S E T H
WHEREAS, pursuant to the corporate restructuring of Holdings
(the "Restructuring") and a realignment of the ownership interests of Evenflo
Company, Inc., Holdings has agreed to indemnity Evenflo against damages relating
to certain non-Evenflo matters and Evenflo has agreed to indemnify Holdings
against certain damages relating to Evenflo matters.
NOW THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Indemnification. (a) Holdings shall indemnify and hold
Evenflo, its directors, officers, employees and affiliates, including
successors, assigns, contractors and lenders (the "Evenflo Indemnified Parties")
harmless against and in respect of (i) any Damages (as defined below) incurred
or sustained by the Evenflo Indemnified Parties as a result of any liability or
obligation that is not related to the operations or business of Evenflo, whether
arising prior to or after the closing of the Restructuring and (ii) any Damages
incurred or sustained by Evenflo Indemnified Parties as a result of any recall
(voluntary or involuntary), safety advisory or other corrective action taken
with respect to any Evenflo products ("Recall Liabilities") manufactured prior
to the close of business on the day of the closing of the Restructuring.
(b) For purposes of this Agreement, "Damages" shall mean any
and all claims, losses, liabilities, damages, deficiencies, costs and expenses
(including without limitation as a result of the defense, settlement or
compromise of any claim), including, without limitation, reasonable attorneys',
accountants' and expert witness fees, costs and expenses of investigation, and
costs and expenses incurred by an indemnified party in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of the
matters indemnified against in this Agreement or to enforce an indemnified
party's rights under this Agreement.
(c) Evenflo shall indemnify and hold Holdings and its
directors, officers, employees and affiliates, including successors, assigns,
contractors and lenders (the "Holdings Indemnified Parties") harmless against
and in respect of any Damages incurred or sustained by the Holdings Indemnified
Parties as a result of any liability or obligation relating to the operations or
business of Evenflo, whether arising prior to or after the closing of the
Restructuring, except for Recall Liabilities which Holdings shall indemnify
Evenflo against pursuant to clause (a) above.
<PAGE>
(d) The parties agree that any liabilities or obligations that
relate to the general corporate operations in Tampa, Florida and/or are not
attributable to either the Evenflo or Non-Evenflo operations or businesses shall
be allocated equally between Evenflo and Holdings.
2. Procedures. Promptly after receipt by an indemnified party
under this Agreement of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Agreement, notify the indemnifying party in
writing of the claim or the commencement of that action, provided that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to the indemnified party unless the indemnifying party is
materially prejudiced in its ability to defend such action. If any such claim
shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled at its
expense to participate therein, and to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party, and to settle and compromise
any such claim or action; provided, however, that if the indemnified party has
elected to be represented by separate counsel pursuant to the proviso to the
following sentence or if such settlement or compromise does not include an
unconditional release of the indemnified party for any liability arising out of
such claim or action, such settlement or compromise shall be effected only with
the consent of the indemnified party, which consent shall not be unreasonably
withheld. After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this Agreement for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, provided, however, that the indemnified party shall have the
right to employ counsel to represent it if, in the opinion of counsel to the
indemnified party, it is advisable for the indemnified party to be represented
by separate counsel due to actual or potential conflicts of interest, and in
that event the fees and expenses of such separate counsel shall be paid by the
indemnifying party; provided, that in no event shall the indemnifying party be
responsible for the fees of more than one counsel. The parties shall each render
to each other such assistance as may reasonably be requested in order to ensure
the proper and adequate defense of any such claim or proceeding. Each party
agrees to promptly pay any amounts required to be paid to an indemnified party
hereunder, upon the receipt of notice of such claim pursuant to the provisions
of this Agreement.
3. Miscellaneous. (a) The indemnities provided in this
Agreement shall survive indefinitely. The indemnity provided in this Agreement
shall be the sole and exclusive contractual remedy of the indemnified party
against the indemnifying party at law or equity for any matter covered by
Paragraphs 1(a) and (c), except for matters relating to fraud.
(b) Each party and their affiliates shall be obligated in
connection with any claim for indemnification under this Agreement to use all
commercially reasonable efforts to obtain any insurance proceeds available to
such indemnitee with regard to the applicable claims. The amount which the
indemnifying party is or may be required to pay to any indemnified party
pursuant to this Agreement shall be reduced (retroactively, if necessary) by
2
<PAGE>
any insurance proceeds or other amounts actually recovered by or on behalf of
such indemnified party in reduction of the related Damage. If an indemnified
party shall have received the payment required by this Agreement from an
indemnifying party in respect of Damages and shall subsequently receive
insurance proceeds or other amounts in respect of such Damages, then such
indemnified party shall promptly repay to the indemnifying party a sum equal to
the amount of such insurance proceeds or other amounts actually received.
(c) Each indemnified party shall be obligated in connection
with any claim for indemnification under this Agreement to use all commercially
reasonable efforts to mitigate Damages upon and after becoming aware of any
event which could reasonably be expected to give rise to such Damages.
(d) All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) or overnight delivery service to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to Evenflo, to:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attn: Richard Frank
with a copy to:
Kohlberg Kravis Roberts & Co.
9 West 57th Street, Suite 4200
New York, New York 10019
Telephone: (212) 750-8300
Facsimile: (212) 750-0003
Attn: Michael Tokarz
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2500
Facsimile: (212) 455-2502
Attn: Alan G. Schwartz, Esq.
and
3
<PAGE>
(ii) if to Holdings, to:
c/o Spalding & Evenflo Companies, Inc.
425 Meadow Street
Chicopee, Massachusetts 01021-0901
4
<PAGE>
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2500
Facsimile: (212) 455-2502
Attn: Charles I. Cogut, Esq.
(e) This Agreement and all the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any right, interest, or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party, except that either
party may assign its rights but not its obligations to any affiliate or in
connection with any sale or transfer of the assets or equity securities of such
party or its affiliates or any recapitalization, reorganization or business
combination transaction involving a party hereto.
(f) This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
each of which will be deemed an original.
(g) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF NEW YORK
(REGARDLESS OF THE LAWS THAT MIGHT BE APPLICABLE UNDER PRINCIPLES OF CONFLICTS
OF LAW) AS TO ALL MATTERS, INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY,
CONSTRUCTION, EFFECT AND PERFORMANCE.
(h) Each of the parties hereto irrevocably and unconditionally
submits to the non-exclusive jurisdiction of The United States District Court
for the Southern District of New York or New York Supreme Court for New York
County. In any action, suit or other proceeding, each of the parties hereto
irrevocably and unconditionally waives and agrees not to assert by way of
motion, as a defense or otherwise any claims that it is not subject to the
jurisdiction of the above courts, that such action or suit is brought in an
inconvenient forum or that the venue of such action, suit or other proceeding is
improper. Each of the parties hereto also agrees that any final and unappealable
judgment against a party hereto in connection with any action, suit or other
proceeding shall be conclusive and binding on such party and that such award or
judgment may be enforced in any court of competent jurisdiction, either within
or outside of the United States. A certified or exemplified copy of such award
or judgment shall be conclusive evidence of the fact and amount of such award or
judgment. THE PARTIES HERETO, HAVING CAREFULLY CONSIDERED THE ISSUE, AND HAVING
SOUGHT AND OBTAINED THE ADVICE OF COUNSEL, KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR
PROCEEDING RELATED
5
<PAGE>
TO OR ARISING OUT OF THIS AGREEMENT AND ANY OTHER AGREEMENT
DELIVERED IN CONNECTION HEREWITH.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of August 20, 1998.
EVENFLO AND SPALDING HOLDINGS
CORPORATION
By:
-----------------------------
Name:
Title:
EVENFLO COMPANY, INC.
By:
-----------------------------
Name:
Title:
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<PAGE>
Exhibit 10.6
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT, dated as of August 20, 1998
(this "Agreement"), between EVENFLO & SPALDING HOLDINGS CORPORATION, a Delaware
corporation ("E&S") and EVENFLO COMPANY, INC., a Delaware corporation
("Evenflo").
1. Transition Services. (a) During the six month period (or
such other period set forth on Annex A hereto or otherwise agreed upon by the
parties) commencing on the effective date set forth in Section 10 (the
"Transition Period"), E&S agrees to provide, or to cause its relevant affiliates
to provide, to Evenflo the financial systems/accounting services set forth on
Annex A attached hereto (such financial systems/accounting services are
collectively referred to herein as "Services"). The quality and relative level
of each Service to be provided hereunder shall be the same as E&S and such
affiliates have provided to Evenflo at comparable times and periods during the
year preceding the date hereof. Evenflo agrees to pay E&S the amounts specified
in the cost schedule set forth on Annex A attached hereto in respect of the
provision of the respective Services. Evenflo shall reimburse E&S and its
affiliates in accordance with Section 3 hereof for all cash disbursements made
by E&S or any of its affiliates relating to payments for payroll and accounts
payable made by E&S or any such affiliate for Evenflo's account.
(b) Notwithstanding anything to the contrary contained herein,
E&S and Evenflo agree that E&S and its affiliates shall not be obligated
hereunder to provide any marketing, sales or distribution-related services to
Evenflo.
2. Billing and Payment. Evenflo agrees promptly to pay any
bills and invoices that it receives from E&S or its affiliates for Services
provided under this Agreement, subject to receiving such appropriate support
documentation for such bills and invoices as may be reasonably requested by
Evenflo. Such charges shall be billed as of the end of each calendar month.
3. Cash Disbursements. Evenflo agrees to establish promptly
after the date hereof procedures relating to the timely settlement of cash
disbursements made by E&S and its affiliates relating to payments for payroll
and accounts payable made by E&S or any of its affiliates for Evenflo's account.
E&S and Evenflo agree that such disbursements will be settled weekly and mode of
payment will be via wire transfer in immediately available funds to an account
in the United States designated by E&S.
4. Validity of Documents. The parties hereto shall be entitled
to rely upon the genuineness, validity or truthfulness of any document,
instrument or other writing presented in connection with this Agreement unless
such document, instrument or other writing appears on its face to be fraudulent,
false or forged.
<PAGE>
5. Termination. Any or all of the services to be provided by
E&S or its relevant affiliates hereunder may be terminated by Evenflo prior to
the expiration of the Transition Period only on ten (10) days prior written
notice to E&S, provided that the payroll Services to be provided by E&S and its
affiliates hereunder may be terminated prior to the expiration of the Transition
Period only on thirty (30) days prior written notice to E&S.
7. Independent Contractors. In providing Services hereunder,
E&S and each relevant affiliate of E&S shall act solely as an independent
contractor. Nothing herein shall constitute or be construed to be or create a
partnership, joint venture or principal/agent relationship between E&S or any of
its affiliates and Evenflo. All persons employed by E&S or its affiliates in the
performance of the obligations of E&S hereunder shall be the sole responsibility
of E&S and its affiliates and Evenflo shall have no obligation or responsibility
with respect thereto.
8. Indemnification. Evenflo agrees to hold harmless and
indemnify E&S and its affiliates from and against all losses, claims, damages,
liabilities and expenses (including, but not limited to, any and all reasonable
expenses incurred in investigating, preparing or defending against any
litigation or proceeding, commenced or threatened, or any claim whatsoever
whether or not resulting in any liability) in connection with E&S's or any such
affiliate's provision of Services to Evenflo hereunder, unless such loss, claim,
damage, liability or expense results from the gross negligence or willful
misconduct of E&S or any of its affiliates or their respective employees or
agents. E&S agrees to hold harmless and indemnify Evenflo and its affiliates
from and against all losses, claims, damages, liabilities and expenses
(including, but not limited to, any and all reasonable expenses incurred in
investigating, preparing or defending against any litigation or proceeding,
commenced or threatened, or any claim whatsoever whether or not resulting in any
liability) in connection with Evenflo's or any such affiliate's provision of
Services to E&S hereunder, unless such loss, claim, damage, liability or expense
results from the gross negligence or willful misconduct of Evenflo or any of its
affiliates or their respective employees or agents.
9. Confidentiality. E&S shall, and shall cause each of its
affiliates to, hold all information relating to Evenflo obtained by E&S or any
such affiliate in connection with its performance of Services hereunder
confidential and not disclose any of such information to any party for a period
of three (3) years from the expiration of this Agreement except for disclosures
required by legal process or proceedings, as to which disclosures E&S shall
provide Evenflo with notice promptly after E&S becomes aware that such a
disclosure is required and prior to making such disclosure and except for
disclosures in connection with legal process or proceedings between Evenflo and
E&S relating to this Agreement.
10. Effective Date. This Agreement shall become effective upon
the closing of the Restructuring.
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<PAGE>
11. Books and Records. All books, records and accounts
maintained by E&S or its affiliates for Evenflo hereunder shall at all times be
the exclusive property of Evenflo, and neither E&S nor any of its affiliates
shall have any right, title nor interest therein. Evenflo shall be permitted to
inspect any such books, records and accounts at any reasonable time during
regular business hours and shall be entitled to such access as Evenflo shall
reasonably request to the representatives, officers and employees of E&S and its
affiliates who are involved in the provision of Services hereunder. Upon
termination of the provision of any or all Services by E&S under this Agreement
all books, records, and accounts relating to the terminated Services shall
promptly be delivered to Evenflo at its address set forth below.
12. Miscellaneous. (a) Notices. All orders, notices, requests,
demands, waivers and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed, certified or registered mail with
postage prepaid, as follows:
(i) If to E&S, to it at:
Evenflo & Spalding Holdings Corporation
c/o Spalding & Evenflo Companies, Inc.
425 Meadow Street
Chicopee, Massachusetts 01021-0901
Attention: General Counsel
(ii) If to Evenflo, to it at:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attention: Richard Frank
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
or to such other person or address as either party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall
-3-
<PAGE>
be deemed to have been received on the date of personal delivery or on the third
business day after the mailing thereof.
(b) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between or among either of the parties with respect to the subject matter
hereof.
(c) Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(d) Assignability. This Agreement shall not be assigned by
either of the parties hereto without the prior written consent of the other
party.
(e) Amendment and Modification; Waiver. Subject to applicable
law, this Agreement may be amended, modified and supplemented by written
instrument authorized and executed by E&S and Evenflo at any time prior to the
termination hereof with respect to any of the terms contained herein. No waiver
by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. The waiver
by either party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach.
(f) Section Headings. The section headings contained in this
Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
(g) Severability. If any provision of this Agreement is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall remain in full force
and effect.
(h) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, and all of which shall be
deemed to be one and the same agreement.
(i) Applicable Law. This Agreement and the legal relations
between the parties shall be governed by and construed in accordance with the
laws of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement on
the date first set forth above.
EVENFLO & SPALDING HOLDINGS CORPORATION
By:
------------------------------
EVENFLO COMPANY, INC.
By:
------------------------------
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<PAGE>
ANNEX A
E&S will continue to provide, or cause its affiliates to
continue to provide, as the case may be, the following financial
systems/accounting services at the monthly costs set forth below in accordance
with the terms of the Transition Services Agreement to which this Annex A is
attached:
FINANCIAL SYSTEM/ACCOUNTING SERVICES MONTHLY COST
- ------------------------------------ ------------
[to come] [to come]
<PAGE>
Exhibit 10.7
TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
TAX ALLOCATION AND INDEMNIFICATION AGREEMENT, dated as of
August 20, 1998 (the "Agreement"), by and among Evenflo & Spalding Holdings
Corporation ("E&S"), a Delaware corporation, and its direct and indirect
subsidiaries (other than Evenflo Company, Inc. and its direct and indirect
subsidiaries) (each, an "E&S Subsidiary", and, collectively, the "E&S Group"),
and Evenflo Company, Inc. ("Evenflo"), a Delaware corporation, and its direct
and indirect subsidiaries (each, an "Evenflo Subsidiary", and, collectively, the
"Evenflo Group").
WITNESSETH:
WHEREAS, E&S is the common parent of an affiliated group (as
defined in Section 1504(a) of the Code) of United States corporations (the "E&S
Consolidated Group"), which includes Evenflo, LISCO Feeding, Inc., a Delaware
corporation ("LISCO Feeding") and LISCO Furniture, Inc., a Delaware corporation
("LISCO Furniture" and, together with LISCO Feeding, the "Evenflo United States
Subsidiaries" and the Evenflo United States Subsidiaries, together with Evenflo,
the "Evenflo Consolidated Group"), that has elected to file consolidated United
States federal income tax returns;
WHEREAS, the members of the E&S Consolidated Group, including
the members of the Evenflo Consolidated Group, are parties to the Consolidated
Federal Income Tax Liability Allocation Agreement among E&S Holdings Corporation
and its Subsidiaries, dated as of September 30, 1993 (the "Old Tax
Sharing Agreement");
WHEREAS, LISCO, Inc., a Delaware corporation and an indirect
wholly-owned subsidiary of E&S, proposes to sell a portion of the Evenflo common
stock that it currently owns;
WHEREAS, as a result of such sale of Evenflo common stock,
Evenflo and the Evenflo United States Subsidiaries will no longer be considered
members of the E&S Consolidated Group for United States federal income tax
purposes and, thus, will no longer be eligible to file consolidated United
States federal income tax returns with E&S and the other members of the E&S
Consolidated Group; and
WHEREAS, Evenflo and the other members of the Evenflo Group,
on the one hand, and E&S and the other members of the E&S Group, on the other
hand, desire to (x) terminate their respective rights, duties and obligations
under the Old Tax Sharing Agreement with respect to each other, (y) allocate the
tax burdens and benefits for taxable years or periods ending on or prior to the
Disaffiliation Date and (z) provide for certain other tax matters, including the
apportionment of tax attributes, the assignment of responsibility for the
preparation and filing
<PAGE>
of Tax Returns and the prosecution and defense of any Tax controversies;
NOW, THEREFORE, in consideration of the agreements and
mutual covenants contained herein, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement,
the following terms shall have the following meaning:
"Affiliate" shall mean, with respect to any
entity, any other individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust or unincorporated
organization which directly or indirectly controls, is controlled by or is under
common control with such entity.
"Code" shall mean the Internal Revenue Code of
1986, as amended.
"Disaffiliation Date" shall mean the date on which
the members of the Evenflo Consolidated Group are no longer eligible to file a
consolidated United States federal income tax return with E&S and the other
members of the E&S Consolidated Group.
"Tax" or "Taxes" shall mean any federal, state,
local or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, value added, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any governmental authority.
"Tax Return" shall mean any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
Section 2. Termination of Prior Agreement. Except to the
extent expressly provided herein and in paragraph 9 of the Old Tax Sharing
Agreement, the rights, duties and obligations of Evenflo and the Evenflo United
States Subsidiaries (and, to the extent applicable, any other member of the
Evenflo Group) under the Old Tax Sharing Agreement shall terminate on the
Disaffiliation Date and the terms of this Agreement shall govern the matters
described herein and in the Old Tax Sharing Agreement. The terms of the Old Tax
Sharing Agreement shall remain in full force and effect after the Disaffiliation
Date with respect to the members of the E&S Consolidated Group, other than the
members of the Evenflo Consolidated Group and the other members of the Evenflo
Group. Except as expressly provided
2
<PAGE>
herein and in paragraph 9 of the Old Tax Sharing Agreement, on and after the
Disaffiliation Date, the terms of this Agreement shall supersede the terms of
the Old Tax Sharing Agreement as they pertain to the rights, duties and
obligations of the Evenflo Group with regard to the members of the E&S Group and
vice versa.
Section 3. Filing of Tax Returns and Payment of Taxes.
(a) E&S shall be responsible for preparing and filing all consolidated United
States federal income tax returns that include Evenflo and/or any of the Evenflo
United States Subsidiaries for all taxable years or periods ending on or prior
to, or including, the Disaffiliation Date. E&S shall cause all such consolidated
returns to be prepared and filed timely. E&S also shall be responsible for
preparing and filing any consents to, and/or requests for, an extension of time
for filing such consolidated returns or any related information or similar
returns. E&S shall provide Evenflo with copies of such consolidated returns for
its review at least 30 days prior to the date such returns are required to be
filed and shall furnish Evenflo a copy of such returns (as filed) promptly after
such returns have been filed. Subject to its right to reimbursement hereunder,
E&S shall be responsible for, and shall pay or cause to be paid timely, all
United States federal income taxes shown as due and owing on such consolidated
returns.
(b) Evenflo and each of the Evenflo United States Subsidiaries
shall furnish to E&S (or its designated representatives) on a timely basis such
information, schedules, analysis and any other items as are necessary, or are
reasonably requested by E&S, to allow E&S to prepare and file timely the
consolidated United States federal income tax returns described in (a) above.
(c) Evenflo and each of the Evenflo United States Subsidiaries
shall pay to E&S the amount of United States federal income taxes that such
entities are required to pay with respect to any consolidated United States
federal income tax return filed by E&S with respect to any taxable year or
period ending on or prior to, or including, the Disaffiliation Date as
determined in accordance with paragraph 2 of the Old Tax Sharing Agreement.
(d) E&S may, in its sole and absolute discretion, file amended
consolidated United States federal income tax returns for any taxable year or
period ending on or prior to the Disaffiliation Date. If any such amended return
affects or relates to Evenflo or the Evenflo United States Subsidiaries, E&S
shall provide Evenflo with a copy of such amended return for its review at least
30 days prior to the filing of such amended return and furnish a copy of such
amended return to Evenflo (as filed) promptly after such amended return has been
filed. Neither Evenflo nor the Evenflo United States Subsidiaries may file an
amended consolidated United States federal income tax return for, or on behalf
of, the E&S Consolidated Group for any
3
<PAGE>
taxable year or period ending on or prior to the Disaffiliation Date.
(e) Evenflo and the Evenflo Subsidiaries shall be responsible
for preparing and filing any Tax Return (each an "Evenflo Separate Return") that
is not required to be filed on a consolidated, combined or unitary basis with
E&S or any E&S Subsidiary. Evenflo and/or the Evenflo Subsidiaries shall be
responsible for, and shall pay or cause to be paid, all Taxes shown as due and
owing on any Evenflo Separate Return.
(f) E&S and the E&S Subsidiaries also shall be responsible for
preparing and filing any Tax Return (each an "E&S Separate Return") that is not
required to be filed on a consolidated, combined or unitary basis with Evenflo
or any Evenflo Subsidiary. E&S and/or the E&S Subsidiaries shall be responsible
for, and shall pay or cause to be paid, all Taxes shown as due and owing on any
E&S Separate Return.
(g) For all taxable years or years beginning after the
Disaffiliation Date, (i) E&S shall be responsible for filing, or causing to be
filed, all Tax Returns required to filed by, or on behalf of, (w) the E&S
Consolidated Group or any member thereof or (x) any other E&S Subsidiary, and
(ii) Evenflo shall be responsible for filing, or causing to be filed, all Tax
Returns required to be filed by, or on behalf of, (y) the Evenflo Consolidated
Group or any member thereof or (z) any other Evenflo Subsidiary. E&S shall be
responsible for, and shall pay or cause to be paid, all Taxes shown as due and
owing on any Tax Return described in (i) above, and Evenflo shall be responsible
for, and shall pay or cause to be paid, all Taxes shown as due and owing on any
Tax Return described in (ii) above.
Section 4. Tax Refunds and Attributes. (a) The United States
federal income tax attributes, including, but not limited to, net operating
losses, net capital losses, foreign tax credits, excess charitable
contributions, alternative minimum tax credits and research and development tax
credits, of the E&S Consolidated Group as of the day before the Disaffiliation
Date shall be apportioned among the E&S Consolidated Group and the members of
the Evenflo Consolidated Group in accordance with the applicable rules set forth
in Treasury Regulation Sections 1.1502-79 and 1.1502-79A; provided, however,
that (x) any alternative minimum tax credits shall be allocated and apportioned
in accordance with the rules set forth in proposed Treasury Regulation Section
1.1502-55 and (y) any research and development credits shall be allocated and
apportioned in accordance with the principles set forth in Treasury Regulation
Section 1.1502-79 and 1.1502-79A.
(b) In the event that Evenflo or any Evenflo United States
Subsidiary elects to carry back any deduction, loss or credit that is allocated
and apportioned to them (the "Evenflo tax attributes"), or that arises in a
taxable year or period that
4
<PAGE>
begins on or after the Disaffiliation Date, any refund of Taxes that results
from the carryback of such Evenflo tax attributes shall be allocable to Evenflo
and/or the relevant Evenflo United States Subsidiary, and E&S shall pay the
amount of such refund to Evenflo within 10 days of the date it receives such
refund. If the carryback of such Evenflo tax attributes reduces the United
States federal income tax liability of the E&S Consolidated Group for any
taxable year or period (e.g., a taxable year or period for which a tax return
has not been filed) but does not result in a refund of Taxes, and such tax
attributes are considered to have been utilized by a member of the E&S
Consolidated Group (other than Evenflo or the Evenflo United States
Subsidiaries) pursuant to paragraph 3 of the Old Tax Sharing Agreement, E&S and
the relevant E&S Subsidiaries shall pay to Evenflo the amounts required to be
paid by them for the utilization of such Evenflo tax attributes under such
paragraph 3. In the event that members of the E&S Consolidated Group (other than
Evenflo and the Evenflo United States Subsidiaries) also have tax attributes
that may be carried back to the same taxable period such tax attributes and the
Evenflo tax attributes shall be deemed to be used proportionately.
(c) If E&S or any of the E&S Subsidiaries receives any refund
of Taxes that is allocable to Evenflo or any of the Evenflo Subsidiaries under
paragraph 4 of the Old Tax Sharing Agreement or otherwise, E&S shall pay the
amount of such refund to Evenflo within 10 days of the date such refund is
received.
(d) If E&S or any E&S Subsidiary utilizes an Evenflo tax
attribute to reduce their United States federal income tax liability or their
liability for taxes under the Old Tax Sharing Agreement, E&S or the relevant E&S
Subsidiary shall pay Evenflo or the relevant Evenflo Subsidiary for the use of
such Evenflo tax attribute in accordance with paragraph 3 of the Old Tax Sharing
Agreement. If Evenflo or any Evenflo United States Subsidiary utilizes a tax
attribute of E&S or any E&S Subsidiary to reduce their United States federal
income tax liability or their liability for taxes under the Old Tax Sharing
Agreement, Evenflo shall pay E&S or the relevant E&S Subsidiary for the use of
such tax attribute in accordance with paragraph 3 of the Old Tax Sharing
Agreement.
Section 5. Contest Provisions. (a) E&S shall have the sole
right to represent Evenflo's and/or the Evenflo United States Subsidiaries'
interests in any audit or administrative or court proceeding relating to the
United States federal income tax liability of Evenflo and/or the Evenflo United
States Subsidiaries for any taxable year or period ending on or before, or
including, the Disaffiliation Date; provided, however, that E&S may not settle
or compromise any issue that would adversely affect Evenflo and/or the Evenflo
United States Subsidiaries without the prior written consent of Evenflo, which
consent may not be unreasonably withheld. Evenflo and the Evenflo United States
5
<PAGE>
Subsidiaries also may participate, at their own expense, in any such audit or
administrative or court proceeding.
(b) E&S shall be responsible for, and shall control, all
audit, administrative or court proceedings related to a E&S Separate Return or
the Taxes reported thereon. Evenflo shall be responsible for, and shall control,
all audit, administrative or court proceedings related to an Evenflo Separate
Return or the Taxes reported thereon.
(c) E&S shall be responsible for, and shall control, all
audit, administrative or court proceedings related to the United States federal
income tax liability of the E&S Consolidated Group for all taxable years or
periods beginning on or after the Disaffiliation Date, and Evenflo shall be
responsible for, and shall control all audit, administrative or court
proceedings related to the United States federal income tax liability of the
Evenflo Consolidated Group for all taxable years or periods beginning on or
after the Disaffiliation Date.
Section 6. Audit Adjustments. (a) If (i) the United States
federal income tax liability of the E&S Consolidated Group for any taxable year
or period ending on or before, or including, the Disaffiliation Date is
increased (whether by reason of the filing of an amended return or refund claim,
or as a result of an IRS audit or judicial decision) and (ii) any part of such
increase is attributable to Evenflo and/or an Evenflo Subsidiary, the liability
of Evenflo and/or the relevant Evenflo Subsidiary for such taxes shall be
redetermined in accordance with paragraphs 2, 3 and 4 of the Old Tax Sharing
Agreement and Evenflo and the Evenflo Subsidiaries shall be jointly and
severally liable to pay E&S any amounts required to be paid by Evenflo or the
relevant Evenflo Subsidiary under the Old Tax Sharing Agreement as a result of
such redetermination; provided, however, that Evenflo and the Evenflo
Subsidiaries shall not be required to pay any amount hereunder in respect of any
Taxes that are paid or indemnified by Abarco, N.V. ("Abarco") under Article VIII
of the Recapitalization and Stock Purchase Agreement, dated as of August 15,
1996, by and among Strata Holdings L.P., E&S Holdings Corporation and Abarco
(the "Abarco Tax Indemnity").
(b) If (i) the United States federal income tax liability of
the E&S Consolidated Group is adjusted or redetermined for any taxable year or
period ending on or before the Disaffiliation Date and (ii) as a result of such
adjustment or redetermination, the E&S Consolidated Group utilizes tax
attributes that are, or would have been, allocated and apportioned to members of
the Evenflo Consolidated Group but for such utilization, then E&S and the
relevant E&S Subsidiaries shall pay to Evenflo the amounts required to be paid
for the utilization of such tax attributes under paragraphs 3 and 4 of the Old
Tax Sharing Agreement. In the event that members of the E&S Consolidated Group
(other than Evenflo or the Evenflo United States Subsidiaries) also have tax
attributes that also may be
6
<PAGE>
utilized in the same taxable year or period as the Evenflo tax attributes
described in this Section 5(b), such E&S and Evenflo tax attributes shall be
deemed to be used proportionately.
(c) If (and to the extent that) E&S or any E&S Subsidiary
receives any amount from Abarco under the Abarco Tax Indemnity that is
attributable to any Taxes that were actually paid by Evenflo or an Evenflo
Subsidiary, E&S shall pay such amounts to Evenflo within 10 days of its receipt
of such amount.
Section 7. Tax Indemnity. E&S and the E&S Subsidiaries shall
jointly and severally indemnify and hold harmless Evenflo and the Evenflo
Subsidiaries from and against any Taxes imposed on Evenflo or the Evenflo
Subsidiaries solely as a result of their being a member of the E&S Consolidated
Group pursuant to Treasury regulation Section 1.1502-6 or any similar provision
of state, local or foreign law.
Section 8. State, Local and Foreign Taxes. The principles set
forth herein also shall apply and govern the allocation of any state, local
and/or foreign tax liabilities and benefits for taxable years or periods ending
on or before, or including, the Disaffiliation Date, the apportioning of any tax
attributes allocable to the relevant parties and the assigning of responsibility
for preparing and filing any state, local or foreign consolidated, combined or
unitary tax returns and prosecuting or defending any controversies or other
matters with respect thereto with respect to any state, local and/or foreign
income or franchise taxes in any state, local and/or foreign jurisdiction where
Evenflo or any Evenflo Subsidiary has elected or has been required to file an
income or franchise tax return on a consolidated, combined, unitary or other
similar basis with E&S or any E&S Subsidiary.
Section 9. Alternative Minimum Tax. The principles of this
agreement also shall apply for purposes of determining the alternative minimum
tax liability of Evenflo and the Evenflo United States Subsidiaries for all
taxable years or periods ending on or before the Disaffiliation Date.
7
<PAGE>
Section 10. Assistance and Cooperation. After the
Disaffiliation Date, each of E&S and Evenflo shall (and shall cause their
respective Affiliates to) provide each other with such cooperation and
information as either of them may reasonably request from the other for purposes
of (x) filing any Tax Return, amended Tax Return or refund claim, (y)
determining a Tax liability or a right to a refund of Taxes or (z) participating
in or conducting any audit, administrative, judicial or other proceeding with
respect to Taxes or otherwise in connection with contesting any Tax liability.
Each of the parties hereto and their respective Affiliates shall give the other
party timely notice of any pending or threatened Tax audits or proceeding that
may have an effect on the Tax liability of such other party or its Affiliates.
Any information obtained by any party under this Section 10 shall be kept
confidential except as may be otherwise necessary in connection with the filing
of Tax Returns or claims for refund, or in connection with an audit or other
administrative or judicial proceeding relating to Taxes or the Tax liability of
such party.
Section 11. General Provisions.
(a) Effectiveness. This Agreement will be effective from and
after the Disaffiliation Date.
(b) Entire Agreement; Binding Effect. This Agreement
constitutes the entire agreement between the parties hereto and supersedes all
other agreements and understandings, both written and oral, between such parties
with respect to the subject matter hereof, including, except as expressly
provided otherwise herein, the Old Tax Sharing Agreement. This Agreement may not
be assigned by either party (by operation of law or otherwise) without the prior
written consent of the other party.
(c) Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
(d) Applicable Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York, without giving
effect to the principles thereof relating to conflicts of laws.
(e) Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
if telecopied (only if confirmed), if sent by FedEx or other overnight courier
or delivery service, or if mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses or
facsimile numbers:
8
<PAGE>
(a) if to E&S:
Evenflo & Spalding Holdings Corporation
425 Meadow Street
Chicopee, Massachusetts 01020
Attention: Wade Lewis, Acting Chief Financial Officer
Telephone: (413) 493-6205
Facsimile: (413) 535-2799
(b) if to Evenflo:
Evenflo Company, Inc.
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
Attention: Daryle Lovett, Vice President and
Chief Financial Offer
Telephone: (937) 415-3205
Facsimile: (937) 415-3113
The address or facsimile number of a party, for the purposes of this Section
11(e), may be changed by giving written notice to the other party of such change
in the manner provided herein for giving notice. Unless and until such written
notice is received, the addresses and facsimile numbers provided herein shall be
deemed to continue in effect for all purposes hereunder.
(f) Amendment and Waiver. No amendment of any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto. Any failure of any party to comply
with any obligation, agreement or condition hereunder may only be waived in
writing by the other party, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Agreement or default by the
other party shall constitute a waiver of such party's right to enforce any
provision hereof or to take any such action.
(g) Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, their respective
subsidiaries and, subject to Section 11(b) hereof, their respective successors
and assigns, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
(h) 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 deemed an original, but
all of which together shall constitute one and the same instrument. E&S shall
execute this Agreement on behalf of itself and all of the E&S
9
<PAGE>
Subsidiaries and Evenflo shall execute this Agreement on behalf of itself and
all of the Evenflo Subsidiaries.
(i) Headings; Pronouns and Conjunctions. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Unless
otherwise indicated herein or the context otherwise requires, the singular shall
include the plural and the plural shall include the singular.
The word "or' shall not be deemed inclusive.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of August 20, 1998.
EVENFLO & SPALDING HOLDINGS CORPORATION
By:
------------------------------------
Name:
Title:
EVENFLO COMPANY, INC.
By:
------------------------------------
Name:
Title:
11
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
Nine Months
Ended June 30, Year Ended September 30,
-------------- -----------------------------------------------------
1998 1997 1996 1995 1994 1993
-------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes $ (9,404) $(11,195) $ 6,178 $ 3,197 $ 7,579 $ 6,266
Fixed charges:
Rent expense (per supplemental P & L) 2,797 2,439 1,644 1,217 708 772
divided by 3 3 3 3 3 3 3
-------- -------- -------- -------- -------- --------
1/3 of annual rental expense 932 813 548 406 236 257
Interest expense & deferred financing costs
(per statement of earnings) 8,102 7,243 4,128 4,273 1,203 868
-------- -------- -------- -------- -------- --------
Total fixed charges 9,034 8,056 4,676 4,679 1,439 1,125
-------- -------- -------- -------- -------- --------
Earnings (loss) before fixed charges (370) (3,139) 10,854 7,876 9,018 7,391
Ratio of earnings to fixed charges -0.04 -0.39 2.32 1.68 6.27 6.57
N/A* N/A*
If ratio < 1, value should be amount of net loss (9,404) (11,195) 0 0 0 0
</TABLE>
*Note: In years in which the earnings (loss) before income taxes is a loss,
this calculation in N/A.
<PAGE>
Exhibit 21: List of subsidiaries for Evenflo Company, Inc.
1. Evenflo Mexico, S.A. de C.V.
2. R.B.D. de Mexico, S.A.
3. Muebles Para Ninos de Baja, S.A. de C.V.
4. Evenflo (Philippines), Inc.
5. Lisco Feeding, Inc.
6. Lisco Furniture, Inc.
7. Evenflo Canada, Inc.
8. Evenflo France SARL
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Evenflo Company, Inc. on
Form S-4 of our report dated November 7, 1997 (August 20, 1998 as to Note R)
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Tampa, Florida
September 30, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Evenflo Company, Inc. on
Form S-4 of our report dated July 10, 1998 (relating to the statements of
revenues and direct costs of Gerry Baby Products Company) appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Tampa, Florida
September 30, 1998
<PAGE>
Exhibit 25
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)
-----------
Marine Midland Bank
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Warren L. Tischler
Senior Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-5167
(Name, address and telephone number of agent for service)
EVENFLO COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 31-136-0477
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Northwoods Business Center II
707 Crossroads Court
Vandalia, Ohio 45377
(937) 415-3300 (Zip Code)
(Address of principal executive offices)
11 3/4% Series B Senior Notes due 2006
(Title of Indenture Securities)
<PAGE>
General
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington,
D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None
<PAGE>
Item 16. List of Exhibits.
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C> <C> <C>
T1A(I) * - Copy of the Organization Certificate of
Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York
Banking Department dated December 31,
1993 as to the authority of Marine
Midland Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine
Midland Bank as adopted on January 20,
1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank
required by Section 321(b) of the Trust
Indenture Act of 1939.
T1A(vii) - Copy of the latest report of condition of
the trustee (June 30, 1998), published
pursuant to law or the requirement of its
supervisory or examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
</TABLE>
* Exhibits previously filed with the Securities and Exchange
Commission with Registration No. 33-53693 and incorporated
herein by reference thereto.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York on the 25th day of September, 1998.
MARINE MIDLAND BANK
By: /s/ Frank J. Godino
-------------------------------
Frank J. Godino
Vice President
<PAGE>
Exhibit T1A (vii)
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Federal Financial Institutions Examination Council Expires March 31, 2000
Please refer to page I, Table of Contents, for the required disclosure of
estimated burden.
Consolidated Reports of Condition and Income for A Bank With Domestic and
Foreign Offices--FFIEC 031
Report at the close of business June 30, 1998 (971231)
------------
(RCRI 9999)
This report is required by law; 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
<PAGE>
NOTE: The Reports of Condition and Income must be signed
by an authorized officer and the Report of Condition must be
attested to by not less than two directors (trustees) for State
nonmember banks and three directors for State member and
National Banks.
I, Gerald A. Ronning, Executive VP &
Controller
Name and Title of Officer Authorized to Sign Report of the named bank do
hereby declare that these Reports of Condition and Income (including the
supporting schedules) have been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and are true to the best
of my knowledge and believe.
/s/ Gerald A. Ronning
------------------------------
Signature of Officer Authorized to Sign Report
7/23/98
------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Malcolm Burnett
- -----------------------------------
Director (Trustee)
/s/ Bernard J. Kennedy
- -----------------------------------
Director (Trustee)
/s/ Sal H. Alfiero
- -----------------------------------
Director (Trustee)
Submission of Reports
Each Bank must prepare its Reports of Condition and Income either:
(a) in automated form and then file the computer data file directly with
the banking agencies' collection agent, Electronic Data System
Corporation (EDS), by modem or computer diskette; or
(b) in hard-copy (paper) form and arrange for another party to convert the
paper report to automated for. That party (if other than EDS) must
transmit the bank's computer data file to EDS
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, attach this signature page to the
hard-copy f the completed report that the bank places in its files.
FDIC Certificate Number 0 0 5 8 9
---------------
(RCRI 9030)
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business
June 30, 1998
ASSETS
Thousands
of dollars
Cash and balances due from depository
<PAGE>
institutions:
<TABLE>
<S> <C>
Noninterest-bearing balances
currency and coin ........................................ $ 1,184,942
Interest-bearing balances ................................ 3,314,932
Held-to-maturity securities .............................. 0
Available-for-sale securities ............................ 3,715,259
Federal funds sold and securities purchased
under agreements to resell ............................... 3,331,158
Loans and lease financing receivables:
Loans and leases net of unearned
income ................................................... 20,916,889
LESS: Allowance for loan and lease
losses ................................................... 404,194
LESS: Allocated transfer risk reserve .................... 0
Loans and lease, net of unearned
income, allowance, and reserve ........................... 20,512,695
Trading assets ........................................... 764,990
Premises and fixed assets (including
capitalized leases) ...................................... 211,851
Other real estate owned ..................................... 12,741
Investments in unconsolidated
subsidiaries and associated companies ....................... 0
Customers' liability to this bank on
acceptances outstanding ..................................... 55,641
Intangible assets ........................................... 473,360
Other assets ................................................ 532,184
Total assets ................................................ 34,109,753
LIABILITIES
Deposits:
In domestic offices ...................................... 21,255,460
Noninterest-bearing ...................................... 4,261,592
Interest-bearing ......................................... 16,993,868
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs ...................................... 5,578,927
Noninterest-bearing ...................................... 0
Interest-bearing ......................................... 5,578,927
Federal funds purchased and securities sold
under agreements to repurchase ........................... 489,724
Demand notes issued to the U.S. Treasury .................... 1,000,000
Trading Liabilities ......................................... 158,102
Other borrowed money:
With a remaining maturity of one year
or less .................................................. 1,877,111
With a remaining maturity of more than
one year through three years ............................. 77,030
With a remaining maturity of more than
three years .............................................. 46,691
Bank's liability on acceptances
executed and outstanding .................................... 55,641
Subordinated notes and debentures ........................... 697,900
Other liabilities ........................................... 588,170
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Total liabilities ........................................... 31,824,756
EQUITY CAPITAL
Perpetual preferred stock and related
surplus ..................................................... 0
Common Stock ................................................ 205,000
Surplus ..................................................... 1,985,131
Undivided profits and capital reserves ...................... 73,230
Net unrealized holding gains (losses)
on available-for-sale securities ............................ 21,636
Cumulative foreign currency translation
adjustments ................................................. 0
Total equity capital ........................................ 2,284,997
Total liabilities, limited-life
preferred stock, and equity capital ......................... 34,109,753
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,399
<SECURITIES> 137
<RECEIVABLES> 69,112
<ALLOWANCES> 1,407
<INVENTORY> 60,721
<CURRENT-ASSETS> 143,393
<PP&E> 95,275
<DEPRECIATION> 34,814
<TOTAL-ASSETS> 255,725
<CURRENT-LIABILITIES> 91,867
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 63,017
<TOTAL-LIABILITY-AND-EQUITY> 255,725
<SALES> 296,743
<TOTAL-REVENUES> 296,743
<CGS> 235,925
<TOTAL-COSTS> 235,925
<OTHER-EXPENSES> 64,720
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,243
<INCOME-PRETAX> (11,195)
<INCOME-TAX> (4,884)
<INCOME-CONTINUING> (6,311)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (367)
<NET-INCOME> (6,678)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,650
<SECURITIES> 106
<RECEIVABLES> 76,766<F1>
<ALLOWANCES> 1,598<F2>
<INVENTORY> 67,794
<CURRENT-ASSETS> 156,969
<PP&E> 107,763<F1>
<DEPRECIATION> 43,866<F2>
<TOTAL-ASSETS> 271,535
<CURRENT-LIABILITIES> 83,397
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 50,888
<TOTAL-LIABILITY-AND-EQUITY> 271,535
<SALES> 245,233
<TOTAL-REVENUES> 245,233
<CGS> 197,119
<TOTAL-COSTS> 197,119
<OTHER-EXPENSES> 49,416
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,102
<INCOME-PRETAX> (9,404)
<INCOME-TAX> (3,675)
<INCOME-CONTINUING> (5,729)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (615)<F3>
<NET-INCOME> (6,344)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>(a) gross value
<F2>(b) allowance or accumulated depreciation credit value
<F3>(c) other comprehensive loss
</FN>
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
FOR
11 3/4% SENIOR NOTES
DUE 2006
OF
EVENFLO COMPANY, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998 (THE "EXPIRATION DATE") UNLESS EXTENDED BY EVENFLO
COMPANY, INC.
- --------------------------------------------------------------------------------
EXCHANGE AGENT:
Marine Midland Bank
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT EXPRESS:
Marine Midland Bank (Insured or Registered Recommended) Marine Midland Bank
140 Broadway, Level A Marine Midland Bank 140 Broadway, Level A
New York, New York 10005-1180 140 Broadway, Level A New York, New York 10005-1180
Attention: Paulette Shaw New York, New York 10005-1180 Attention: Paulette Shaw
Attention: Paulette Shaw
BY FACSIMILE:
(212) 658-2292
(For Eligible Institutions Only)
BY TELEPHONE:
(212) 658-5931
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated ,
1998 (the "Prospectus") of Evenflo Company, Inc. (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 in principal amount of
its new 11 3/4% Series B Senior Notes due 2006 (the "Exchange Notes") for each
$1,000 in principal amount of outstanding 11 3/4% Senior Notes due 2006 (the
"Old Notes"). The terms of the Exchange Notes are identical in all material
respects (including principal amount, interest rate and maturity) to the terms
of the Old Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes are freely transferable by holders thereof
(except as provided herein or in the Prospectus) and are not subject to any
covenant regarding registration under the Securities Act of 1933, as amended
(the "Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- -----------------------------------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) PRINCIPAL AMOUNT PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY OLD NOTES* TENDERED**
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Old Notes. See
instruction 2.
This Letter of Transmittal is to be used either if certificates representing
Old Notes are to be forwarded herewith or if delivery of Old Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering Old Notes."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
/ / The Depository Trust Company ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Name of Eligible Institution that Guaranteed Delivery ______________________
Date of Execution of Notice of Guaranteed Delivery _________________________
If Delivered by Book-Entry Transfer:
Account Number _____________________________________________________________
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
________________________________________
________________________________________
(INCLUDING ZIP CODE)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address ____________________________________________________________________
(INCLUDING ZIP CODE)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name _______________________________________________________________________
Address ____________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as 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. A broker-dealer may not participate in the Exchange Offer
with respect to Old Notes acquired other than as a result of market-making
activities or other trading activities. Any holder who is an "affiliate" of the
Company or who has an arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act must comply with the registration and prospectus
delivery requirements under the Securities Act.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Old Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company, in connection with the Exchange
Offer) to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Old Notes, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Old Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
also warrants that it 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 exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained by
the book-entry transfer facility. The undersigned further agrees that acceptance
of any and all validly tendered Old Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement (as defined
in the Prospectus) and that the Company shall have no further obligations or
liabilities thereunder except as provided in the first paragraph of Section 2 of
said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Company), as more particularly
set forth in the Prospectus, the Company may not be required to exchange any of
the Old Notes tendered hereby and, in such event, the Old Notes not exchanged
will be returned to the undersigned at the address shown above. In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth under "The Exchange Offer--Certain Conditions to
the Exchange Offer" occur.
By tendering, each holder of Old Notes represents that the Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. Any holder of Old Notes using
the Exchange Offer to participate in a distribution of the Exchange Notes (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission (the "Commission") enunciated in its interpretive letter with respect
to Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (ii) must comply with the registration and prospectus requirements
of the Securities Act in connection with a secondary resale transaction.
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 Old 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. A broker-dealer may not participate in the
Exchange Offer with respect to Old Notes acquired other than as a result of
market-making activities or other trading activities.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of this Letter of
Transmittal. See Instruction 2.
<PAGE>
Certificates for all Exchange Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, and registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
TENDER HOLDER(S) SIGN HERE
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
______________________________________________________________________________
______________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated ____________________ Area Code and Telephone Number ___________________
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OLD NOTES. 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, PLEASE SET FORTH THE
FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
Name(s) ______________________________________________________________________
(PLEASE PRINT)
Capacity (full title) ________________________________________________________
Address ______________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No. __________________________________________________
Taxpayer Identification No. __________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature _________________________________________________________
Name _________________________________________________________________________
Title ________________________________________________________________________
Address ______________________________________________________________________
Name of Firm _________________________________________________________________
Area Code and Telephone No. __________________________________________________
Dated ________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in the
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other document required by this Letter of Transmittal, to the Exchange
Agent at its address set forth above on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY
DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at 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 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 with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent 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.
<PAGE>
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received on
or prior to the Expiration Date, a letter, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
business days after the Expiration Date, the 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), will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless Old
Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Notice of Guaranteed Delivery") which may be used by
Eligible Institutions for the purposes described in this paragraph are available
from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.
<PAGE>
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Old Notes to be withdrawn, (iv) include a statement that such holder
is withdrawing his election to have such Old Notes exchanged, (v) 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 or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Old Notes into the name of the person withdrawing
the tender and (vi) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn Old Notes or otherwise comply with the book-entry transfer facility
procedure. All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Company and such determination will
be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the 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 under the caption "Procedures for Tendering Old Notes" in
the Prospectus at any time on or prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this Letter
of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements
of certificates or separate written instruments of transfer or exchange are
required.
<PAGE>
If this Letter of Transmittal is signed by a person other than the
registered holder or holder of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Old Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated above for further
instructions.
<PAGE>
7. SUBSTITUTE FORM W-9.
Each holder of Old Notes whose Old Notes are accepted for exchange (or other
payee) is required to provide a correct taxpayer identification number ("TIN"),
generally the holder's Social Security or federal employer identification
number, and with certain other information, on Substitute Form W-9, which is
provided under "Important Tax Information" below, and to certify that the holder
(or other payee) is not subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the holder (or other payee)
to a $50 penalty imposed by the Internal Revenue Service and 31% federal income
tax backup withholding on payments made in connection with the Exchange Notes.
The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or
other payee) has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is
not provided by the time any payment is made in connection with the Exchange
Notes, 31% of all such payments will be withheld until a TIN is provided.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Evenflo Company, Inc., Northwoods Business
Center II, 707 Crossroads Court, Vandalia, Ohio 45377, Attention: Secretary
(telephone: (937) 415-3300).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes are
accepted for exchange may be subject to backup withholding unless the holder
provides Marine Midland Bank (as payor) (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of Old Notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no longer
subject to backup withholding; or (ii) an adequate basis for exemption from
backup withholding. If such holder of Old Notes is an individual, the TIN is
such holder's social security number. If the Paying Agent is not provided with
the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Old Notes should indicate their exempt
status on Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the holder must submit a Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Paying Agent. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Old Notes or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the holder of Old Notes or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the Paying
Agent will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN (e.g.,
social security number or employer identification number) of the record owner of
the Old Notes. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
<PAGE>
PAYER'S NAME: MARINE MIDLAND BANK, AS PAYING AGENT
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE Social Security Number(s)
FORM W-9 YOUR TIN IN THE BOX AT or
Department of the Treasury RIGHT AND CERTIFY BY -------------------------------
Internal Revenue Service SIGNING AND DATING Employer Identification
BELOW Number(s)
--------------------------------------------------------
Part 2--CERTIFICATION--Under penalty of perjury, I
Payer's Request for Taxpayer certify that:
Identification Number ("TIN") (1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to
be issued for me), and
(2) I am not subject to backup withholding because: (a)
I am exempt form backup withholding, or (b) I have not
been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2)
above if you have been notified by the IRS that you are
currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
--------------------------------------------------------
Part 3--Awaiting TIN / /
- ------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE
INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO
YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not
been issued to me, and either (1) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (2) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer identification
number by the time of payment, 31% of all reportable cash payments made to me thereafter
will be withheld until I provide a taxpayer identification number.
Signature ------------------------------------------------- Date
----------------------
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
11 3/4% SENIOR NOTES
DUE 2006
IN EXCHANGE FOR NEW
11 3/4% SERIES B SENIOR NOTES DUE 2006
OF
EVENFLO COMPANY, INC.
Registered holders of outstanding 11 3/4% Senior Notes due 2006 (the "Old
Notes") who wish to tender their Old Notes in exchange for a like principal
amount of new 11 3/4% Series B Senior Notes due 2006 (the "Exchange Notes") and
whose Old Notes are not immediately available or who cannot deliver their Old
Notes and Letter of Transmittal (and any other documents required by the Letter
of Transmittal) to Marine Midland Bank (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facisimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) or mail to the Exchange
Agent. See "The Exchange Offer--Procedure for Tendering Old Notes" in the
Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
MARINE MIDLAND BANK
<TABLE>
<CAPTION>
BY HAND: BY MAIL:
<S> <C>
Marine Midland Bank (INSURED OR REGISTERED RECOMMENDED)
140 Broadway, Level A Marine Midland Bank
New York, New York 10005-1180 140 Broadway, Level A
Attention: Paulette Shaw New York, New York 10005-1180
Attention: Paulette Shaw
</TABLE>
BY OVERNIGHT EXPRESS:
Marine Midland Bank
140 Broadway, Level A
New York, New York 10005-1180
Attention: Paulette Shaw
BY FACSIMILE:
(212) 658-2292
(For Eligible Institutions Only)
BY TELEPHONE:
(212) 658-5931
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated September 21, 1998 of Evenflo Company, Inc. (the "Prospectus"), receipt of
which is hereby acknowledged.
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<CAPTION>
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DESCRIPTION OF SECURITIES TENDERED
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NAME AND
ADDRESS OF
REGISTERED
HOLDER AS IT CERTIFICATE PRINCIPAL
APPEARS ON THE NUMBER(S) AMOUNT
OLD NOTES OF OLD NOTES OF OLD NOTES
NAME OF TENDERING HOLDER (PLEASE PRINT) TENDERED TENDERED
<S> <C> <C> <C>
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</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth above, the certificates representing the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at the book-entry transfer facility), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, and any other documents required by the Letter of
Transmittal within three business days after the Expiration Date (as defined in
the Prospectus and the Letter of Transmittal).
<TABLE>
<S> <C>
Name of Firm: (Authorized Signature)
Address: Title:
(Zip Code) Name:
Area Code and Telephone No.: Date: (Please type or print)
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
